Hospitality Verticals, Part 1

Part
01
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Part
01

Hospitality Verticals: Food & Beverage Market Size

The global market size of the food and beverage industry in 2020 is an estimated $4.71 trillion. Growing at a CAGR of 3.0%, the market size is expected to reach $5.0 trillion by 2022. However, this estimate was released prior to the COVID-19 crisis, which will likely heavily impact the food and beverage market. The extent to which each segment of the food and beverage industry will be affected, though, is not yet known.

Market Size

  • According to The Business Research Company's Food And Beverages Global Market Report 2019, the global market size for the food and beverage industry is expected to reach $5.0 trillion in 2022.
  • Growing at an anticipated CAGR of 3.0%, the global food and beverage market size can be calculated for each year between 2019 and 2022 as follows.
    • 2022: $5.0 trillion
    • 2021: $4.85 trillion
    • 2020: $4.71 trillion
    • 2019: $4.57 trillion
  • Therefore, the estimated global market size for the food and beverage industry in 2020 is $4.71 trillion.

Growth Rate

  • The Business Research Company has estimated the growth rate for the global food and beverage market to be 3.0% between 2019 and 2022.
  • This would mean the market size would grow by an average of 3% each year to move from $4.57 trillion in 2019 to $5.0 trillion in 2022.

Research Strategy

Despite extensive research through market reports, industry publications, and reputable news outlets, we were unable to find an estimated market size for 2019 or 2020. This information does exist, but it is behind paywalls and requires purchase. However, The Business Research Company published its anticipated market size for 2022 along with a CAGR, so we were able to calculate the approximate market size for 2020. The calculations are below.

2022: $5.0 trillion
2021: $4.85 trillion ($5.0 trillion / 1.03)
2020: $4.71 trillion ($4.85 trillion / 1.03)
2019: $4.57 trillion ($4.71 trillion / 1.03)

The report issued by The Business Research Company was completed before the COVID-19 crisis emerged. The global travel and tourism industry is likely to be significantly impacted by the virus, but no new market size estimates have yet been released. According to Vitafood's Insights, the global food and beverage industry has largely been negatively affected by the pandemic, but "it is yet to be understood what impacts and what magnitude of impact the outbreak of COVID-19 will have on the supply chain in the long term." As such, it is likely the estimates here are high, and may be adjusted down as the full impact of the virus on the industry is known.
Part
02
of four
Part
02

Hospitality Verticals: Food & Beverage Market Outlook

The outlook for the food and beverage industry is moderately positive; however, with the recent COVID-19 crisis, it is less positive than it was before the pandemic began. While experts predict the industry to grow at a slow pace through 2022, consumers may be cutting back their discretionary spending, which could cause the industry to stall. To be competitive in the future, food and beverage establishments will need to embrace digital technology, focus on healthy menu offerings, and promote sustainability and transparency.

The Digital Experience Will be Critical

  • NPD predicts that the food and beverage industry will continue to evolve digitally as more consumers embrace ordering online, both for carryout and delivery.
  • Restaurants that are able to adapt their business model to an omni-channel approach will fare better in the near future than those that refuse to go digital.
  • Modern Restaurant Management noted that in the near future, "guests will expect a seamless digital experience and want their preferences known at each interaction with a restaurant."
  • Cloud kitchens, which only offer to-go and delivery orders, will continue to grow and "consumers may grow increasingly loyal to third-party delivery apps, impacting loyalty to individual restaurants."
  • The need to go digital was especially apparent during the recent COVID-19 crisis, as those food service locations that already had online ordering functionality were better equipped to handle the abrupt changes to their business model.
  • About 40% of customers have indicated that they will maintain the same usage of delivery and carryout after the crisis has passed as they adopted during the crisis. This means that use of online ordering and delivery will still be critical functions for many restaurants.
  • Additionally, 13% of consumers have "come to prefer getting restaurant meals to-go or delivered since coronavirus," which is a significant portion of diners who will continue to need the ability to order food and beverages online.
  • Along with implementing more technology, restaurants will need to use their digital presence to entice consumers with rewards for ordering via text message or through an app. A research study conducted by Bottle Rocket found that 80% of consumers were "more likely to order from a restaurant if they offer rewards for digital or text message ordering."
  • Maintaining an online presence on social media will be important for restaurants as well since the younger generations would rather engage with their favorite brands over social media than through the mail.

Focus on Health

  • As more consumers embrace healthy lifestyles, it will be important in the future for restaurants to cater to their varying needs.
  • With all the new eating plans available (Paleo, Whole30, and plant-based), restaurants have a significant challenge ahead of them as they attempt to have menu items for everyone.
  • The key, according to NPD, to addressing this challenge is to show flexibility so that all consumers feel like they can request specific items and not be shamed or excluded.
  • Modern Restaurant Manager predicts that "advanced genetic knowledge and the rising incidence of lifestyle diseases are likely to create growing demand for meals that provide specific health benefits to diners" and restaurants will have to prove their foods and beverages offer these benefits.
  • The COVID-19 crisis could have an impact on eating habits as well, since many consumers may have changed their diets during stay-at-home orders.
  • Datassential found that nearly 75% of "consumers across all generations will retain many habits developed during quarantine, from stocking up on essential groceries to being mindful of health and sanitation practices."
  • Healthy offerings will also be necessary because following the crisis, 16% of consumers stated they will be looking to eat better or lose weight that they gained during quarantine and 17% of consumers say they want to return to eating in restaurants because they offer healthier foods and beverages than they make at home.

Sustainability and Transparency

  • As younger generations get older and become paying consumers, sustainability will be a vital component to any food and beverage establishment's operations.
  • To remain competitive, restaurants will need to adapt to consumer preferences, which have increasingly been toward businesses that cater to their "health-conscious, ecological mindset."
  • Modern Restaurant Manager indicates that single-use packaging will be a thing of the past, even for food delivery companies, as consumers demand restaurants adopt sustainable processes and procedures.
  • Consumers will also increasingly want to know where their food originated from, so restaurants will need to be transparent and be able to trace their products back through their supply chain to their beginnings.
  • According to Julia B. Olayanju of Forbes, "I believe that consumers’ growing need and interest for transparency within the food industry is continuing to hold food companies accountable and driving change within the industry."
  • The need for transparency and sustainability will cause restaurants and food brands to change the way they market their products as well as provide more information about their products on their packaging so consumers can make informed choices.
  • Transparency is also important for restaurants following the COVID-19 crisis as consumers will want to know what cleanliness and safety practices businesses have put in place to keep them from contracting the virus. In fact, 76% of consumers stated that "a restaurant’s cleanliness and food safety will matter more to [them] after COVID-19."
  • Additionally, 43% of consumers are afraid to dine in at restaurants, even as restrictions are lifting because they are afraid of contracting the virus. Another 42% are concerned that restaurants will be too crowded, which poses a health risk, and 34% are worried that restaurant employees may be infected and will pass it on to customers. For these reasons, restaurants will need to continue to clearly convey their practices to alleviate consumers' fears.

Economy and Employment

  • The economic impact of COVID-19 on the food and beverage industry is not yet fully known, but it is widely believed it will be a negative impact.
  • However, what is more certain is that COVID-19 is likely going to significantly impact the economy overall with job losses and reduced spending, which will in turn affect the food and beverage industry as well.
  • Prior to the COVID-19 crisis, the global food and beverage industry was only growing at a CAGR of 3.0%, which is far from a blistering pace. However, after COVID-19, many people will have lost their jobs and may be cutting back on discretionary spending.
  • Datassential found that if the economy worsens following the COVID-19 crisis as expected:
    • 19% will cut back on meals from full-service restaurants,
    • 22% will cut back on buying coffee away from home,
    • 21% will cut back on buying appetizers and desserts,
    • 22% will cut back on buying alcoholic beverages,
    • 19% will cut back on buying snacks and smoothies away from home,
    • 13% will cut back eating at restaurants that expect tips,
    • 26% will cut back on going out for drinks,
    • 15% will cut back on buying non-alcoholic beverages with a meal, and
    • 11% will cut back on buying meals at limited-service restaurants.
  • Based on these survey results, it appears that limited-service restaurants may weather an economic downturn better than full-service restaurants.
  • Additionally, it will be important for restaurants to have budget-minded menu items because 19% of consumers expect to choose less expensive menu items after the COVID-19 crisis than they did before. What's more is that 22% of consumers plan to dine at less expensive restaurants than they did before, which is important to understand as restaurants look to position themselves during the recovery.
  • Modern Restaurant Manager predicts there will be a shift in employment for the food and beverage industry within the next few years.
  • The number of teenagers, who are often employed by quick-service restaurants, is expected to decline over the next decade to reach its lowest point in 2028.
  • As such, restaurants will need to re-think their employment strategies to be more career-focused to employ long-term workers
  • Moreover, with a labor shortage already in effect for the food and beverage industry, restaurants will begin looking at ways to "automate more routine back-of-house tasks to enhance productivity and efficiency."
Part
03
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Part
03

Hospitality Verticals: Travel & Tourism Market Size

The global market size of the travel and tourism industry in 2020 is an estimated $9.05 trillion. Growing at a CAGR of 5.2%, the market size is expected to reach $13.57 trillion by 2027. However, this estimate was released prior to the COVID-19 crisis, which will likely heavily impact the travel and tourism market. As such, the global market size of the travel and tourism industry could be as low as $7.42 trillion in 2020.

Market Size

  • Research Insights indicates that the global travel and tourism market will reach $13.57 trillion by 2027.
  • Growing at an anticipated CAGR of 5.2% between 2019 and 2027, the estimated market sizes for all years between 2019 and 2027 can be calculated as follows.
    • 2027: $13.57 trillion
    • 2026: $12.90 trillion
    • 2025: $12.26 trillion
    • 2024: $11.65 trillion
    • 2023: $11.08 trillion
    • 2022: $10.53 trillion
    • 2021: $10.01 trillion
    • 2020: $9.52 trillion
    • 2019: $9.05 trillion
  • Therefore, in 2020, the global travel and tourism market is estimated to be $9.05 trillion.

Growth Rate

  • Research Insights indicates that the CAGR for the global travel and tourism market is going to be 5.2% between 2019 and 2027, causing the market size to increase from $9.05 trillion to $13.57 trillion.

Possible COVID-19 Impact

  • Research Insights estimated the market size for travel and tourism prior to the emergence of the COVID-19 crisis. According to the World Travel and Tourism Council, the COVID-19 pandemic is projecting a "global loss of 75 million jobs and $2.1 trillion in revenue."
  • As such, for 2020, the market size for global travel and tourism could be as low as $7.42 trillion.

Research Strategy

Despite extensive research through market reports, industry publications, and reputable news outlets, we were unable to find an estimated market size for 2019 or 2020. This information does exist, but it is behind paywalls and requires purchase. However, Research Insights published its anticipated market size for 2027 along with a CAGR, so we were able to calculate the approximate market size for 2020. The calculations are below.

2026: $12.90 trillion ($13.57 trillion / 1.052)
2025: $12.26 trillion ($12.90 trillion / 1.052)
2024: $11.65 trillion ($12.26 trillion / 1.052)
2023: $11.08 trillion ($11.65 trillion / 1.052)
2022: $10.53 trillion ($11.08 trillion / 1.052)
2021: $10.01 trillion ($10.53 trillion / 1.052)
2020: $9.52 trillion ($10.01 trillion / 1.052)
2019: $9.05 trillion ($9.52 trillion / 1.052)

The report issued by Research Insights was completed before the COVID-19 crisis emerged. The global travel and tourism industry is likely to be significantly impacted by the virus, but no new market size estimates have yet been released. The World Travel and Tourism Council released figures that show the industry could lose $2.1 trillion in revenue in 2020. Therefore, a revised market size for 2020 was calculated to be $7.42 trillion ($9.52 trillion — $2.1 trillion).
Part
04
of four
Part
04

Hospitality Verticals: Travel & Tourism Market Outlook

The outlook for the travel and tourism industry was particularly positive; however, with the recent COVID-19 crisis, it is now trending downward. While experts predict the industry to grow at a moderate pace through 2027, the revenue lost during the pandemic will be difficult to overcome. To be competitive in the future, travel and tourism companies will need to be sustainable, focus on the mobile digital experience, and incorporate the sharing economy.

Sustainability

  • Driven by eco-conscious millennials, the travel and tourism industry will need to become more sustainable in the next few years.
  • A Booking.com survey found that 55% of global travelers were more determined to choose sustainable accommodations in 2019 than they were in 2018.
  • However, the lack of consumer knowledge and available appealing options for sustainable travel represent significant barriers to their desire to travel sustainably.
  • In fact, 37% of consumers do not know how to make their travel more sustainable and 34% say that sustainable destinations appeal less to them than other destinations.
  • This data represents an opportunity for travel and tourism operators to cater to the desires of younger travelers to visit more eco-friendly locations.
  • Additionally, 36% of travelers say they are unable to afford the extra costs that come with sustainable travel, so budget-friendly trips that incorporate sustainability will be in demand.
  • Online booking agencies that offer eco-friendly travel as a search filter have an advantage over those that do not have this functionality because 45% of travelers would be more encouraged to travel sustainability if such a filter were offered.
  • Travelers are also looking for ways to offset their carbon footprint when they travel (56%), so tools that allow them to contribute to reforestation or other ecology protection projects are likely to be popular in the future.
  • Cvent also recommends that hotel dining centers and restaurants remove single-use plastics in favor of more sustainable options and source their food from local farms.
  • Hotels and other lodging operators should carefully monitor their resource use and ensure travelers are aware of their conservation efforts.

Digital Experience Matters

  • At one time, online travel agencies (OTAs) were huge disruptors to the travel and tourism industry, but in the near future, "online travel bookings will be dominated by the companies that create the best mobile experience."
  • Therefore, companies that are web- or desktop-based must change their business model to ensure a positive digital booking experience.
  • In fact, Gillian Morris, Founder at HitList, believes that "by 2020 almost all travel business bookings are expected to be done from mobile, so paying attention to [a company's] website’s mobile version should be [its] topmost priority.
  • Search aggregators will not be as effective on mobile, so OTAs will need to revamp their processes to rely on "data science, artificial intelligence, predictive analytics, chatbots, voice commands, automation, personalization, augmented reality, and virtual reality" to provide bookings and experiences to travelers on their mobile devices.
  • Globalluxsoft recommends that travel startups focus on a mobile-first, data-science-based experience for consumers to beat "the legacy meta searches."
  • Artificial intelligence (AI) will help travel companies "predict the best routes for business trips and buy the cheapest airline tickets, complete with booking the rooms via AirBNB and renting the cars online."
  • AI will make the travel experience more personalized by providing relevant travel offers to consumers based on previous searches and preferences.
  • For example, as A.J. Dunn, Co-founder at Abroaders, stated, "Today, the travel business consultant will try to squeeze such a person into some offer. In 3–5 years, AI will rapidly compose the routes based on the customer’s preferences and previous travels."
  • The travel and tourism industry has been late to transform digitally, but experts predict that significant innovation will occur in the next few years that will redesign everything from travel rewards to smart hotels.

The Sharing Economy

  • With the majority of travelers already preferring Airbnb rentals over hotels for travel, the sharing economy is expected to heavily impact the travel and tourism industry in the next few years.
  • Again, millennials are the driving force behind the sharing economy and are determined to have unique traveling experiences that no one else has had.
  • Shared accommodations make it easy for travelers to book unique lodging in just about any place in the world, which is specifically attractive to millennials, who often want to immerse themselves in the local culture.
  • Uber and Lyft are also a part of the sharing economy and have impacted the travel and tourism industry by taking market share from taxi and limousine companies. As more people discover the ease of booking and paying for shared transportation, it is expected to continue to eat away market share from traditional companies.
  • Legacy hotels and other accommodations will need to adjust their business model to take advantage of the desire for sharing services. For instance, Hyatt’s OneFineStay in Britain has begun to offer shared rentals that are carefully curated prior to making them available to consumers.
  • New companies are jumping on board the sharing economy trend to develop tools that will allow consumers to use companies like Airbnb without the associated pain points.
  • Moreover, in the near future, experts suggest that business travel will begin to enter the sharing economy and that "corporate travel companies that are willing to take a chance on the sharing economy can come out ahead."

Post-COVID-19 Outlook

  • As of the end of April, losses in the travel and tourism industry reached $910 billion, which equals seven times the losses from 9/11.
  • The World Travel and Tourism Council expects the total losses for the industry to top $2.1 trillion by the time the crisis has bottomed out.
  • However, there are certain segments of the industry that will feel the impact more (or less) than others. For instance, Forbes predicts that Expedia will be sold because "bookings have come to a standstill, sparking a sharp decline in the company’s margins and sending its stock price into free fall."
  • Companies that are in a solid position to buy Expedia include "Google, Amazon, Alibaba, Costco, and Facebook," all of which would have the capacity and revenue to innovate the legacy OTA.
  • In contrast, and in line with the predicted expansion of the sharing economy, Forbes expects Airbnb to flourish in a post-COVID world because "private vacation rental companies stand to benefit... compared to large chain hotels with hundreds of rooms and shared communal spaces built to encourage large gatherings."
  • The CEO of the aforementioned OneFineStay also reiterated this new development, stating, "What we’re going through is unprecedented. People who don’t want to stay in a hotel because of social distancing are booking private homes. We don’t want to say we’re actively capitalizing on this, but it is happening."
  • Cruise ships will likely be subjected to heavier regulations, at least in the United States, due to their relatively lax environmental practices. The U.S. government may use COVID-19 as an excuse to put additional restrictions on cruise ships that "want to continue operating within the U.S. market."
  • Additionally, when cruise ships begin operating again, they will probably have significantly fewer passengers because as stated in Forbes, "if you’re worried about disease spread, you’d probably rather be sailing on a ship of 50 than 5,000, right?"
  • The COVID-19 crisis has also spurred innovation in the travel and tourism industry, with airports "turning to facial recognition tech, AI, automation, and biometric scanners designed to deliver a 'touchless' journey" for passengers.
  • Singapore, Hong Kong, and Abu Dhabi are all experimenting with thermal screeners, self-serve kiosks that take passengers' temperature, and "intelligent sterilization" robots, but U.S. airports are far behind in terms of technology.
  • As such, private companies are stepping up to help airports adjust to the new normal by developing technology like the Symptom Sense device that "screens blood oxygen levels, temperature, heart rate, and respiration rates without making physical contact."
  • Once these new technologies hit the market and airports open back up, travelers will have to adjust to biometric tracking, which will be a large shift from what has been mostly image surveillance. Whether passengers will want to share as much data as will be necessary to enable biometrics remains to be seen.
Sources
Sources