Consumer spending and visitor confidence in the hospitality sector.

Just as the hospitality industry thought it was clear of the covid crisis the next challenge it is facing is now the cost of living crisis.  

Tourism-oriented cities were predicated to be fully back to pre-Covid levels by 2023. But despite seeing visitors slowly increase in confidence with travel during 2022, consumers are now struggling to pay their monthly bills, and are tightening their purse strings – reducing their confidence in travel. 

In addition, restaurants and hotels are juggling extortionate cost increases as well as supply chain issues – raw material costs, electricity, gas, and increases in components from overseas.  Some restaurants in particular, are being forced to make decisions daily as to whether to stay open or close their doors.   

A report by PWC suggests that Inflation, coupled with energy costs and rising interest rates remain major factors impairing the industry’s recovery, in addition to staffing shortages and supply chain disruption. It is likely this new cost of living crisis means consumers will have less to spend on eating out, and look to rein in their overnight breaks and holidays.  

Hotel room rates have skyrocketed in many areas of Europe, meaning that even business travellers are thinking twice before travelling, instead looking for more cost-effective ways of meeting again – utilising video calls when possible for example. 

However, despite consumer confidence continuing to be hit, current forecasts predict inflation to fall back to 3.6% by the end of 2023, which could start to ease some of that pressure. 

There is no immediate easy response to the supply chain issues and cost increases, however in the hospitality industry, providing a top class service, coupled with an innovative business plan, can add value to guest experience and set a hotel apart from its counterparts. Robotic solutions are an example of how a hotel can overcome both staffing and operational problems, but also look to technology to deliver cost savings and data driven solutions that will help be more agile in their outlook. 

With over 100,000 new hotel rooms planned for this year, many European countries have a material development pipeline of hotels already under construction.  In addition, more than one-third of real estate investors want more hotel investments in Europe. 

According to Lodging Econometrics’ (LE) Second Quarter 2022 Construction Pipeline Trend Report however, at the close of the second quarter of 2022, Europe continues to show steady growth in new hotels opening in 2022, opening 188 new hotels with 28,350 rooms in the first half of the year. For nearly 25 years, Lodging Econometrics (LE) has been the industry-leading provider of global hotel intelligence and decision-maker contact information so has a good track record.  

The countries leading Europe’s construction pipeline with the most project and room counts at Q2 are the United Kingdom with 309 projects/46,296 rooms, Germany with 258 projects/44,692 rooms, France with 152 projects/17,338 rooms, Portugal with 123 projects/14,811 rooms, and Poland with 85 projects/12,205 rooms. These five countries account for 54% of the projects and 51% of the rooms in Europe’s total construction pipeline at Q2 2022. There is also a dramatic increase in hotels planned within the luxury market.  

The outlook for the hotel and hospitality sector looks to be turbulent again, but those who can weather the storm and look forward may just benefit in the longer term. Those who can look to the future with agility, and think outside the box, will hopefully survive the storm.  


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