Insights From CIP: The Future of Leisure & Hospitality

Introduction

In this engagement, our team reviewed trends surrounding Technological Advancement, Societal & Workforce, and Sustainability & ESG themes within the Leisure & Hospitality industry. Since Leisure & Hospitality is rather broad, we narrowed our research to three major subsectors of Media, Restaurants/Pubs/Bars/Nightlife (RPBN), and Hotels & Accommodations in the United States and the United Kingdom.

In analysis, our team found that the theme that has had and is likely to have in the future the most pronounce impact across industries is Technological Advancement, while there were more targeted impacts regarding Sustainability and Societal/Workforce within each individual subsector. In terms of research priorities, our project is most applicable to the area of Innovation Opportunities and Risks, which entails understanding pertinent trends impacting selected subsectors and their implications. From tightening data privacy to increasing sustainability regulations, the recommendations we propose all come with significant risks to consider. On the other hand, the metaverse, among other technological advancements, offers unprecedented opportunities for companies to engage with consumers.

Research Methodology

Our research consisted of three distinct phases: primary research, secondary research, and synthesis. In the first phase, we conducted 9 interviews with experts in these subsectors to identify the most impactful theme in each subsector. These in-depth interviews informed the design of primary research surveys across our three sub sectors to deep dive into consumer insights across our two target countries. The surveys included approx. 50 questions and garnered 204 responses from respondents in the US and UK. Insights from the survey resulted in a series of interesting themes to explore in further research. The secondary research phase included a holistic literature review of scholarly sources and research papers, in addition to breaking innovation news, and analysis of corporate case studies within the leisure and hospitality industry. Our final synthesis accounted for primary and secondary research findings to create a point of view discussing key themes within the leisure and hospitality industry.

Summary of Findings & Risk Assessment

Across our three focused subsectors, we identified increased data collection and use as well as AI applications as a key driver for the next five to ten years. Within Media, WiFi streaming accounts and Connected TV allow media companies, as well as all advertising companies, access to individual demographic, habitual, and preferential data points about consumers. This will be a game-changer for advertisers, as they can use this data to personalize the advertisement experience as well as make it interactive. Streaming services can use data to make better content recommendations, which we found in our survey are widely used by viewers; this will have a tremendous impact as the competition between streaming platforms (Amazon, Netflix, etc.) and traditional studios (Paramount, Universal, etc.) becomes increasingly fierce. For RPBN, the order data from delivery platforms gives insights not only into their most popular menu items but also into what their customer demographics and spending habits look like. Finally, for Hotels & Accommodations, data collection and analysis will allow for increased customer segmentation and a better, more seamless customer experience. Especially within Hotels & Accommodations, we found that high-value customers (aka frequent travelers) value a personalized experience more than anything and generally support giving up their data to achieve it. Hotels & Accommodations can use data collected through their apps, websites, and employee notes combined with AI to personalize each guest’s experience – from check-in/out to room stay to suggested activities and restaurants and more. Across the board, the evolution of AI capabilities (and the data collection required to run them) will have a tremendous impact across Leisure & Hospitality.

However, there are significant risks for all three subsectors surrounding increased data collection/use and AI investment and development. For all companies, they must keep a close watch on the evolving data collection and usage laws in the US and UK; these laws and regulations are developing quickly, and we found in our survey that most consumers are at least somewhat concerned about their data being collected. Companies in all three subsectors will also need to invest in cybersecurity measures and insurance; with the large amount of data they have / will have on consumers, they must take initiative to prevent hacks. Even then, hacks are still a large risk, so they’ll need to have appropriate insurance in the event of a data breach.

Media

Diving further into Media, we identified five key trends. Firstly, the Metaverse is gaining momentum as awareness and technology increase, especially among younger consumers. Secondly, as mentioned earlier, Connected TV will have implications for algorithmic recommendations and streaming services being able to push their own content in front of viewers, intensifying the already fierce competition between streaming services and traditional film studios. To this end, we’ll continue to see growth in “cord-cutters,” canceling their cable subscriptions and using only streaming. However, with increase in number of available streaming services, costs are rising and we predict a trend of partnerships between streaming services and bundling offerings. This is supported by our survey findings that consumers are most concerned with price and content selection when choosing their paid services. They are less concerned with media ethics or sustainability practices, although we found that US consumers are more sensitive to negative news surrounding entertainment companies and are more likely to change their viewing habits because of it. Finally, we predict that the trend of increasing representation, both in front of and behind the camera, will continue to grow as it is important to viewers; most still do not feel represented in most of the content they consume.

Restaurants, Pubs, Bars and Nightclubs

In RPBN, the four main trends identified are data-driven restaurant model, elevated customer experience through automation, push for green packaging & reduction in food waste. and delivery intermediaries and flexible kitchen spaces. As previously mentioned, Restaurants, Bars, and Nightclubs are increasingly using data to track and predict customer preferences and optimize the food management and inventory processes. This is seen in the proliferation of advanced point of sale systems that incorporate end-to-end data tracking and management. Secondly, we’ve also seen automation taking place in elevating customer experience in PRBN such as contactless automated ordering systems that reduce wait time. Thirdly, due to regulatory pressure and changing customer preferences, restaurants and bars are adopting more green food packaging practices such as plastic straws, plastic bags, and Styrofoam container bans. Finally, growth in e-commerce, customer changing habits, and rising operational costs lead to delivery intermediaries and flexible kitchen spaces.

Hotels and Accommodations

In Hotel and Accommodations, we also identified four main trends: continued competition with online travel agencies (OTA), the rise of personalized services and reduced costs through technology and automation, increasing consolidation and a shift to the franchisee operated model of operation, and increase in use of consumer data and the rise of data security. Firstly, hoteliers are directing efforts to capture direct bookings to increase profitability, but the competition between hotels and OTAs (such as booking.com) is set to continue. Second, hoteliers are constantly upgrading to newer technologies and increasing automation to personalize and improve user experience as well as reduce costs. Many hotel chains have been the leaders on this front. For example, Marriott introduced resorts in augmented reality, Alexa for Hospitality brings voice assistant tech to hotels, and several hotel chains have deployed Smart Room Keys that allow customers to unlock rooms with their phones, skipping the check-in line entirely. Thirdly, increasing consolidation in the hotel industry and a shift from owner to franchisee operated operations model have increased the importance of centralized cloud-based property management systems, which was accelerated even further with COVID. Lastly, the hotel industry is increasingly collecting and leveraging consumer data. This has been accompanied by a rise in risks of data breaches and higher importance of data security. In 2018, Marriott announced a data security incident affecting its Starwood database resulting in the exposure of 9.1M encrypted payment card numbers. Hotels need to balance automation, personalization, and privacy to reduce these risks.

Conclusion and Discussion

The Leisure and Hospitality industry is going through major transformations in many areas. While technology continues to be a key focus, sustainability will undoubtedly take a bigger role with companies realizing the need to be ahead in this space to maintain relevance. However, these growing innovations also present a new realm of risks that companies and consumers alike within the leisure and hospitality industry should take into consideration when planning. Further work can be done in pinpointing specific implications of each trend on the subsectors, key impacted stakeholder groups, and recommending appropriate actions. We would recommend that companies in this space take a deep dive in their organizational strategy to understand which innovations of those discussed make sense within their business model, then conduct a comprehensive business impact assessment to understand key risk areas to address in implementation.