The state of the US economy has a significant impact on the hospitality industry. When the economy is doing well, it is good for all industries. However, hospitality can really ride the highs and sink with the lows during recessions. People are less likely to travel, eat out, and spend money on leisurely activities when the economy is poor, and money is tight. A strong economy will leave people with extra cash for traveling and recreation. The hospitality industry has experienced an unusual trend in the past few months. Luxury properties are doing well in terms of reservations while more economic properties have experienced reduced levels of growth. This blog will investigate what’s causing this trend and look at how this could play out in the future, and what properties can do to remain competitive.
Wealth Effect
According to CoStar, luxury property occupancy rates were up almost 2% while economical properties
were down a little over 3%. This is an unusual swing rate because in the past, all economic levels of hospitality properties tended to experience growth and losses at a similar rate. What is it that has caused the demand to increase for luxury properties, though? Industry experts have stated that the stock market and home ownership prices could be a contributing factor because it has led to a sharp increase in net worth for people who have assets in these areas. So, those who were already wealthy have seen their wealth increase more in the last few years which has given them excess money to be used for higher end traveling while much of the middle and lower class is struggling with the effects of inflation. Basically, the rich are getting richer and the divide between the upper and lower class has gotten wider.
Income Levels
While income levels can vary greatly especially depending on your location across the United States,
experts like Jan Freitag, national director of hospitality analytics at CoStar Group, say that the middle class is experiencing difficulties with having extra money due to high inflation on basic necessities, housing, and high mortgage rates. These are the types of people who would be spending time at more economical lodging facilities on a vacation, but a lot of them don’t have room in the budget to be making that trip for this year. There was a big boom in traveling once the pandemic began to subside and people began returning to their normal levels, but now the industry has noticed that travel levels are beginning to even back to pre-pandemic levels. Inflation may be influencing that.
The Future of the Economy and the Industry
Those who follow the news may be hearing predictions about interest rates being cut soon which could hopefully result in some more economic growth. Industry leaders are also hoping for other economic factors that could help contribute to growth, including more infrastructure spending. Last year, supply growth for properties like hotels was only 0.5% which was a result of high prices for construction and financing. Growth is always good for any industry, and interest rate cuts could be an ideal situation for the growth of hospitality.
Remaining Competitive is Key
Regardless of how the economy is performing, it is always wise to make sure your property has high-
quality linens and hospitality products to stand ahead of the competition. Properties are all over the place, so it is always a challenge when trying to stand out when people are looking at where to book a reservation. It is a good idea to review bed linens, towels, dining linens, and current amenities with your staff to make sure everyone is on the same page with what should be presented to the guests. Properties will also want to keep their website updated by posting new pictures of the facility, writing new blogs, and responding to customer reviews. This will help Google know your website is active and should improve its website ranking on search results.
InnStyle is Here to Help
Like any industry, the hospitality industry will be heavily influenced by how well the economy is performing. When the economy is doing well, people will be more inclined to spend money traveling. Even when the economy is doing well, properties will always be competing with one another for bookings. InnStyle has hospitality linens and products to help give you an advantage. Please give InnStyle a call about any hospitality product questions you may have. Their account managers will be happy to assist you. InnStyle can be reached at 267-354-6020 or 800-877-4667. Their website is https://www.innstyle.com/.