Hospitality and Travel: Background

Industry Composition:

The hospitality and travel industry is a collection of companies catering to the needs of people who travel, either leisurely or for business. These companies provide a range of services and products. The bulk of the industry is composed of airlines and charters; lodging, ranging from campgrounds to five star hotels; and foodservice establishments, including restaurants, cafes, and catering companies. The industry also includes travel agencies and services, such as car rental or tours; gambling, and recreation and attractions, including sporting events, amusement parks, and roadside attractions. These different services also merge to offer options such as resorts or cruise lines - a mix of lodging, attractions, and even transportation. In the United States alone, there are over four million guest accommodations available, and many billions of dollars are spent on travel; with global travel becoming more affordable and in greater demand, the hospitality and travel industry will become increasingly important.


Hospitality has its recorded origins in the Roman Empire, when Roman businessmen and authorities had to travel much further distances to accomplish their work. Originally, inns were the host’s actual house. The host charged guests for spare rooms and food that they had, eventually realizing that they could do this as a full time job. Once demand started to increase, people created buildings designed specifically for tourists or passing businessmen and authorities, as well as buildings specifically to feed these passer-bys. Despite much refinement and evolution in the services and offerings, as well as the invention of the more modern forms of transportation, lodging and foodservice remains exactly as it was then.


Delta Air Lines, Southwest Airlines and United Continental proved best able to transport people in the often fickle U.S. market, the world’s largest, and have emerged, along with Air France and Lufthansa, as leaders in airline travel. Big travel services providers include American Express, Cendant, Expedia and Travelocity. In terms of lodging; Hilton, Marriott, Wyndham, Accor, Best Western and Intercontinental HG are the largest hotel groups in the business. Major companies in the global foodservice market are McDonalds, Yum! Brands, Starbucks and Darden Restaurants. In the entertainment industry, Time Warner, Vivendi Universal and Walt Disney are major players.


The Internet has changed the shape of the travel industry; it is no longer necessary to call a travel agent, hotel, and airline to arrange a trip. Instead, travelers are able to log into a travel website and they can plan their entire trip in a couple minutes. This has increased competition among establishments in this industry and caused many independently owned and operated hotels and other lodging places to join national or international online reservation systems. Computer reservation systems have enabled the consumer to have direct control over the price and quality of a trip. Another recent change to the reservation system is the dramatic improvement in individual airline and hotel sites in order to compete with online booking sites. Since the websites of the actual providers do not need to take a fee on top of the price, these are often where the best deals are found.

The foodservice industry is also being affected by technology. Point-of-service (POS) systems enhance efficiency by combining functions such as keying in customer orders, sending orders to the kitchen, totaling and printing checks, authorizing credit cards, and tracking sales.

The industry as a whole is moving towards niche markets, or specialized areas of interest to attract a particular type of customer. People want to do what interests them when they travel and these companies realize that. For instance, several companies will emphasize golf resorts in the region if that is what interests the consumer.

The airline industry has been seeing a trend towards Discount flyers for short and mid distance flights. Companies, most notably Southwest Airlines, have created profitable business plans offering discounted flights for consumers reduced budgets. A notable fact for the long distance hauls is the move towards larger more luxurious planes with the ability to fly significantly farther than yesterday’s jumbo cruisers. Cities that have not traditionally been major airport hubs could not become important players in the global market with the advent of these newer long distance flyers.

Future Outlook:

The airline segment has been doing very well recently. After initial increases in 08-09, occupancy rates have been on the rise even with reduced budgets by consumers. Despite recent setbacks moving the focus back towards safety, the segment is expected to do well. As a proxy for this growth, international arrivals in the U.S. are expected to increase by 40% between 2009 and 2014. The largest amount of growth has been in developing countries.

In the food services segment, competition remains steep and profit margins low. Studies in the United States have shown people are eating out more often, and as a result, demand is expected at the least to remain stable. These companies must remain focused on cost control, but with a rise in consumer confidence, growth may be expected to continue. Lastly, the lodging segment has done well the last five years. National chains have seen the most growth, as they offer predictable prices with a consistent level of quality. Hotels in general have been enjoying rising utilization rates, albeit with kinder prices for consumers.

For the industry as a whole, increased globalization will help to drive demand in all segments. The recovering economy will help as well, as consumers will have more money to spend on discretionary products like vacations, entertainment and upscale dining again.


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