Following its recovery from the pandemic-induced slump, the hospitality sector is on track to reach new heights. In Europe, the resurgence saw a +8% annual growth rate in RevPAR since 2022. ADR and occupancy have both seen annual growth since 2022 (+5% and +4% respectively), but occupancy has yet to fully recover to pre-COVID levels (a trend mirrored in France) while ADR is at an all-time high.
Looking ahead, the hospitality sector is showing strong confidence in sustained growth, with an all-time-high global hotel construction pipeline projecting a 3% YoY increase in rooms, while the global hospitality market is projected to grow from $4.9 trillion in 2024 to $5.8 trillion by 2027 - a +5.8% annual increase.
This future growth is expected to be driven primarily by higher occupancy rates, fueled by increasing international travel from key regions, particularly Asia, and the continued resurgence of business travel. The sector’s profitability remains strong, as players have successfully passed on rising supply chain and labor costs to customers, as evidenced by higher ADR. The outlook for the hospitality industry appears very positive.
The industry is however facing an unprecedented convergence of disruptive factors, rendering the traditional playbook obsolete. Key challenges include high interest rates, which have created funding difficulties and driven asset owners to demand higher returns on equity (RoE) for both new construction and renovations.
Additionally, widespread staff shortages and increased turnover, rising customer expectations for technological innovation, and shifting booking patterns and travel behaviors across various demographics (e.g., age, location, and income) have further complicated the landscape. The industry also faces intensified competition from both established and emerging players, growing scrutiny of ESG (Environmental, Social, and Governance) considerations influencing travel decisions, continuous technological evolutions (e.g., Gen AI), and ongoing political uncertainty.
In this new era, how can hospitality leaders mitigate risks, capitalize on opportunities, and secure a competitive edge while taking into consideration regional specificities?
Drawing on interviews with executives from leading French hospitality players and BCG's expertise, this study aims to provide focused, actionable insights for hospitality leaders.