TL;DR: The COVID-19 pandemic hit the hospitality sector the hardest. Overnight, millions of people were jobless and local communities had no source of income. To stay afloat, the industry began using technology platforms. Now, fintech products are leading the digital transformation within the sector.
One of the industries most heavily impacted by the COVID-19 pandemic was hospitality and tourism. After years of steady growth, the pandemic’s travel restrictions and quarantine measures caused these sectors to face a decrease of 73% in arrivals between 2020 and 2021. The World Tourism Organization recognized 2020 as the worst year in tourism history with over one billion fewer arrivals. The hospitality industry was hit hard. Millions of people who depended on the tourist influx were left without a source of income.
Though the industry is slowly recovering from such a bleak period, the market will take a while to normalize. In order to return to its pre-pandemic state, many businesses are now resorting to tech-forward industries such as fintech. Some of the greatest technological innovations in the past years can help the hospitality sector recover quickly.
The hospitality sector in numbers
The École Hoteliere de Lausanne (EHL), regarded as one of the best hospitality schools in the world, indicates that international arrivals increased from 900 million to more than 1.3 billion over a decade. Although the pandemic stalled sustained growth, recent World Travel and Tourism Council (WTTC) data state that the hospitality sector contributed 8.6 trillion dollars to the global economy in 2022.
The WTTC also notes that hospitality provides jobs to 330 million around the world. This means that one out of ten people financially depend on activities related to tourism and travel. Yet the benefits of the hospitality sector go beyond generating new jobs. Economic growth, cultural preservation, and environmental protection caused by tourism have improved local communities and countries alike.
If you have a hard time visualizing this information, try to think of how many hotels, hostels, motels, and restaurants are within a three-mile radius from where you live. Chances are you’ll find a couple. Currently, there are more than over 700 thousand hotels in the world. By 2025, the global hotel and travel accommodation industry is projected to have a market value of a trillion.
Though the pandemic halted the industry, this period also witnessed a wide range of creative solutions that helped mitigate unemployment and reduced income.
Responding with creativity
According to an anonymous account from a hospitality worker in Israel: “My hotel had worked at a speed of 120 km/h and in one day was down to zero. There is a lot of stress, managing 5600 employees, thinking of what to do with each one, and how to take care of them. This is where the personal and emotional issue comes in a bit, we are all human beings and you must think about the implications for the people.” Stories such as this one were abundant all over the world. They also accurately represent the many problems workers faced at the start of the pandemic.
Because hospitality relies on customer experience, work-from-home policies and other forms of remote work that worked successfully in other industries didn’t apply. Therefore, many hotels and leisure resorts came up with short-term solutions. In the United States, for example, hotels volunteered as alternative facilities for hospital networks, thus reducing commute times for healthcare staff.
Some sectors within the hospitality industry flourished, as is the case of food delivery services. Many restaurants quickly switched to third-party marketplaces, such as Deliveroo and Uber Eats. Doing so meant adapting their business model to a digital platform that wasn’t necessarily an important part of their strategy. However, incorporating digital players, especially digital financial services, into the equation has ignited a technological awakening within the industry.
The road to great customer experience
As we mentioned in the previous section, a few aspects are as crucial in hospitality as customer experience. Recent trends within the hotel industry pay closer attention to personalized experiences. Managers now rely on data to provide those services for which people are looking.
The most recent advancements in big data analytics, particularly when it comes to cloud services and intuitive data visualization platforms, have helped companies collect and store their information. Implementing big data tools and machine learning-based models help areas such as revenue management, where hoteliers can use new insights to optimize revenue growth and profitability.
Digitizing the hospitality sector
Booking a hotel room is only one action in the complex network of processes. Hotels are slowly digitizing other processes, such as food and beverage inventory or restaurant and leisure services within the premises. Many hotels have resorted to the use of a property management system (PMS), designed to integrate many functionalities into a single platform.
A PMS isn’t a one-size-fits-all solution for all hotels, especially small properties or single property companies. More complex operations, however, can take complete advantage of everything a PMS has to offer. Some examples of this are system functionality, check-in/check-out, and rate management.
Payment platforms also form an important part of this digital transformation. According to a Hotel Tech Report, payments have helped “close the gap between what digital customers already expect and what analog businesses actually deliver.” They’re responsible for automating and streamlining many hotel services, reducing waiting times, and enhancing the customer experience.
The pandemic promoted the rise of e-wallets and credit card payments instead of traditional face-to-face sales or cash payments. Fintechs also stepped in to solve issues within the entire process: from making mistakes with the credit card information to fraud. One of these solutions is ECOMMPAY, an international payment service provider that partnered with the Accor hotel chain to streamline the payment process.
Ensuring a customer visits a hotel or restaurant on several occasions can be a challenge. Hoteliers have just begun investing in online visibility and brand recognition to establish more direct communication with their target market. Younger generations, particularly Millenials and Gen Z, are looking for tailored experiences instead of an all-included resort. To create unique experiences, many companies in hospitality are distancing themselves from traditional services.
A good example is Selina, a chain of 130 hostels targeted at a millennial audience. In order to offer a customized experience, the hotel chain partnered with a neo-bank to create a Selina Visa card. Their reasoning? At least 20 percent of the customers come back a year after their first visit. Even though they’re not a large-scale hotel chain, its customer base is very loyal and requires a customized solution to maintain a good relationship.
Financial services are transforming the sector from within. Using better data insights, automation and administration tools are just the first steps. However, an opportunity is also visible in customer experience. Financial services can truly aid businesses to create those unique experiences that motivate people to keep coming back.