Posted on: September 18, 2024


Hospitality Challenges: What’s Affecting Your Business?

The hospitality sector is regaining lost ground after the pandemic, with businesses having re-opened, some pivoting and travellers eager to explore.

However, despite the resurgence, that’s not uniform and there are bumps in the road. And, it’s yet to return to pre-pandemic levels for all metrics.

That’s because the sector faces ongoing challenges that could impact your small-to-medium-sized enterprise (SME) like yours. Issues include:

  • Ongoing staff shortages
  • Addressing sustainability and net-zero targets
  • Bridging the digital skills gap
  • Inflation and higher commodity prices
  • Cybersecurity breaches
  • Personalisation and new digital technologies, and
  • The battle between online bookings and those through travel agencies.

Understanding and addressing these challenges will help you stay ahead and ensure your business thrives in this ever-changing landscape.

Ongoing Staff Shortages

One of the biggest hurdles in hospitality right now is the global staff shortage, and that includes Australia. The Australian Bureau of Statistics most recent data shows hospitality was the worst affected for staff shortages in 2023. The nature of the hospitality businesses doesn’t help: compared to other sectors, wages are low, hours long, burnout and challenging working conditions common and there are limited career progression opportunities. Some experts even ponder the hospitality sector is becoming inhospitable … to its workers!

A staff shortage can disrupt your operations, making it harder to maintain high service levels. Four in 10 customers complain about the lack of or poorly trained staff in hospitality, alas. To boost your talent pipeline, one option is to look to the ‘grey army’ of silver workers, those on the mature side, as this Austrade article suggests.

On the flip side, this shortage has led to better working conditions and career advancement opportunities for those in the industry, which helps with retention.

Sustainability and Environmental Targets

Hospitality operators are under the pump to meet sustainability and net-zero targets thanks to environmental and consumer pressures. For instance, major hotel brands such as Accor, Marriott, Radisson, Hilton, and Hyatt have already committed to significant sustainability goals.

While transitioning to sustainable practices can be challenges, it could open the door to opportunities for innovation and leadership in the market. As well, meeting these targets slims your environmental footprint and may attract eco-conscious guests. In fact, 85% of Australian hospitality services surveyed said that having more sustainable initiatives would help them attract more customers.

Digital Skills Gap

Digital tools and platforms are the lifeblood of the hospitality industry, but there’s a significant digital skills gap. A Torrens University study found just one in three staff have digital technology experience.

Many businesses are struggling to keep up with the latest technology trends, which can deflate efficiency and customer satisfaction. Consider training existing staff or outsourcing digital tasks so your business can stay competitive. If you’re in Victoria, check out these free courses to fast-track new workers.

And, if your hospitality SME has a great handle on digital technology, you might look at offering part time consultancy to help bring other SMEs up to speed. The sector is crying out for more skilled technology services with expertise in hospitality.

Inflation and Higher Commodity Prices

Worldwide inflation is also hitting Australia’s hospitality industry. Increasing operational costs and less consumer spending are having an impact. Although consumer spending has been rising since the pandemic. Many operators are finding it difficult to balance increased expenses with the need to remain attractive to customers.

To adapt, businesses are employing various strategies, such as:

  • Streamlining operations
  • Renegotiating supplier contracts, and
  • Exploring alternative revenue streams.

Staying flexible and proactive is essential in these economic conditions.

Cybersecurity Breaches

As hospitality businesses adopt more digital technology, so too the risks of cybersecurity breaches increase. The ClubsNSW data breaches earlier this year affect 20 clubs inadvertently exposing their customer data.

Robust cybersecurity measures help protect your guests’ information and maintain their trust in your business. Auditing, reviewing, updating and tightening your system security is a key way to safeguard against these threats and prevent costly breaches.

As your broker or adviser we can advise you on the best cyber insurance cover that meets your needs & requirements as part of your risk management approach.

Personalisation and New Technologies

In a competitive market, personalised customer experiences are more important than ever. New technologies like AI and machine learning are enhancing personalisation, allowing businesses to tailor services to individual preferences. These advancements can significantly improve guest satisfaction and loyalty. Keeping an eye on future developments in personalisation tech can help you stay ahead of the curve and offer unique, memorable experiences to your guests.

Direct Bookings vs. OTA Battle

The tension between hospitality operators and Online Travel Agencies (OTAs) continues to be a hot topic. While OTAs can boost visibility and bookings, they also take a significant commission. Balancing the benefits and challenges of using OTAs versus direct booking platforms is crucial for maximising your reach and profitability. Finding the right mix can help you reduce costs and build stronger, direct relationships with your guests.

Navigating the current challenges in the hospitality industry requires adaptability and proactive measures. From staff shortages and sustainability targets to digital skills gaps and cybersecurity risks, staying informed and continuously seeking improvement is vital. By understanding these issues and implementing strategic solutions, your business can thrive in the evolving hospitality landscape.

Stay updated on industry trends and seek professional advice to tackle these challenges head-on. Your ability to adapt and innovate will determine your success in this dynamic industry.


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