Tough Challenges in Hotel Industry & What To Do – Part II

This is continuation of our previous article – Challenges Facing the Hotel Industry Part I. If you did not read that article we highly suggest that you do so. In this second part of the series we cover few more challenges of the hospitality industry.

– Competition from Upcoming Alternatives like Airbnb:
One of the biggest threats to regular hotels is the competition from Airbnb and similar apartment sharing platforms. According to Hospitalitynet report, the valuation of Airbnb is over $10 billion which is higher than Hyatt and other large hotel chains.

Airbnb type of model is seriously impacting the hotel industry as it is providing cheaper alternatives for people. However the good side for hotels is that people staying in Airbnb locations do not get any additional service or security. These are the areas where hotels can focus more in order to overcome the threat of Airbnb to their business.

Hotels can emphasize the importance of security and also the value of additional services which people can only get at a good hotel. People who want safety, luxury, add on services will prefer a regular hotel over limited-service Airbnb properties.

– Rising Costs:
Another major challenge plaguing the hotel industry is that of rising costs. Labor wages, construction costs, daily consumable prices are all increasing rapidly which is taking a toll on the hotel’s profit margins.

Prices of daily use items and eatables have increased quite dramatically in the last decade or so. Though it has affected a lot of industries the hospitality industry seems to be one of the worst hit. Rising wages is another area of major concern. Labor, insurance, and property taxes have grown much faster than inflation, which is causing serious problems in the whole industry.

What can hotels do to combat this? In order to minimize the effects of rising cost of consumables, the hotels have to devise strategies to reduce wastage as much as possible, and start doing a much better job of keeping inventory of the goods they require.

To minimize the effects of rising labor costs, hotels need to start making a shift towards more technology-oriented way of doing things. They need to automate as many tasks as possible so the need for labor involvement is reduced.

– Losing Loyal Customers
The customers these days are not loyal to a single brand. Since many hotels keep putting up attractive discount offers, the customer may shift from one brand to another in order to avail the discounted deals.

One way to overcome this problem is to deliver as great an experience as possible to each guest that comes to stay at your hotel. Make sure the guests have a comfortable, memorable and pleasurable stay with you and leave with a smile on their faces. In order for this to happen you need to interact with them, connect and engage with them personally and make sure they don’t face any inconveniences and problems.

Another way is to run loyalty programs. These can be helpful in retaining your customers over a longer period of time. Offering better amenities than others is another possible option you can explore.

– Rising Competition
The competition is growing more and more fierce as new hotels keep entering the market. In order to keep afloat in this highly competitive era you need to have a solid plan in place. You may need to do a thorough competition analysis in order to know what the competitors are doing, what are their strong and weak points, and identify opportunity areas where you can exceed them.

Based on this competition analysis you can devise a plan to get ahead of the competitors. You should also consider the use of innovative technology solutions and offering more personalized services in order to stand out from the competition.