Overview of the Hotel Industry
Roselyn Bondoc
May 2, 2021
BCOM 214
Table of Contents
Industry Trends...........................................................................................................................................3
Competitive Landscape...............................................................................................................................4
Products and Markets..................................................................................................................................5
References...................................................................................................................................................6
Table of Figures
Figure 1: Bar Chart of Annual Hotel Industry Revenue..............................................................................3
Figure 2: Bar Chart from AHLA Survey.....................................................................................................4
Figure 3: Major Market Segmentation.........................................................................................................5
As the head of business development at Young Legacy, it is my duty to continue adding content
to the company’s website. The information will reduce the time of the consultants who have
spent educating clients and speaking about investing strategies. This brief informational report
on the hotel and motel industry will provide specific information about the industry trends,
competitive landscape, and products & markets.
Industry Trends
Revenue Analysis
The annual growth for revenue has changed drastically due to the pandemic. The annual growth
for the last five years since 2016 is -7.5%, this may have been much lower because of the recent
events and does not represent an accurate percentage of growth. The estimated annual growth for
the next five years to 2026 was 11.7% (Ristoff, 2021).
Figure 1: Bar Chart of Annual Hotel Industry Revenue
The bar chart shows the revenue of the hotel industry by year. From the left to the right, revenue
has been growing at a standard rate but dropped low since 2020 and has recovered in 2021
(Lock, 2021). Over the next few years, the hotel industry will recover and generate more revenue
than ever.
Strengths and Weaknesses
Like most industries, the hotel and motel industry has its own strengths and weaknesses. The
strengths of the hotel industry is that they have low imports, have an increasing level of
assistance, and high revenue per employee. Their weaknesses is that there is high competition,
product and service concentration, capital requirements, and taxes (Ristoff, 2021). Looking away
from the statistics, the hotel industry offers a safe and comfortable atmosphere like home and
they have many employee opportunities. Hotels can also stand out by being unique, create
dynamic prices, and have the power of online booking (Shaw, 2020). The hotel industry has
proved to have many strengths by looking at the revenue and can overcome the weaknesses.
COVID Impact on the Hotel Industry
Due to the pandemic and the need to stay home to prevent the spread of COVID, the hotel and
motel industry has experienced substantial volatility. According to the American Hotel &
Lodging Association, the industry will not be able to reach the same financial level that were
before COVID until 2023. “71% of hotels won’t make it another 6 months without further
federal assistance given current and projected travel demand.” The bar chart below gives a better
view of how long hotel operators think they can last.
Figure 2: Bar Chart from AHLA Survey
Although it seems like many hotels will fall, IBISWorld predicts that the “industry will rebound
and expand, and have a strong annual growth rate in extended stay hotels, spa and health retreats,
and resorts segments” by 2026 (Ristoff, 2021). Looking from a farther perspective, once the
industry recovers, they will be profitable more than ever.
Competitive Landscape
Market Share Concentration
Overall, the market share concentration in the industry is low. Four of the largest operators in the
industry take less than 5% of the industry revenue. Their market share is not going to increase
significantly because franchises are not considered. 43.7% of establishments operate with nine or
fewer employees and 89.5% operate with less than 50 employees. Furthermore, major companies
are looking to grow their brand recognition and operate on a global scale to increase
concentration (Ristoff, 2021). The concentration of the whole industry will always remain low
and prove to be highly competitive.
Barriers to Entry
The barriers to enter the hotel industry are known to be steady and medium. Some barriers
IBISWorld has stated were high competition, low concentration, and medium regulation &
policy change. For capital, it will be harder for those who would like to start their own branded
establishment rather than franchising. When franchising are included, over 49% of industry
revenue is covered by the top three hotel brands. Establishing a reputation will also be
challenging because of the large existing hotels and their networks, it would be hard to go
against their memberships and reward programs (Ristoff, 2021). Overall, hotel operators have to
be very unique and accessible for it to be successful but it is still possible.
Key Success Factors
The IBISWorld has identified many factors that contribute to a hotel operator’s success. Some
examples are having access to multiskilled and flexible workforce, being part of a franchising
chain, receiving the benefit word of mouth recommendations, and being able to quickly adopt
new technology. Being part of a franchise has proven to be very successful because of the brand
recognition, national marketing, and quality control. Not all hotels need these qualities to be
successful, nut they are the most popular factors to success.
Products and Markets
Demand Determinants and Major Markets
IBISWorld has listed some groups that represent most of the market and the factors that help the
consumer determine whether they will book a hotel room. The greatest market would be for
domestic travel, leisure traveling depends on the consumers income and fuel price. They reduce
disposable income and consumers’ willingness to spend in long car trips. Another market would
be international tourism, it is very similar to domestic travelers, but they are affected by the
changes in the US dollar compared to other major currencies. The last frequent market is for
business travel, they take economic growth, business confidence, and corporate profit into
accountability. These groups make up majority of the customers that the industry serves to.
Figure 3: Major Market Segmentation
The figure above from IBISWorld shows the market for the hotel industry. Leisure purpose trips
makes up 67.7% of revenue, international leisure travelers account for 17.1% of revenue, and
business traveler account for 8.9% of revenue in 2021. As vaccination rates go up the number of
business travelers may rise also. The demand determinants and market may change in size due to
the pandemic.
Conclusion
This report summarized specific information of the hotel and motel industry in the U.S. by
explaining the industry trends, competitive landscape, and products & markets. Although the
industry may not look as well as it used to be, it is estimated to recover over the next few years
and overcome the pre-pandemic levels as vaccination rates rise. With the information presented,
investors will come to consulted educated and make better informed decisions in the future. For
more information or questions, please contact Roselyn Bondoc by email at
roselynbondoc@email.arizona.edu.
References
COVID-19'S IMPACT ON THE HOTEL INDUSTRY. AHLA. (2021). https://www.ahla.com/covid-19s-
impact-hotel-industry.
Lock, S. (2021, March 16). Hotel and motel sector market size US 2021. Statista.
https://www.statista.com/statistics/1170216/hotel-and-motel-industry-market-size-
us/#:~:text=The%20market%20size%20of%20the,of%20195.33%20billion%20U.S%20dollars.
Ristoff, Jared (2021, April). Hotels & Motels in the U.S. - Competitive Landscape (72111). https://my-
ibisworld-com.ezproxy3.library.arizona.edu/us/en/industry/72111/competitive-landscape.
Ristoff, Jared (2021, April). Hotels & Motels in the U.S. - Industry at a Glance (72111). https://my-
ibisworld-com.ezproxy3.library.arizona.edu/us/en/industry/72111/industry-at-a-glance#industry-
structure.
Ristoff, Jared (2021, April). Hotels & Motels in the U.S. - Major Companies (72111). https://my-
ibisworld-com.ezproxy3.library.arizona.edu/us/en/industry/72111/major-companies#major-
players.
Ristoff, Jared (2021, April). Hotels & Motels in the U.S. - Products and Markets (72111). https://my-
ibisworld-com.ezproxy3.library.arizona.edu/us/en/industry/72111/products-and-markets.
Shaw, A. A. (2020, April 19). SWOT Analysis of the Hotel Industry. Marketing Tutor.
https://www.marketingtutor.net/swot-analysis-of-the-hotel-industry/.
