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Hospitality Industry 4.0 and Climate Change

• Original Paper
• Published: 23 January 2022
• Volume 2 , pages 1043–1063, ( 2022 )

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• Adel Ben Youssef 1 &
• Adelina Zeqiri 2  

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This paper investigates under which conditions implementation of Industry 4.0 in the hospitality sector could help to combat climate change. The paper takes the form of a systematic literature review to examine the main pillars of Industry 4.0 in the hospitality industry and discuss how these technologies could help combat climate change. We propose five conditions under which Industry 4.0 could help to combat climate change. First, in the hospitality industry, increased use of Industry 4.0 technologies induces an increase in energy efficiency and a reduction of GHG. Second, increased use of Industry 4.0 technologies induces a reduction in water consumption and an increase in water use efficiency. Third, increased use of Industry 4.0 technologies induces a reduction in food waste. Fourth, increased use of Industry 4.0 technologies can promote Circular Hospitality 4.0. Fifth, increased use of Industry 4.0 technologies helps to reduce transport and travel. Hospitality Industry 4.0 technologies offer new opportunities for enhancing sustainable development and reducing GHG emissions through the use of environmentally friendly approaches to achieve the Paris Agreement objectives.

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Introduction

Climate change is considered one of the most serious problems faced by humanity today. Climate change is increasing and is characterized by record-breaking weather events in the form of extreme heavy rainfall, floods, and global temperature shifts with 2010–2019 the hottest decade recorded so far [ 1 ]. According to NASA (2021), the highest temperatures so far were recorded in 2020 despite a large decrease in global emissions due to the COVID-19 crisis. The Intergovernmental Panel on Climate Change (IPCC, 2021) report warns that in relation to climate change, the “worst is yet to come” and will include extreme heat waves, widespread hunger and drought, rising sea levels, and extinction and that although “Life on Earth can recover from a drastic climate shift by evolving into new species and creating new ecosystems. Humans cannot.”

Climate change is affecting all areas of our lives; land areas are decreasing due to rising sea levels [ 2 , 3 ], agricultural productivity is decreasing [ 3 , 4 , 5 ], and labor productivity and human health [ 6 , 7 , 8 , 9 ] and the tourism and hospitality industries [ 3 , 10 ] are all being affected.

The new technological revolution (Industry 4.0) could help to combat climate change; how successful it will be is debatable. There is a stream of work investigating the extent to which Industry 4.0 can tackle climate change [ 11 , 12 , 13 , 14 , 15 ]. However, the findings are inconclusive—some studies find a positive impact of Industry 4.0 on climate change, and others find a negative or no effect.

By definition, the tourism and hospitality industry is diverse and includes restaurants, hotels, casinos, airlines, and tourist attractions [ 16 ]. The hospitality industry includes accommodation [ 17 ], food and beverages [ 18 , 19 , 20 ], and tourism-related services [ 15 ]. “Tourism comprises the activities of persons travelling to and staying in places outside of their usual environment for not more than one consecutive year for leisure, business or other purposes” [ 20 ].

Debate over the relationship between tourism and climate change [ 21 ] has been ongoing for several years. There is a strand of work on the potential effects of climate change on tourism and hospitality and the contribution of tourism to climate change [ 22 , 23 , 24 , 25 , 26 ]. According to Gössling [ 27 ], this sector is considered one of the main contributors to GHG emissions. Tourism contributes hugely to carbon emissions [ 28 , 29 ], which account for 5% of global carbon emissions which are due 75% to transport, 21% to accommodation, and 4% to other tourism activities [ 20 ].

The tourism and hospitality industry is one of the sectors that has been hit hardest by the COVID-19 pandemic. Part of the solution to both climate change and the COVID-19 pandemic is behavioral change [ 30 , 31 , 32 ,  33 ]. During the COVID-19 pandemic, emissions were reduced and consumers’ behavior changed. Citizens were focused more on ecological and sustainability issues [ 34 ]. According to IEA [ 35 ], the biggest reduction in emissions was seen in the transport sector. Emissions from oil used for transport accounted for over 50% of the overall decrease in emissions in 2020. The restrictions imposed to reduce the spread of the virus resulted in about a 14% drop in the emissions from this sector compared to 2019, with the hardest hit being aviation where in 2020 emissions almost halved and fell to 1999 levels.

Another strand of work examines the links between the hospitality industry and Industry 4.0 [ 36 , 36 , 38 ], [ 39 , 39 , 40 , 41 , 43 ]. Most of these studies focus on reshaping the hospitality industry as a result of implementing Industry 4.0 technologies and providing personalized experiences and digitalized services. However, work on the direct link between Industry 4.0 and environmental and climate change issues in the hospitality sector is not well developed. A few studies [ 44 , 45 ] investigate environmentally friendly practices in the hospitality industry.

The aim of this paper is to investigate under what conditions implementation of Industry 4.0 in the hospitality sector could help to combat climate change. First , it examines the main pillars of Industry 4.0 in the hospitality industry and discusses how it is reshaping the sector. We consider cyber physical systems (CPS), the Internet of Things (IoT), virtual reality (VR), augmented reality (AR), big data, artificial intelligence (AI), and robotics. Second , we explore the relationship between the hospitality industry and climate change by discussing the effects of climate change on tourism and the contribution of tourism to climate change. We consider adaptation and mitigation strategies to fight climate change. Third , we propose five conditions under which Industry 4.0 could help to combat climate change. Hospitality Industry 4.0 enables, first , increased energy efficiency, second , increased water use efficiency, third , reduced food waste, fourth , “circular hospitality,” and fifth , replacement of transport and travel by VR.

Research objectives include (1) a comprehensive literature review of hospitality Industry 4.0 and climate change, (2) five conditions under which Industry 4.0 could help to fight climate change, and (3) formulation of a future hospitality Industry 4.0 and climate change research agenda. We address the following research questions:

How can Industry 4.0 induce an increase in energy efficiency and a reduction in GHG emissions in the hospitality industry?

Can Industry 4.0 lead to reduced consumption of and more efficient use of water?

How can Industry 4.0 help to reduce food waste?

Can Industry 4.0 promote Circular Hospitality 4.0?

Will Industry 4.0 result in reduced transport and travel?

The paper is organized as follows: the “ Methodology ” section discusses the methodology, the “ Theoretical Background: Main Definitions and Concepts ” section provides the main concepts of hospitality Industry 4.0 and examines the relationship between climate change and tourism, the “ How Hospitality Industry 4.0 Could Help to Combat Climate Change: Five Proposed Conditions and the Future Research Agenda ” section shows how hospitality Industry 4.0 could contribute to reducing climate change, and the “ Concluding Remarks and Policy Implication ” section offers some conclusions and policy implications.

Methodology

The paper is based on a systematic literature review which enables five propositions for how Industry 4.0 could help to combat climate change. A literature review allows more choices compared to an empirical study. A literature review allows the researcher to address broader questions, and by the ability to focus on patterns and connections among many empirical findings, a literature review can address theoretical questions that are beyond the scope of a single empirical study. While empirical studies allow single conclusions, a literature review allows several [ 46 ].

The objective of a systematic review is to formulate a well-defined question and provide a quantitative and qualitative analysis of the relevant evidence, followed (or not) by a meta-analysis [ 47 ]. The strengths of a systematic literature review are that they allow a focus on a unique query, retrieval of articles for review, objective and quantitative summaries, and inferences based on evidence [ 48 ]. However, a literature review also has some limitations such as the heterogeneity in the studies selected, possible bias from single studies, and possible publication bias [ 49 ]

The literature on hospitality Industry 4.0 and climate change is very heterogeneous. We have tried to identify the most relevant studies and those most likely to avoid biased findings. We searched the literature using the keywords “climate change,” “hospitality,” “tourism,” “Industry 4.0,” “energy efficiency in hospitality,” “circular hospitality 4.0,” “water in hospitality,” “food waste in hospitality,” “travel and transport,” “Industry 4.0 technologies,” and “virtual tourism.”

The corpus of literature was based on the snowballing technique, i.e., identifying additional papers based on the papers identified—which is especially useful if identification of relevant publications is difficult. We used the reference lists in the initial (more than 2 papers) identified to identify other papers on the topic. As our search progressed, we refined the list of keywords. We identified a range of journal articles from different fields.

Wohlin [ 50 ] states that snowballing can be particularly useful for systematic literature reviews:

In particular, it should be noted that snowballing is particularly useful for extending a systematic literature study, since new studies almost certainly must cite at least one paper among the previously relevant studies or the systematic study already conducted in the area. Thus, snowballing is by deduction a better approach than a database search for extending systematic literature studies. The actual evidence for this assertion is left for further research.

Theoretical Background: Main Definitions and Concepts

What is hospitality industry 4.0.

Rapid technological developments and innovation result in paradigm shifts [ 51 ]. The most recent is the 4th industrial revolution which like previous industrial revolutions is characterized by its effects on industry. The first industrial revolution involved mechanization and the introduction of steam and water power,the second industrial revolution saw the introduction of mass production and assembly lines based on electrical power; the third industrial revolution involved automation of production and computers. The fourth industrial revolution is characterized by CPS and interconnection between the virtual and physical worlds. Frank et al. ([ 52 ], p. 343) define Industry 4.0 “as a new industrial maturity stage of product firms, based on the connectivity provided by the industrial Internet of things, where the companies’ products and process are interconnected and integrated to achieve higher value for both customers and the companies’ internal processes.”

The fourth industrial revolution is making it hard for humankind to distinguish between what is artificial and what is natural [ 53 ]. Industry 4.0 is affecting almost every sector of the economy, including the hospitality industry. Hospitality 4.0 is one of many sub-concepts (e.g., Tourism 4.0,Hospitality 4.0; Medicine 4.0, Agriculture 4.0, Travel 4.0, Energy 4.0) under the broader Industry 4.0 umbrella [ 53 , 54 ]. The aim of Hospitality 4.0 is to create more personalized and digitalized services for consumers and resolve problems related to massification, individual experiences, and sustainability. In this context, Tourism 4.0 allows a richer tourist experience [ 55 ].

Smart hospitality is envisaged as an interoperable and interconnected system enabling information sharing which will provide added value for the entire ecosystem of stakeholders via digital platforms [ 56 , 57 ]. Smart hospitality will allow information exchanges along the value chain and will put customers at the center of the process through the provision of personalized and contextualized services and experiences [ 57 ]. The new technologies have changed consumer behavior in terms of use of hospitality services [ 15 ,  58 , 59 ]. Digitalization is allowing consumers to engage in various activities. Consumers are requiring more than basic facilities, and hospitality must change to satisfy their expectations.

The world has seen a massive increase in environmental pollution since the second industrial revolution. While existing studies link Industry 4.0 technologies to environmental management and climate change, the lack of a strong focus and positive actions are calling for better technological solutions to saving the environment and increasing sustainability, e.g., Industry 5.0. The concept of Hospitality 5.0 has already been advanced [ 60 ]. While Industry 4.0 is concerned mainly with automation, Industry 5.0 will focus on synergies between humans and autonomous machines [ 61 ].

Hospitality 4.0 Technologies

The fourth industrial revolution includes a set of technological developments such as CPS, the IoT, AR, VR, AI, robotics, big data, blockchain, and 3D printing. There is stream of work which examines the links between the hospitality industry and the various pillars of Industry 4.0 such as the IoT [ 36 , 43 , 62 , 63 ], VR [ 37 , 38 , 64 , 62 , 63 , 67 ], AR [ 37 , 40 , 68 ], big data [ 42 , 43 ], and AI and robotics [ 39 , 41 ]. Industry 4.0 technologies can be interconnected using horizontal, vertical, and end-to-end system integration tools along the value chain [ 11 ].

CPS are the main pillar of Industry 4.0. They are defined as integrated and interconnected physical and virtual arrangements based on computation, communication, and control systems [ 69 ]. Sensors, 3D scanners, cameras, and radio frequency identification (RFID) devices are used by CPS to collect data [ 70 ]. Embedded CPS enable the exchange of data in smart networks [ 71 ]. The IoT is based on the interconnection between CPS and the Internet [ 72 ]. According to Lee et al. [ 69 ], CPS involve interconnection of the physical and cyber worlds which enables access to real-time data and smart data management, analytics, and computational capability. CPS allow autonomous and decentralized production processes [ 73 ].

The IoT involves interconnectivity among physical devices such as sensors, actuators, RFID tags, laptops, and mobile phones, and their communication through networks or the Internet which enable integration of the physical and cyber worlds [ 74 ]. RFID enable the identification of objects or humans,wireless sensor networks can sense the environment and process data through large numbers of nodes which enable communication and computation; smart technology can transform objects into smart objects able to communicate with users in active or passive ways; and nanotechnology allows interconnection of nanoscale objects [ 75 ]. The IoT includes smart vehicles and smart homes to enable integration of services such as notifications, security, energy saving, automation, communication, computing, and entertainment [ 76 ]. In the context of the hospitality industry, the emergence of IoT technology is transforming hotels into smart hotels within smart cities [ 77 ]. Application of the IoT in the hospitality sector allows interactions with tourists and collection of real-time tourist data. It allows instant, personalized, and localized services and accurate evaluation of tourist behaviors and preferences [ 62 ].

Another pillar of Hospitality 4.0 is AR which involves the combination of real and virtual objects in a real environment, synchronization of real and virtual objects, and interaction in 3D and in real time [ 78 ]. There are several types of AR technologies [ 37 ]: marker-based AR enables the scanning of physical images through a camera and visual markers which can be sensed by readers; markerless AR or GPS-based AR provide data on precise location; projection-based AR allows projection of artificial light on the surface of the real world; and superimposition-based AR enables partial or complete replacement of the original object view by an augmented view. In recent years, AR has provided opportunities for hospitality businesses and tourists. It provides tourists with more personalized services and additional benefits such as navigation of selected locations and allows tourists to share and exchange information and opinions with other tourists in large networks [ 68 ].

While AR augments elements in the real environment, VR simulates reality [ 79 ]. According to Rajesh Desai et al. ([ 80 ], p. 175), VR is “a computer simulated (3D) environment that gives the user the experience of being present in that environment.” It provides people with opportunities for virtual travel [ 81 ]. It contributes to sustainable tourism by providing the opportunity for low cost and environmentally friendly travel [ 38 ]. VR allows people to visit difficult to access places, to travel across time, and to enter fantasy worlds [ 82 ] and allows people of all ages and those with reduced mobility to enjoy tourism and participate in online communities [ 38 ].

Big data analytics are related to recent technological developments which have increased the amount of data generated making traditional techniques insufficient to cope with their processing and analysis. The hospitality industry captures and generates huge volumes of data on consumer preferences and characteristics. In the hospitality sector, big data includes internal big data which are held in central databases and external big data which are collected from the Internet via sensors. Data can be classified based on their characteristics and type, and hospitality ecosystem actors can access and use these data to prepare strategic business plans and manage their operations in a dynamic way [ 57 ]. The hospitality industry needs to understand tourist preferences, behaviors, and locations in order to offer personalized services. This involves the collection, storage, and use of data in appropriate ways and their protection from threats. Computing resources help to enhance the security and interconnectivity of tourist networks with the hospitality industry [ 62 ]. However, secure data storage is a major problem.

AI and robots are used in the hospitality sector to create more personalized and unique experiences at low cost. Service robots in workplaces maintain contact with people in a shared non-industrial environment [ 83 ]. Robots can replace humans in R&D activities [ 84 ]. Robots are being used by airport management to substitute for traveler information centers and allow services that do not require human interaction. Hotels use robots to support both their employees and their consumers [ 39 ]. Continued development of advanced technology will make AI and intelligent robots more affordable and faster and more reliable than humans.

Tourism and Climate Change: Twofold Relationship

The relationship between climate change and tourism has been the topic of debate for many years (Fig. 1 ). The first international climate change conference in the context of tourism was held in 2003 in Djerba, Tunisia [ 85 ] when the importance of the tourism industry to the global economy and its vulnerability to the impacts of climate change were emphasized. It was agreed that there was a need to develop sustainable policies and reduce GHG emissions [ 85 ]. In 2007, the second International Conference on Climate Change and Tourism was held in Davos, Switzerland, and discussion on climate change and tourism continued in the framework of the United Nations Environment Programme, the World Meteorological Organization, and the United Nations Framework Convention on Climate Change (UNFCCC), at the UN Climate Change summit in Bali. The conference theme “Tourism: responding to the challenge of climate change” was the centerpiece of the 2008 World Tourism Day [ 20 ]. UNWTO et al. ([ 20 ], p. 13) suggest that “climate is a key resource for tourism and the sector is highly sensitive to the impacts of climate change and global warming, many elements of which are already being felt.” Debate on the importance of climate change was reignited by the definition of the UN Sustainable Development Goals (SDG). SDG 13 was aimed at combating climate change [ 86 ] and led to the Paris Agreement on Climate Change [ 87 ]. In 2018, the World Travel and Tourism Council (WTTC) and the UNFCCC agreed a common agenda for climate action related to travel and tourism to tackle climate change.

Two-way relationship between tourism and climate change. Source: Patterson, Bastianoni and Simpson [ 96 ]

Debate continues on the relationship between tourism and climate change [ 21 ] and its complexity [ 22 ]: tourism affects climate change and climate change affects tourism [ 24 ]. On the one hand, tourism and its associated activities contribute to climate change [ 88 ]. Tourism contributes to GHG emissions through transport, accommodation [ 89 ], food production and consumption [ 90 ], and other activities. In the case of transport, the largest contributor to carbon emissions is air travel, followed by car transport [ 89 ]. On the other hand, tourism is affected by climate change in the form of heat waves and rising sea levels. Other impacts include changes to arctic temperatures and ice, precipitation amounts, ocean salinity, and wind patterns, and more frequent occurrence of extreme weather events such as droughts and tropical cyclones [ 91 ]. These aspects affect coastlines and cause beach erosion, water shortages, forest fires, desertification, extinction of wildlife, and damage to heritage sites [ 90 ]. Furthermore, Hall et al. ([ 92 ], p. 2) suggest that climate change “is extremely significant for tourism because of its influences on the economic viability of tourism destinations and activities, tourist behavior, and its ramifications for the entire tourism system.” According to IPCC [ 93 ], tourism is already being affected by global warming, with increased risks of an additional 1.5 °C of warming in specific geographic regions which will affect beach and snow sports destinations. The link between tourism and climate is important for people planning holidays and other leisure travel. According to Zanni et al. [ 94 ], considerable numbers of people have changed their travel plans due to weather-related disruptions. The weather affects destination choices and tourist satisfaction [ 95 ].

Adaptation and Mitigation Strategies

There are two important climate change strategies in the tourism industry: adaptation and mitigation [ 20 , 96 ]. According to the findings of the 5th IPCC Assessment Report (AR5), summarized by Scott, Hall, and Gössling ([ 97 ], p. 15), it is suggested that “all tourism destinations will need to adapt to climate change, whether to minimize risks or to capitalize on new opportunities.” Adaptation involves means to moderate or curb the impact of climate change by institutions, governments, individuals, and corporations [ 24 ]. Adaptation efforts in the tourism sector differ across sectors, activities, and destinations. They include protection of coastlines and provision of artificial snow to allow continued tourism to ski resorts experiencing less snowfall during the skiing season [ 26 , 98 ]. The strategies employed depend on different social, economic, and environmental conditions [ 99 ].

Climate change mitigation includes efforts to reduce the effects of tourism [ 24 ] which can be achieved via use of Industry 4.0 technologies. Below, we discuss in more detail five proposed ways that Industry 4.0 technologies could allow the hospitality industry to reduce its carbon footprint.

How Hospitality Industry 4.0 Could Help to Combat Climate Change: Five Proposed Conditions and the Future Research Agenda

Ben Youssef [ 11 ] proposes four ways that Industry 4.0 could help combat climate change by promoting energy efficiency and achieving substantial energy gains, enabling the circular economy, achieving sustainable development through eco-innovation, and allowing significant technology transfer to the least developed countries (LDCs). The application of Industry 4.0 to combat climate change requires consideration of three main issues [ 11 ]: first, cloud computing providers need to shift to renewable energies and use less fossil fuel energy,second, economic and societal transformations will be needed to enable massive adoption of Industry 4.0; third, Industry 4.0 will require governance and agreements about ethical considerations.

We propose five conditions under which Industry 4.0 could help to combat climate change: first, increased use of Industry 4.0 technologies to induce increased energy efficiency and reduction of GHG from the hospitality industry; second, increased use of Industry 4.0 technologies to induce a reduction in water consumption and an increase in water use efficiency; third, increased use of Industry 4.0 technologies to induce a reduction in food waste; fourth, increased use of Industry 4.0 technologies in the hospitality industry to promote circular Hospitality 4.0; and fifth, increased use of Industry 4.0 technologies to reduce transport and travel. The motivation of the choice of these propositions comes from the literature review. The previous work treats these issues as separate topics; we suggest that they are crucial for reducing the carbon footprint of the hospitality industry.

Proposition 1: Increased Use of Industry 4.0 Technologies to Increase Energy Efficiency and Reduce Greenhouse Gas Emissions

Several studies [ 100 , 98 , 102 ] show that buildings consume 40% of the world’s energy which accounts for 30% of CO2 emissions. There should be an emphasis on green incentives, green programs, and modern heating, cooling, and water systems using digital technologies to record and report green efforts and use energy more efficiently to reduce carbon emissions. On average, some 30% of energy savings could be achieved through implementation of intelligent automation technologies in buildings [ 102 ]. According to Harish and Kumar [ 103 ], new buildings could achieve energy savings of between 20 and 50% through the incorporation of appropriate building, heating, ventilation, air conditioning (HVAC, 20–60%), lighting (20–50%), water heating (20–70%), refrigeration (20–70%), and electronics and other designs (10–20%).

New technologies could provide hotel staff with critical data and send alerts to help them manage energy consumption and increase sustainability. The IoT could contribute to more efficient energy use in the hospitality sector. The hospitality industry is making efforts to offer more personalized services and unique experiences while also trying to respond to calls for more sustainable travel. A sustainable travel report from Booking.com (2018) found that 87% of global travelers are keen to find ways of more sustainable travel.

The IoT will allow more efficient energy use based on smart devices and energy-saving systems. According to Eskerod et al. [ 44 ], the use of smart energy management systems could reduce hotel energy costs by between 20 and 25%. Many hotels are employing smart lighting, temperature control equipment, and devices such as compact fluorescent bulbs and LED lights to reduce energy use [ 62 ]. Use of heating and cooling technologies is temperature dependent,higher temperatures increase use of air conditioners and call for more efficient air conditioning technologies [ 104 ].

Smart HVAC systems would optimize energy consumption in particular for lighting. Use of sensors to monitor HVAC systems saves time and reduces maintenance requirements. A control center can provide information related to lighting including energy consumption per light fixture [ 44 ]. Industry 4.0 technologies enable automatic adjustment to room temperatures and automatic switching off of lights and TVs when guests leave their rooms.

As Industry 4.0 technologies become more ubiquitous, they are being employed in more places and for different purposes. Reducing energy consumption requires both implementation of these new technologies and training in how to use them to increase sustainability. Industry 4.0 technologies to increase energy efficiency will become imperative for hospitality businesses in the future. Cybersecurity, reliability, and workforce skills must be considered in the adoption of these technologies to increase energy efficiency.

While technology enables substantial improvements in terms of energy savings and energy efficiency, tourist behavior also matters and the possible “rebound effect” when improvements to energy efficiency do not translate into less demand for energy must also be considered [ 105 ]. The improvements enabled by technology can be reduced by the attitudes and behavior of tourists. However, we would suggest that the potential improvements enabled by technology will be greater than the potential negative effects of tourist behavior.

Proposition 2: Increased Use of Industry 4.0 Technologies to Reduce Water Consumption and Increase Water Use Efficiency

Water consumption is a major item in the hotel and accommodation sector and contributes significantly to carbon emissions. Tourist activities increase the sector’s carbon footprint and affect water resources. It is estimated that water consumption per tourist per day ranges between 84 and 2,000 l, or up to 3,423 l per room per day [ 106 ]. According to [ 107 ], showering is the biggest consumer of water,in apartments, hotels, and houses, around 25% of total monthly water consumption is due to showering. During the winter when temperatures are low, there is a dramatic increase in consumption of hot water [ 107 ]. Huge volumes of water are consumed by laundries which accounts for approximately 35% of their total energy consumption, 65% of which is related to drying and finishing.

Hotels are implementing innovative water-saving devices which allow collection and use of rainwater, separation of “gray” water for composting toilets, and water recycling. Hotel guests should be encouraged to reuse towels, and baths should be replaced by showers [ 108 ]. The IoT is offering new perspectives on smart buildings and more efficient use of resources [ 107 ]. IoT-enabled water meters can be used to monitor water use at low cost. Use of smart bathrooms equipped with smart showers, smart sinks, flow-controlled toilets, etc. helps to reduce water consumption in hotels,smart showers would result in more efficient use of water. A recycling shower developed by OrbSys saves 90% on water consumption and 80% on energy compared to a regular shower.

There are several examples of the benefits deriving from Industry 4.0 in terms of water use efficiency in the hospitality industry. Prasad et al. [ 109 ] propose a smart water quality monitoring system using the IoT and remote sensing technology to ensure water quality and provide real-time water monitoring. Saseendran and Nithya [ 110 ] describe an automated water usage monitoring system which uses the IoT to control domestic and industry water use and water waste via wireless sensor nodes. Ahemed and Amjad [ 111 ] discuss a water management system (WMS) which monitors water storage tanks and takes action if water levels become too high or too low. Pereira-Doel et al. [ 112 ] study a hotel in Spain that has smart technology installed in 20 individual rooms. Their findings indicate that real-time feedback induced 12.06% reduced guest shower times on average, equivalent to 40.91 s and 6.14 l of water.

However, water savings depend also on tourist behavior. Raising awareness about the fragility of our environment and the importance of protecting it is vital. Prompts in the areas most exposed to tourism remind tourists of the importance of careful use of water.

We would suggest that the potential offered by new technology is enough to overcome any rebound effects. As Industry 4.0 technologies evolve, their optimization will enable better environmental performance and better adaptation to water scarcity and water availability for the hospitality industry.

Proposition 3: Increased Use of Industry 4.0 Technologies to Reduce Food Waste

About 1.3 billion tonnes of food is wasted annually [ 113 ], and that waste food is responsible for about 8% of global GHG emissions [ 114 ]. How much food is wasted in the hospitality industry is debatable. In the UK, it is estimated that, annually, 920,000 tonnes of food is wasted at outlets, 75% of which is avoidable waste of still edible food [ 115 ]. In Sri Lanka, it is estimated that 79% of total hotel waste is food waste [ 116 ]. Large amounts of food are wasted every day, and much of it could be used to feed the world’s hungry people. Action is needed to reduce and prevent food waste.

Recent digital innovations could help reduce food waste in the hospitality sector by allowing more accurate forecasting of demand and supply. AI and big data, smartphones, and apps Footnote 1 can help to reduce food waste from kitchens. AI devices send notifications about the cost of the food being thrown away and record daily waste. This kind of information helps hotels, restaurants, etc. to reduce food waste and to better understand consumer preferences. Food waste includes the water, energy, and other resources used in its preparation; therefore, reducing food waste reduces both costs and environmental footprint.

Wen et al. [ 117 ] discuss an IoT-based food waste management system for restaurants, developed and implemented in Suzhou, China. It consists of RFID and sensor systems which provide real-time data on food waste to the catering companies involved, and a smart food waste collection truck equipped with RFID readers. Implementation of the system has had positive effects and resulted in better management of food waste across the value chain. Hong et al. [ 118 ] proposed an IoT-based smart garbage system which collects and analyzes information on food waste. The system was implemented as a 1-year pilot project in Seoul’s Gangnam district, and the results show average food waste reductions of 33%.

Based on the examples in the literature, we propose that Industry 4.0 technologies could reduce food waste. Most food waste ends up in landfill and increases GHG emissions. We need to collect data and information along the entire food chain. This information can be used to adapt future buying decisions, menus, food preparation techniques, and consumer preferences. Offering different portion sizes on online menus would allow consumers to choose the right sized portions which would avoid food waste.

However, application of Industry 4.0 technologies to reduce food waste can be difficult to implement in all hospitality businesses. Very small businesses may consider the investment required to be overly expensive and may decide not to invest. Large hospitality businesses may be unaware of the benefits to be derived from the use of these technologies. In addition to reducing food waste and pollution, Industry 4.0 technologies help to reduce the time and monetary costs involved in managing the necessary human resources.

Proposition 4: Increased Use of Industry 4.0 Technologies to Promote Circular Hospitality 4.0

The linear economy should be transformed into a circular economy to allow reuse and recirculation of resources. Larsson ([ 119 ], p. 12) defines the circular economy as “an economic system where production and distribution are organized to use and re-use the same resources over and over again”. It should be considered a new way of consumption linked to the move to a low carbon economy. According to Preston ([ 120 ], p.3), the circular economy “involves remodeling industrial systems along lines of ecosystems, recognizing the efficiency of resource cycling in the natural environment” and relies on three main principles [ 121 ]: maintaining and boosting natural resources through use of renewable rather than fossil fuel energy and use of other sustainable methods, optimizing resources efficiency by circulating products, components, and materials, and strengthening system effectiveness.

Application of circular economy principles in hospitality could result in more sustainable hospitality and tourism. Sustainability has for long focused mainly on energy use, water use, and recycling. The circular economy would promote sustainable tourism and travel, and water and energy savings, by replacing non-renewable resources with renewable resources which would help to reduce carbon emissions, and waste, and introduce zero km menus in restaurants [ 122 ]. According to Manniche et al. [ 123 ], circular hospitality includes building and construction, refurbishing and redecorating, operational services, practices related to accommodating managers and staff, and interactions with guests.

The more complex issues are those related to governance and behavior. Circular Hospitality 4.0 will contribute to making the hospitality industry more sustainable. Implementation of technologies in the hospitality industry will result in more efficient use of the resources which would contribute directly to sustainability.

However, the application of eco-innovation practices in hotels is not enough to achieve a circular business. Circularity must include the host–guest relationship. Hotels must involve their consumers in related environmental issues and actions. Consumers must be trained in more efficient use of resources and receive information to allow them to reduce their travel and tourism ecological footprint.

Proposition 5: Increased Use of Industry 4.0 Technologies to Reduce Transport and Travel

Tourism accounts for 5% of global carbon emissions [ 25 ]. The biggest contributor to carbon emissions from the tourism sub-sector is transport which accounts for 75% of carbon emissions in this sector [ 20 ]. Air travel is the main source of carbon emissions accounting for 40% of this 75% [ 124 ].

Reducing GHG emissions from travel and transport will require use of recent technological developments. The implementation of environmentally friendly tourism is needed to enable continuous improvements to the quality of the natural environment [ 125 ]. Increased use of Industry 4.0 technologies could result in less travel and transport. In this context, it has been suggested that VR could substitute for actual travel [ 82 , 126 ] and would contribute significantly to sustainability [ 127 ] by providing low cost and environmentally friendly ways of “traveling” [ 38 ]. Drones could be used to enable virtual tourism,video cameras attached to drones could record and capture pictures and aerial views of historical and natural sites in an environmentally friendly way [ 128 ].

The lockdowns imposed by many countries in 2020 to try to stem the spread of the COVID-19 virus have provided a unique setting to explore whether and to what extent virtual tourism can substitute for physical tourism. The collapse of tourism activities due to the COVID-19 pandemic increased interest in virtual tourism activities which can be expected to increase in the future (Ben [ 34 ].

The opportunity for virtual visits to various tourism destinations such as museums, castles, galleries, and exhibitions increased interest in shifting from physical tourism to virtual tourism during this period. Popular destinations are focusing on virtual experiences enabling people to visit various attractions worldwide from their homes. Tourism businesses will need to invest in technology since Industry 4.0 technologies will continue to be in demand even after the pandemic. The implementation of Hospitality 4.0 technologies would solve the problem of mass tourism and reduce degradation and overcrowding of heritage sites. They would contribute also to sustainability since Industry 4.0 technologies aim to be environmentally friendly.

This effect is not one-sided; Industry 4.0 will have an impact on tourism jobs, and the growth of VR and the reduction in physical travel will have negative social and economic impacts on reducing income and employment at destinations, especially in the global South. In these areas, operations respond to demand from the global North. Existing workforces will require retraining.

Proposed Research Agenda

Based on the literature review and the five propositions identified above to combat climate change, we propose a future research model (Fig.  2 ). Our choice of the model variables is based on previous evidence. We reviewed several works to identify the most important variables. We conducted a quantitative analysis to validate the proposed model and enable its application to different countries.

Proposed model

The first part of the model includes applications of Industry 4.0 technologies in the hospitality sector—CPS, the IoT, AR, VR, AI, robots, and big data. These technologies have been shown to have the potential to combat climate change in the hospitality sector. Industry 4.0 and climate change have several commonalities. They are systematic and complex and affect society. Since the technologies have the potential to increase energy and water use efficiency, reduce food waste, enable a circular model, and minimize travel and transport, we can assume that they will have a significant impact on efficient use of resources such as energy, water, food, and transport in the hospitality sector.

The second part of the model shows that energy efficiency, water use efficiency, food waste reduction, and circularity are linked. First , implementation of circular Hospitality 4.0 will have a significant effect on increasing energy and water use efficiency and reducing food waste. Circular hospitality will also reduce costs. Application of the new technologies is making it possible to reuse and recycle resources, which reduces waste and costs and increases efficiency. At the same time, Industry 4.0 technologies help to reduce carbon emissions and are less damaging to the environment. Second , reducing food waste will increase energy efficiency and water use. Food, energy, and water are linked, and the more food that is produced and prepared, the more energy and water is consumed. Use of technologies to reduce food waste would increase water and energy efficiency. Third , more efficient water use will have a significant influence on increasing energy efficiency.

Finally, all of these aspects will enhance business performance. The potential of Industry 4.0 technologies goes beyond combating climate change and enhances business performance by reducing energy, water, and food waste costs. In addition to circular Hospitality 4.0 and reduced travel and transport, this will reduce GHG emissions hugely.

Concluding Remarks and Policy Implication

This paper has examined the use of Industry 4.0 technologies in the hospitality sector to reduce climate change. While both adaptation and mitigation strategies are crucial, we focused on mitigation of climate change. We proposed a model for the potential effects of Industry 4.0 technologies in the hospitality sector aimed at reducing climate change.

We have shown the potential of these technologies in the hospitality industry to increase sustainability. The five applications focused on show that Industry 4.0 could have major implications for efficiency increases and a reduced carbon footprint. Integration of CPS, the IoT, AR, VR, AI, robotics, and big data in the hospitality sector would allow customized services for consumers and reduce costs. Implementation of Hospitality 4.0 technologies will enable increased energy efficiency, more efficient use of water resources, reduced food waste, circular Hospitality 4.0, and reduced travel and transport which currently contribute hugely to carbon emissions from the hospitality sector.

Ben Youssef [ 11 ] identifies three limitations to use of Industry 4.0 technologies. First, the world’s data centers emit as much CO2 as the global aviation industry and should focus on more use of renewable energies and less use of fossil energy. Second, the social effect of Industry 4.0 applications is not clear, and especially in a context of high unemployment. Industry 4.0 could cause significant economic and social transformations which need to be taken into account. Third, Industry 4.0 technologies require good governance to ensure they benefit everyone and contribute to inclusive and sustainable societies.

Main Contributions

The paper makes three main contributions.

First , it contributes to debate on the application of Industry 4.0 technologies in the hospitality industry and how these technologies are reshaping the sector. The literature examines the impact of different Industry 4.0 technologies in the hospitality industry, but the results are inconclusive. Some studies discuss how these technologies are disrupting the hospitality sector, and others explore their potential to combat climate change and reduce GHG emissions. Our paper contributes by analyzing how the application of these technologies in the hospitality industry could result in increased efficiency of use of resources and adoption of environmentally friendly practices.

Second , it suggests that Industry 4.0 could help combat climate change in the hospitality sector through increased energy efficiency, increased water use efficiency, reduced food waste, circular hospitality, and use of VR instead of actual transport and travel. These five conditions could be important mechanisms to increase the efficiency of the hospitality businesses and reduce its carbon footprint. These findings should be useful for stakeholders and policymakers in the hospitality industry.

Third, the paper contributes by proposing a future research agenda and directions for further quantitative research. The proposed model could be employed in future research.

Policy Implications

Industry 4.0 offers a sustainable solution for the hospitality industry with appropriate implementation of technologies. Given the potential of these technologies to mitigate climate change, we need policies to foster their adoption by the hospitality industry.

First , a set of technologies needs to be implemented; interconnected and interoperable technological systems will increase business opportunities and environmental performance. Their adoption must be part of a systemic change and deep organizational change in the hospitality industry.

Second , the hospitality ecosystem must be designed as a smart system which includes all stakeholders to provide added value along the entire chain. Current business models must be redesigned, and the business as usual model must be replaced by smart, sustainable, and environmentally friendly business models.

Third , policymakers must implement innovative energy and water efficiency policies and programs for the hospitality industry to reduce energy use. Renewable energies, smart grids, and other energy efficiency solutions should be introduced. Smart meters to increase water efficiency must be used in all parts of the hospitality sector to increase efficiency and reduce costs and carbon footprint.

Fourth , Circular Economy 4.0 should be at the heart of hospitality industry policy. Promotion of a circular economy in the hospitality industry would improve the use of resources, reduce transport of goods, and reduce waste and pollution.

Fifth , workforces should be retrained to meet the organizational changes which will follow application of Hospitality 4.0. Workers will need appropriate digital skills and training in how to fight climate change.

Limitations and Future Research

The paper has the following limitations.

First , it is based on a systematic literature review. Quantitative methods and surveys of hospitality businesses would provide more information on perceptions of Industry 4.0 technologies to combat climate change.

Second , the paper focuses mainly on the benefits of Industry 4.0 technologies in relation to combating climate change. Future research could consider the negative effects of the application of these technologies.

Third , we proposed five conditions allowing Industry 4.0 technologies to combat climate change. Future research could consider other factors, determinants, and strategies related to combating climate change and reducing the carbon emission from the hospitality sector.

Fourth , our future research agenda has not been validated. The proposed model requires the development of appropriate measures. The present study should be considered a preliminary qualitative exploration of the role of Industry 4.0 in the hospitality sector in relation to climate change. We plan to conduct quantitative analysis to validate our proposed model and apply it to different countries to allow its components to be analyzed in more depth.

Data Availability

Not applicable.

Code Availability

“Wise Up on Waste” was developed by Unilever Food Solutions to allow kitchen professionals to measure, monitor, and manage food waste and reduce costs. “Karma” # is an app which helps restaurants and cafes to reduce food waste by enabling them to sell what would otherwise be unsold food, at reduced prices. Consumers can order via the app and buy the food as a takeaway item. This reduces food waste in restaurants and allows consumers to buy food at reduced prices. Winnow Solution # has developed a smart tool involving a touchscreen which allows staff to identify what is being thrown away and when.

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Ben Youssef, A., Zeqiri, A. Hospitality Industry 4.0 and Climate Change. Circ.Econ.Sust. 2 , 1043–1063 (2022). https://doi.org/10.1007/s43615-021-00141-x

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Sustainability in the Hospitality Industry: Challenges and Opportunities

Industry and academic experts convened online to make the business case for sustainability initiatives.

The hospitality industry has been shifting its focus and taking a robust approach when it comes to sustainability. From better managing energy and water consumption to eliminating single-use plastics and food waste, the industry is working toward championing responsible business and tourism. In an effort to accurately measure their impact and provide transparency to investors, customers, and employees, companies have begun scrutinizing their sustainability practices, moving from symbolic initiatives to those that actually combat climate change. With the help of technology companies are uncovering their true environmental impact, and quantifying less-tangible indirect emissions that are adversely affecting the planet.

On June 10th, the Cornell Nolan School of Hotel Administration’s (SHA) Center for Hospitality Research (CHR) hosted a virtual keynote webinar to explore the challenges and opportunities of sustainability in the hospitality industry. The keynote was moderated by SHA Assistant Professor Aaron Adalja . He was joined by Patrick Flynn , global head of sustainability at Salesforce ; Geraldine Guichardo ’10 , global head of research for the hotels & hospitality group, as well as director of Americas hotels research at JLL ; Denise Naguib , vice president of sustainability and supplier diversity for global operations at Marriott International ; and Jake Shirmer MBA ’12 senior manager and sustainability specialist at Deloitte .

Here are the top takeaways from the discussion:

Emissions scopes and opportunities.

Owing, in part, to scoping complexity and varying industry standards, Jake Shirmer explained the difficulties that companies have when attempting to understand their full and true environmental impact. Greenhouse gas (GHG) emissions, he said, are measured in terms of scope. Scope 1 is defined as direct emissions from sources owned or controlled by a company, think diesel burned in facilities or vehicles. Scope 2 is the electricity or steam purchased to keep the lights on in an operation. And lastly, Scope 3 includes essentially everything else, for example, upstream emissions from suppliers and downstream emissions from a company’s consumers.

Reducing Scope 3 value chain emissions, the largest complexity, is about influencing vendors, suppliers, employees, and customers to change their sustainability practices. One way that companies are reducing Scope 3 emissions, for example, is adding climate breach and remediation fees to procurement contracts, binding suppliers and vendors into setting carbon neutral goals or paying the fees, and initiating a form of collective accountability that ensures sustainability is of utmost importance in business to business transactions. If vendors and suppliers don’t buy in to their customers’ sustainability initiatives, they could lose that business.

Greenhouse gas accounting, actionable insights, and standardization

After understanding and defining emissions scopes, companies can begin to quantify their impact. Patrick Flynn explained that there is a lack of skilled individuals who can standardize and fill in the gaps in the data and asked leaders to consider how many people in their organization conduct financial accounting compared to greenhouse gas accounting, suggesting that companies need to prioritize the latter as much as they do the former.

Salesforce has found ways to turn emissions data into actionable insights with their Sustainability Cloud, which Flynn described as “a comprehensive single source of truth for your full Scope 1, 2, and 3 greenhouse gas emissions picture, coupled with the data analytics and visualization you need to take…action.”

Meanwhile, other industry tools are tackling standardization. Denise Naguib shared how, in 2012, the Sustainable Hospitality Alliance, the World Travel & Tourism Council, and 23 global hospitality companies co-created the Hotel Carbon Measurement Initiative (HCMI) and the Hotel Water Measurement Initiative (HWMI), consistent methodologies to help hotels measure guests’ carbon footprint and water consumption.

Getting stakeholder buy-in

Conceptualizing and communicating the value of sustainability initiatives to guests, hotel owners, brand operators, and other stakeholders can be a challenge, but their collective buy-in is crucial to any initiative’s success.

Hotels have a unique ownership and management structure, which, according to Geraldine Guichardo, means that stakeholder goals are not always aligned. Oftentimes, in order to align stakeholders, sustainability leaders must appeal to their wallets. Business leaders who have a tendency to focus on the bottom line might be surprised to learn, as Naguib elaborated, that there are real revenue implications and cost reductions associated with environmental practices. For example, a hotel owner may want to introduce a sustainability initiative that may not be in line with the brand standards of the management company operating the property. If the owner can demonstrate cost-savings to the brand, she might get the green light on her initiative.

Naguib also explained that matching service offerings to the needs of customers, who are increasingly interested in sustainable products and services, can reduce environmental impact and drive revenue, a practice that is critical for companies wanting to capture this demand and increase their market share. For example, organic or plant-based options at food and beverage outlets are popular, known to drive revenue, and reduce emissions associated with meat consumption and non-organic food. Similarly, replacing single-use plastic water bottles with reusable ones can encourage sustainable behavior among guests and, for the hotel, shift spending to more sustainable products.

Going green—from niche to mainstream

Today, companies that fail to take sustainability initiatives seriously risk going out of business as a result of rising conscious consumerism. Guichardo reminded viewers that Generation Z has $183 billion of buying power in the United States alone, and they are concerned about businesses’ efforts to combat climate change. Corporate behavior is shifting too as institutional capital increasingly favors sustainable business practices, and governments offer incentives and tax benefits for going green.

Naguib challenged companies to reframe sustainability initiatives so that they’re not always predicated on guests’ willingness to pay more. “It’s about [companies’] willingness to be competitive,” she said, and sometimes, that means sustainability initiatives will be at parity with cost. The outcome though is a better product or service that is also better for the environment. Instead of branding sustainability initiatives as the “expensive avenue,” Naguib suggested focusing on ways to “effectively compete…to drive the best value holistically” to truly make an impact.

To learn more about the opportunities and challenges of sustainability in hospitality, watch the keynote .

Learn more about the CHR 

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Drew Conte is pursuing a Master of Management in Hospitality degree at Cornell University. Prior to enrolling in graduate school, Drew was completing Marriott’s manager-in-training program in the rooms division, at one of the largest non-casino hotels in the country, the Gaylord Opryland Resort & Convention Center in Nashville, TN. There, he was able to apply his customer service and leadership skills at a corporate level operation, working on projects to increase employee engagement and guest satisfaction. Drew graduated from Johnson & Wales University Magna Cum Laude in 2019, with a degree in hotel and lodging management. He solidified his passion for hospitality and travel after completing several internships, ranging from front office operations in MI to destination marketing in RI. Currently, Drew is expanding his knowledge of the industry and hopes to transition into a marketing role upon graduation.

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Rising global temperatures are already affecting the tourism industry - here's how

From rising heat to rising seas, holiday hotspots the world over are at risk from climate change. Image:  Gaddafi Rusli on Unsplash

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Stay up to date:, travel and tourism.

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• Tourism is crucial to many economies, but rising global temperatures are putting parts of the industry at risk.
• The climate crisis is changing the face of many tourist destinations and is already making some holidaymakers rethink their plans.
• The World Economic Forum’s Global Future Council on the Future of Sustainable Tourism is working to help the tourism sector build towards a more sustainable future.

Hot weather is what many people go on holiday for. But record global temperatures have been sending people home early from their vacations this July, raising questions about what kind of impact the climate crisis could have on the tourism sector – and on tourism-dependent economies.

Greece – where travel and tourism make up 15% of GDP – has had to evacuate over 2,000 holidaymakers after wildfires broke out on the island of Rhodes. Athens took the unprecedented step of closing its top tourist attraction, the Acropolis, after temperatures reached 45°C .

"The climate crisis is already here ,” said Greek Prime Minister Kyriakos Mitsotakis. “It will manifest itself everywhere in the Mediterranean with greater disasters."

Over in Italy, visitors to Rome have been returning home early because of the heatwave, while hospitals have faced a rise in the number of medical emergencies . Admissions at one hospital reached their highest since the COVID-19 pandemic.

Soaring temperatures have not just been ending holidays – they’ve even stopped some from getting started. This is because aircraft find it harder to get off the ground in hotter conditions, as it makes the air less dense .

US airlines flying out of Las Vegas – where temperatures hit 46°C – have consequently had to reduce passenger numbers, remove baggage, reduce the level of fuel they are carrying or delay flights until temperatures fall.

The impact of the climate crisis on tourism

The climate crisis has played an "absolutely overwhelming" part in the northern hemisphere heatwave , according to World Weather Attribution. And heatwaves will become hotter and longer unless the world quickly halts its use of fossil fuels, they say.

The tourism sector creates around a tenth of the greenhouse gas emissions that are driving the climate crisis , according to the World Travel & Tourism Council. Practically half of all transport emissions stem from global tourism, other studies say. And total emissions from tourism are forecast to rise by a quarter between 2016 and 2030, says the UN World Tourism Organization.

But the tourism industry and tourism-dependent economies are also highly vulnerable to the impacts of rising temperatures.

The Caribbean attracted over 28 million visitors in 2022 and its economy is more reliant on travel and tourism than any other region , according to the World Travel & Tourism Council. Tourism makes up around 90% of GDP in Aruba and the British Virgin Islands .

Yet these low-lying states are seeing sea levels rise almost 10% faster than the global average , according to the World Meteorological Association. The vast majority of holiday resorts in the Caribbean are coastal, leaving 60% of them at risk from sea level rise , according to the University of Cambridge.

Biodiversity damage

Coral bleaching and increasing droughts are already impacting the Caribbean’s tourism potential , the UK government notes.

Meanwhile, South-East Asia’s most popular costal destinations are suffering environmental damage from factors including pollution and overtourism . Thailand’s Maya Bay, Malaysia’s Sipadan Island and the Philippines’ Boraca Island are all being impacted, and some countries in the region are now closing tourist spots to give the most damaged areas time to recover , the Harvard School of Public Health notes.

“As the prime motivation for visitors to come to the region hinges on local landscapes, biodiversity, heritage and cultures, the sector’s survival depends on the ability to retain and preserve as much of these natural resources as possible,” The ASEAN Post reports.

The prospects of African safaris could also be hit by the climate crisis, which is forecast to lead to the loss of over half of the continent’s bird and mammal species by 2100 and trigger huge losses of plant species .

Measures are being taken to protect the continent’s natural bounties. The Seychelles islands off East Africa have added conservation guidlines to the national constitution – the first time a country has done so.

Sustainable, nature-based tourism is a potentially huge economic driver for Africa , and could create 40% more full-time jobs than agricutlure, the UN Environment Programme says.

High temperatures will change tourism patterns

Rising temperatures are likely to result in tourists travelling in spring and autumn rather than the summer , as well as opting for cooler destinations, Italy’s environment ministry says.

There has already been a 10% drop in the number of people planning to visit the Mediterranean in June-November this year following last year’s high temperatures, according to the European Travel Commission. It says tourists are considering trips to the Czech Republic, Denmark, Ireland and Bulgaria instead.

On top of this, “ large-scale land loss” is already eating into the Mediterranean’s beaches , according to Germany’s federal environment agency. One beach in Mallorca now has space for half the amount of huts it used to have, as well as fewer sun loungers, DW News reports.

The Global Risks Report 2023 ranked failure to mitigate climate change as one of the most severe threats in the next two years, while climate- and nature- related risks lead the rankings by severity over the long term.

The World Economic Forum’s Centre for Nature and Climate is a multistakeholder platform that seeks to safeguard our global commons and drive systems transformation. It is accelerating action on climate change towards a net-zero, nature-positive future.

Learn more about our impact:

• Scaling up green technologies: Through a partnership with the US Special Presidential Envoy for Climate, John Kerry, and over 65 global businesses, the First Movers Coalition has committed $12 billion in purchase commitments for green technologies to decarbonize the cement and concrete industry.
• 1 trillion trees: Over 90 global companies have committed to conserve, restore and grow more than 8 billion trees in 65 countries through the 1t.org initiative – which aims to achieve 1 trillion trees by 2030.
• Sustainable food production: Our Food Action Alliance is engaging 40 partners who are working on 29 flagship initiatives to provide healthy, nutritious, and safe foods in ways that safeguard our planet. In Vietnam, it supported the upskilling of 2.2 million farmers and aims to provide 20 million farmers with the skills to learn and adapt to new agricultural standards.
• Eliminating plastic pollution: Our Global Plastic Action Partnership is bringing together governments, businesses and civil society to shape a more sustainable world through the eradication of plastic pollution. In Ghana, more than 2,000 waste pickers are making an impact cleaning up beaches, drains and other sites.
• Protecting the ocean: Our 2030 Water Resources Group has facilitated almost $1 billion to finance water-related programmes , growing into a network of more than 1,000 partners and operating in 14 countries/states.
• Circular economy: Our SCALE 360 initiative is reducing the environmental impacts of value chains within the fashion, food, plastics and electronics industries, positively impacting over 100,000 people in 60 circular economy interventions globally.

Want to know more about our centre’s impact or get involved? Contact us .

The spike in temperatures is also worrying the organizers of the 2024 Olympics Games in Paris . They are closely monitoring long-term weather models, with International Olympic Committee President Thomas Bach saying the climate crisis is affecting how sporting events – a major driver of tourism – will be organized around the globe.

Colder climates are suffering, too

The Alps region attracts around 120 million tourists a year , and tourism is critical to the economies of many local towns. Skiing and snowboarding are top of many visitor lists, but rising global temperatures have reduced seasonal snow cover in the Alps by 8.4% per decade in the past 50 years.

Canada’s Whistler ski resort has responded to this by offering more snow-free activities – so much so that it now makes more money in summer, according to TIME magazine.

But adapting in this way is not an option for all tourism destinations, such as coastal resorts. With coastal tourism accounting for more than 60% of European holidays and more than 80% of US tourism revenues, the tourism industry and the countries that rely on it may need to urgently rethink the way they operate.

“In the coming years, the success of travel and tourism businesses and destinations will be increasingly tied to their ability to manage and operate under ever greater ecological and environmental threats,” says the World Economic Forum’s Travel & Tourism Development Index .

Have you read?

Is 2023 going to be the hottest year on record, what is sustainable aviation fuel and why are only 0.1% of flights powered by it, how global tourism can become more sustainable, inclusive and resilient, how tourism can change.

Sustainable tourism is one way to help protect countries and economies at risk from the climate crisis. It is also one of the UN’s Sustainable Development Goals .

The UN World Tourism Organization defines sustainable tourism as “tourism that takes full account of its current and future economic, social and environmental impacts, addressing the needs of visitors, the industry, the environment and host communities".

This could include limiting tourist numbers (as is being done in Southern France to help protect ecosystems ), banning polluting forms of transports (as the Dutch capital Amsterdam is doing with cruise ships and the Spanish city of Barcelona is trying to do ).

Staying only in environmentally friendly resorts is another option. Some are ensuring they run on renewable power, harvest rainwater and cut waste.

Avoiding flying is another option. British eco-charity Possible is promoting this through its Climate Perks initiative . UK companies who sign up agree to give staff increased paid leave to cover the time needed for slower, greener modes of transport such as trains or coaches when they go on holiday.

Ditching planes is also part of the “slow travel” trend . It advocates dropping the “bucket list” approach of ticking off as many destinations as possible, with travellers instead staying in one place and experiencing a local culture more fully.

The World Economic Forum’s Global Future Council on the Future of Sustainable Tourism is working to help the tourism sector create pathways towards net-zero, nature-positive tourism that benefits local communities.

“Diversifying tourism strategies and activities is essential for countries to build resilience against economic fluctuations, mitigate overreliance on a single industry, and foster sustainable development that benefits both the local communities and the environment,” says Topaz Smith, Community Lead for Aviation, Travel and Tourism at the World Economic Forum.

“Long-term planning is crucial for a more risk-resilient travel and tourism sector that anticipates and plans for future headwinds while maximizing development potential.”

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Reimagining the $9 trillion tourism economy—what will it take?

Tourism made up 10 percent of global GDP in 2019 and was worth almost $9 trillion, 1 See “Economic impact reports,” World Travel & Tourism Council (WTTC), wttc.org. making the sector nearly three times larger than agriculture. However, the tourism value chain of suppliers and intermediaries has always been fragmented, with limited coordination among the small and medium-size enterprises (SMEs) that make up a large portion of the sector. Governments have generally played a limited role in the industry, with partial oversight and light-touch management.

COVID-19 has caused an unprecedented crisis for the tourism industry. International tourist arrivals are projected to plunge by 60 to 80 percent in 2020, and tourism spending is not likely to return to precrisis levels until 2024. This puts as many as 120 million jobs at risk. 2 “International tourist numbers could fall 60-80% in 2020, UNWTO reports,” World Tourism Organization, May 7, 2020, unwto.org.

Reopening tourism-related businesses and managing their recovery in a way that is safe, attractive for tourists, and economically viable will require coordination at a level not seen before. The public sector may be best placed to oversee this process in the context of the fragmented SME ecosystem, large state-owned enterprises controlling entry points, and the increasing impact of health-related agencies. As borders start reopening and interest in leisure rebounds in some regions , governments could take the opportunity to rethink their role within tourism, thereby potentially both assisting in the sector’s recovery and strengthening it in the long term.

In this article, we suggest four ways in which governments can reimagine their role in the tourism sector in the context of COVID-19.

1. Streamlining public–private interfaces through a tourism nerve center

Before COVID-19, most tourism ministries and authorities focused on destination marketing, industry promotions, and research. Many are now dealing with a raft of new regulations, stimulus programs, and protocols. They are also dealing with uncertainty around demand forecasting, and the decisions they make around which assets—such as airports—to reopen will have a major impact on the safety of tourists and sector employees.

Coordination between the public and private sectors in tourism was already complex prior to COVID-19. In the United Kingdom, for example, tourism falls within the remit of two departments—the Department for Business, Energy, and Industrial Strategy (BEIS) and the Department for Digital, Culture, Media & Sport (DCMS)—which interact with other government agencies and the private sector at several points. Complex coordination structures often make clarity and consistency difficult. These issues are exacerbated by the degree of coordination that will be required by the tourism sector in the aftermath of the crisis, both across government agencies (for example, between the ministries responsible for transport, tourism, and health), and between the government and private-sector players (such as for implementing protocols, syncing financial aid, and reopening assets).

Concentrating crucial leadership into a central nerve center  is a crisis management response many organizations have deployed in similar situations. Tourism nerve centers, which bring together public, private, and semi-private players into project teams to address five themes, could provide an active collaboration framework that is particularly suited to the diverse stakeholders within the tourism sector (Exhibit 1).

We analyzed stimulus packages across 24 economies, 3 Australia, Bahrain, Belgium, Canada, Egypt, Finland, France, Germany, Hong Kong, Indonesia, Israel, Italy, Kenya, Malaysia, New Zealand, Peru, Philippines, Singapore, South Africa, South Korea, Spain, Switzerland, Thailand, and the United Kingdom. which totaled nearly $100 billion in funds dedicated directly to the tourism sector, and close to $300 billion including cross-sector packages with a heavy tourism footprint. This stimulus was generally provided by multiple entities and government departments, and few countries had a single integrated view on beneficiaries and losers. We conducted surveys on how effective the public-sector response has been and found that two-thirds of tourism players were either unaware of the measures taken by government or felt they did not have sufficient impact. Given uncertainty about the timing and speed of the tourism recovery, obtaining quick feedback and redeploying funds will be critical to ensuring that stimulus packages have maximum impact.

2. Experimenting with new financing mechanisms

Most of the $100 billion stimulus that we analyzed was structured as grants, debt relief, and aid to SMEs and airlines. New Zealand has offered an NZ $15,000 (US $10,000) grant per SME to cover wages, for example, while Singapore has instituted an 8 percent cash grant on the gross monthly wages of local employees. Japan has waived the debt of small companies where income dropped more than 20 percent. In Germany, companies can use state-sponsored work-sharing schemes for up to six months, and the government provides an income replacement rate of 60 percent.

Our forecasts indicate that it will take four to seven years for tourism demand to return to 2019 levels, which means that overcapacity will be the new normal in the medium term. This prolonged period of low demand means that the way tourism is financed needs to change. The aforementioned types of policies are expensive and will be difficult for governments to sustain over multiple years. They also might not go far enough. A recent Organisation for Economic Co-operation and Development (OECD) survey of SMEs in the tourism sector suggested more than half would not survive the next few months, and the failure of businesses on anything like this scale would put the recovery far behind even the most conservative forecasts. 4 See Tourism policy responses to the coronavirus (COVID-19), OECD, June 2020, oecd.org. Governments and the private sector should be investigating new, innovative financing measures.

Revenue-pooling structures for hotels

One option would be the creation of revenue-pooling structures, which could help asset owners and operators, especially SMEs, to manage variable costs and losses moving forward. Hotels competing for the same segment in the same district, such as a beach strip, could have an incentive to pool revenues and losses while operating at reduced capacity. Instead of having all hotels operating at 20 to 40 percent occupancy, a subset of hotels could operate at a higher occupancy rate and share the revenue with the remainder. This would allow hotels to optimize variable costs and reduce the need for government stimulus. Non-operating hotels could channel stimulus funds into refurbishments or other investment, which would boost the destination’s attractiveness. Governments will need to be the intermediary between businesses through auditing or escrow accounts in this model.

Joint equity funds for small and medium-size enterprises

Government-backed equity funds could also be used to deploy private capital to help ensure that tourism-related SMEs survive the crisis (Exhibit 2). This principle underpins the European Commission’s temporary framework for recapitalization of state-aided enterprises, which provided an estimated €1.9 trillion in aid to the EU economy between March and May 2020. 5 See “State aid: Commission expands temporary framework to recapitalisation and subordinated debt measures to further support the economy in the context of the coronavirus outbreak,” European Commission, May 8, 2020, ec.europa.eu. Applying such a mechanism to SMEs would require creating an appropriate equity-holding structure, or securitizing equity stakes in multiple SMEs at once, reducing the overall risk profile for the investor. In addition, developing a standardized valuation methodology would avoid lengthy due diligence processes on each asset. Governments that do not have the resources to co-invest could limit their role to setting up those structures and opening them to potential private investors.

3. Ensuring transparent, consistent communication on protocols

The return of tourism demand requires that travelers and tourism-sector employees feel—and are—safe. Although international organizations such as the International Air Transport Association (IATA), and the World Travel & Tourism Council (WTTC) have developed a set of guidelines to serve as a baseline, local regulators are layering additional measures on top. This leads to low levels of harmonization regarding regulations imposed by local governments.

Our surveys of traveler confidence in the United States  suggests anxiety remains high, and authorities and destination managers must work to ensure travelers know about, and feel reassured by, protocols put in place for their protection. Our latest survey of traveler sentiment in China  suggests a significant gap between how confident travelers would like to feel and how confident they actually feel; actual confidence in safety is much lower than the expected level asked a month before.

One reason for this low level of confidence is confusion over the safety measures that are currently in place. Communication is therefore key to bolstering demand. Experience in Europe indicates that prompt, transparent, consistent communications from public agencies have had a similar impact on traveler demand as CEO announcements have on stock prices. Clear, credible announcements regarding the removal of travel restrictions have already led to increased air-travel searches and bookings. In the week that governments announced the removal of travel bans to a number of European summer destinations, for example, outbound air travel web search volumes recently exceeded precrisis levels by more than 20 percent in some countries.

The case of Greece helps illustrate the importance of clear and consistent communication. Greece was one of the first EU countries to announce the date of, and conditions and protocols for, border reopening. Since that announcement, Greece’s disease incidence has remained steady and there have been no changes to the announced protocols. The result: our joint research with trivago shows that Greece is now among the top five summer destinations for German travelers for the first time. In July and August, Greece will reach inbound airline ticketing levels that are approximately 50 percent of that achieved in the same period last year. This exceeds the rate in most other European summer destinations, including Croatia (35 percent), Portugal (around 30 percent), and Spain (around 40 percent). 6 Based on IATA Air Travel Pulse by McKinsey. In contrast, some destinations that have had inconsistent communications around the time frame of reopening have shown net cancellations of flights for June and July. Even for the high seasons toward the end of the year, inbound air travel ticketing barely reaches 30 percent of 2019 volumes.

Digital solutions can be an effective tool to bridge communication and to create consistency on protocols between governments and the private sector. In China, the health QR code system, which reflects past travel history and contact with infected people, is being widely used during the reopening stage. Travelers have to show their green, government-issued QR code before entering airports, hotels, and attractions. The code is also required for preflight check-in and, at certain destination airports, after landing.

4. Enabling a digital and analytics transformation within the tourism sector

Data sources and forecasts have shifted, and proliferated, in the crisis. Last year’s demand prediction models are no longer relevant, leaving many destinations struggling to understand how demand will evolve, and therefore how to manage supply. Uncertainty over the speed and shape of the recovery means that segmentation and marketing budgets, historically reassessed every few years, now need to be updated every few months. The tourism sector needs to undergo an analytics transformation to enable the coordination of marketing budgets, sector promotions, and calendars of events, and to ensure that products are marketed to the right population segment at the right time.

Governments have an opportunity to reimagine their roles in providing data infrastructure and capabilities to the tourism sector, and to investigate new and innovative operating models. This was already underway in some destinations before COVID-19. Singapore, for example, made heavy investments in its data and analytics stack over the past decade through the Singapore Tourism Analytics Network (STAN), which provided tourism players with visitor arrival statistics, passenger profiling, spending data, revenue data, and extensive customer-experience surveys. During the COVID-19 pandemic, real-time data on leading travel indicators and “nowcasts” (forecasts for the coming weeks and months) could be invaluable to inform the decisions of both public-sector and private-sector entities.

This analytics transformation will also help to address the digital gap that was evident in tourism even before the crisis. Digital services are vital for travelers: in 2019, more than 40 percent of US travelers used mobile devices to book their trips. 7 Global Digital Traveler Research 2019, Travelport, marketing.cloud.travelport.com; “Mobile travel trends 2019 in the words of industry experts,” blog entry by David MacHale, December 11, 2018, blog.digital.travelport.com. In Europe and the United States, as many as 60 percent of travel bookings are digital, and online travel agents can have a market share as high as 50 percent, particularly for smaller independent hotels. 8 Sean O’Neill, “Coronavirus upheaval prompts independent hotels to look at management company startups,” Skift, May 11, 2020, skift.com. COVID-19 is likely to accelerate the shift to digital as travelers look for flexibility and booking lead times shorten: more than 90 percent of recent trips in China  were booked within seven days of the trip itself. Many tourism businesses have struggled to keep pace with changing consumer preferences around digital. In particular, many tourism SMEs have not been fully able to integrate new digital capabilities in the way that larger businesses have, with barriers including language issues, and low levels of digital fluency. The commission rates on existing platforms, which range from 10 percent for larger hotel brands to 25 percent for independent hotels, also make it difficult for SMEs to compete in the digital space.

Governments are well-positioned to overcome the digital gap within the sector and to level the playing field for SMEs. The Tourism Exchange Australia (TXA) platform, which was created by the Australian government, is an example of enabling at scale. It acts as a matchmaker, connecting suppliers with distributors and intermediaries to create packages attractive to a specific segment of tourists, then uses tourist engagement to provide further analytical insights to travel intermediaries (Exhibit 3). This mechanism allows online travel agents to diversify their offerings by providing more experiences away from the beaten track, which both adds to Australia’s destination attractiveness, and gives small suppliers better access to customers.

Governments that seize the opportunity to reimagine tourism operations and oversight will be well positioned to steer their national tourism industries safely into—and set them up to thrive within—the next normal.

Download the article in Arabic  (513KB)

Margaux Constantin is an associate partner in McKinsey’s Dubai office, Steve Saxon is a partner in the Shanghai office, and Jackey Yu  is an associate partner in the Hong Kong office.

The authors wish to thank Hugo Espirito Santo, Urs Binggeli, Jonathan Steinbach, Yassir Zouaoui, Rebecca Stone, and Ninan Chacko for their contributions to this article.

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The Future of the Hospitality Industry

The world we live in, and the ways in which we live in our world, are changing incredibly fast. Globalization and technological advances, in particular, are making our current global village very different from anything that came before.

However, although technology is playing a bigger role than ever before in every aspect of our lives, the personal touch has also never been more important. When a business makes use of an industry leading property management system , that business is free to concentrate on the personal touches that make for a really unforgettable customer experience.

The Impacts of COVID-19

While person-to-person contact was discouraged and even forbidden during the global COVID-19 pandemic, the industry increasingly moved online. Of course, the move towards digitalization was taking place anyway, independently from COVID-19, but technology has definitely been introduced in ways it might not otherwise have been.

In the business community generally, remote work is on the rise. It’s much more convenient (not to mention much quicker and much cheaper) to set up online meetings than to have to worry about scheduling an in-person meeting in a physical venue. It wouldn’t be surprising if people don’t book venues for business functions nearly as much as they did previously, and that will also affect the hospitality industry.

In the hospitality industry, in particular, streaming technology was introduced to help hotel staff communicate with one another and to help staff communicate with guests. It’s especially important for guests to be able to engage meaningfully with staff, but there’s absolutely no reason that streaming technology shouldn’t continue to play an important role in the future!

The New Look of Hospitality

Everyone has become much more aware of personal hygiene, and hospitality businesses will need to ramp up their standards. At the very least, guests will be alarmed if handwashing facilities are not conveniently (and frequently) available, if adequate ventilation is not ensured, and if too many people are physically squeezed into too small a space.

But sustainability is also becoming more and more important to people, so businesses will have to be sure that their improved hygiene practices are fully sustainable. No single-use plastics! No harming rainforests!

A growing awareness of the impact our activities have on our environment means that the hospitality industry must be visibly environmentally conscious. As technology advances, concerns about sustainability become more central, and guest expectations change, the hospitality industry needs to adapt – and fast!

Sustainable hygiene protocols will be important, and so will sustainable energy policies. Something like installing solar panels not only ticks the necessary green boxes but also makes venues independent of unreliable power suppliers – plus, it saves them quite a lot of money.

In the future, hotels and other hospitality businesses will need to be much more sustainable - and their sustainability policies must be made explicit to their guests. Businesses must be seen to reduce, reuse, and recycle.

The Personal Touch

New technology is taking over so many roles that have always been played by humans. We’re accustomed to using self-service touch screens when we’re shopping, but buying a takeaway meal is not quite like paying for an experience. The whole point of hospitality is that it’s not supposed to be impersonal: when we are staying somewhere away from home, we still want to feel at home.

It seems probable that human hosts or hostesses will not be replaced with self-service options any time soon. However, there are several crucial roles for technology in the hospitality industry – roles that enable humans to provide better and more customized personal services.

For example, the smart use of AI enables hotels to adjust the lighting and temperature settings in rooms automatically, so no guest ever has to return to cold or darkness, no matter how long they’ve been out or at what short notice.

Technological Advances

Another area in which automation is taking on more importance is reservations. When your booking system is online, you can upload your availability and rates in real time as guests arrive and depart. 

Even check-in and payment can be effortlessly accomplished before the guest enters the venue. If the boring check-in functions are all online, the physical reception area can become an extension of the hotel’s vision: a place to welcome guests and make them feel at home.

(Even better, if check-in is available on mobile , lucky visitors don’t even have to find a desk or computer to get their check-in sorted. Without even pausing in what they’re doing, they can press a few buttons and check in or out with ease!)

Holistic Wellness

Obviously, making money is still the main point of most people’s lives. However, nowadays, people also tend to be more aware that it’s pointless to spend their whole lives working, in order to earn money, in order to have enough money to spend enjoying themselves, if they are too busy to take time to enjoy the money they’ve earned.

That may be why holistic wellness retreats are becoming more popular. In the past, health spas and resorts were very specialized and not all that ubiquitous, but now, holistic wellness is something most people are much more aware of. 

Hotel guests want dining options that are delicious, nutritious, and ethical. They want quiet and tranquil spaces in which to practice mindfulness or meditation. They want gyms, yoga, and Pilates classes so that they can keep healthy at the same time having fun.

To this end, hotels are already embracing more water features, plants, and natural lighting in their designs: anything that may help to make the home-away-from-home a haven of peace and tranquility. This ensures them of more guests and when they come stay longer.

In other words, the hospitality industry aims to provide guests with a break from the rat race of daily life – a break from computers, phones, and other screens. By fully automating and streamlining as many of their functions as possible, hotels and guesthouses can ensure their guests spend a minimum of time on administrative tasks and the maximum time doing the activities they love the most.

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25 Hotel Industry Statistics [2023]: Hotel Rate Trends And Market Data

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Research Summary. The hotel industry not only reaches across the globe but also spans a wide cross-section of options ranging from budget motels to luxury resorts, making it an interesting field to study. Here are the key statistics on the hotel industry:

There are at least 187,000 hotels in the world as of 2023.

There are an estimated 17.5 million guestrooms in the world.

The global hospitality industry is worth over $4.548 trillion as of 2022.

There are about 1.6 million people employed by the U.S.’s accommodation industry.

The global travel and tourism industry was worth $4.671 trillion in 2020 , down from its $9.17 trillion value in 2019.

The average U.S. hotel occupancy rate is 64.2% as of February 2023.

Hotel Industry Statistics by Consumer Preferences

78% of millennials would rather spend their money on experiences than on things.

Hotels with a significant number of high-quality photos on their websites see a 15% increase in conversion rates.

This is compared to hotels that use few and/or low-quality photos. Including good photos of hotel rooms and amenities helps travelers know what they’re getting into and better imagine themselves there.

TripAdvisor shared that the number of photos a hotel has on its TripAdvisor profile has the most impact on traveler engagement with the listing.

More specifically, properties with at least one photo see a 138% increase in engagement and are 225% more likely to receive a booking inquiry, and those with over 100 photos see a 151% increase in engagement and are 283% more likely to receive a booking inquiry.

Europe has the highest hotel occupancy rate of any region in the world.

As of 2019, European hotels have an occupancy rate of 72.2%, meaning an average of 72.2% of all hotel rooms are occupied.

US Hotel Industry Statistics

There are 90,562 hotel and motel businesses in the U.S.

This number is a 0.4% increase from 2021, which is on trend with the average annual growth rate of 0.4% that this industry has seen from 2017 to 2022.

There are approximately 5.29 million hotel rooms in the U.S.

The U.S. hotel and motel industry is worth $177.6 billion.

This industry is predicted to grow by 33.6% throughout 2022 as it continues to recover from the COVID-19 pandemic, although it’s seen an average annual decline of 2.4% from 2017 to 2022.

The U.S. tourism industry was valued at $545.11 billion in 2020.

In 2020, U.S. hotels had an average occupancy rate of 44%.

Hotel Industry Statistics by Employment

The U.S.’s accommodation industry employs about 1.6 million people.

In Q1 2019, there were 1.352 million gross job gains in the U.S. leisure and hospitality sector.

Here are data points for each quarter from Q1 2019 through Q2 2021.

In Q1 of 2019, there were 1.22 million gross job losses in the U.S. leisure and hospitality industry.

Here are the numbers for each quarter following that through Q2 2021:

The average employee of the U.S. leisure and hospitality industry makes $19.44 an hour.

32% of U.S. leisure and hospitality industry employees have access to employer-sponsored health care.

43% get paid vacation from their employers, and 50% receive paid sick leave .

Hotel Industry Trends and Projections

In 2019, the global hotels and resorts market was worth over $1.5 trillion.

This was just before the COVID-19 pandemic caused widespread lockdowns in 2020, and it was the pinnacle of seven years of nearly continuous growth.

From 2021 to 2025, the global hotel and travel accommodation industry is projected to have a CAGR of 7%.

This will result in a market value of $1.05 trillion in 2025. In 2020, the global hotel and travel accommodation market was worth $673.02 billion, and it grew to $801.9 billion in 2021, which is a CAGR of 19.1%.

In 2020, travel and tourism contributed $4.671 trillion to the global GDP.

While this is a significant amount of money, it is also a significant decrease from the $9.17 trillion it contributed in 2019. This is a result of the 2020 COVID-19 lockdowns that significantly reduced the amount of travel in the world.

From 2008 to 2018, the number of hotels around the world has increased by nearly 14,300.

Hotel Industry Statistics FAQ

What is the growth rate of the hotel industry?

The growth rate of the hotel industry is 19.1%. This was the CAGR from 2020 to 2021 as the global hotel industry reopened after the COVID-19 pandemic lockdowns began to lift.

What are the four segments of the hospitality industry?

The four segments of the hospitality industry are Food and Beverage, Accommodation (also referred to as Lodging), Travel and Tourism, and Entertainment and Recreation.

You don’t necessarily have to be traveling to enjoy the hospitality industry’s offerings. The Food and Beverage sector, for example, includes restaurants , bowling alley food, and concessions stands, not just hotel restaurants. As a result, this is the largest sector of the hospitality industry.

The Accommodation or Lodging sector includes hotels, campgrounds, rental homes, and any other facility that gives people a place to sleep. This includes resorts, motels, and hostels all alike.

The Travel and Tourism sector covers the actual act of traveling via airlines, cruise ships, trains, taxis, and more. Whether you’re traveling for leisure or business, chances are you’ll utilize at least one of travel and tourism’s offerings on a trip.

The last sector of the hospitality industry is Entertainment and Recreation. This sector is made up of all the activities that people do just for the enjoyment of it. These include:

Swimming pools

Spectator sports

Movie theaters

Participatory sports (e.g., scuba diving, golf, tennis)

Amusement parks

How many American hospitality workers were fired or laid off in 2020?

10.65 million American hospitality workers were fired or laid off in 2020. While About 1.2 to 1.4 million people in this industry lost their jobs each quarter throughout 2019, 1.695 found themselves unemployed in Q1 2020, and a whopping 6.331 million were suddenly unemployed in Q2 2020 due to the COVID-19 pandemic lockdowns.

Is the hotel industry recovering?

Yes, the hotel industry is recovering. The global hotel and travel accommodation industry is expected to have a CAGR of 7% from 2021 to 2025.

What are the latest trends in the hotel industry?

The latest trends in the hotel industry are high-tech, green facilities, alternative accommodation options, and incorporating experiences into hotel stays.

Hotels are beginning to implement more and more smart technology, whether it’s a keyless entry or turning on the AC with an app. In addition, many hotels are looking for ways to reduce their carbon footprint by conserving water, reducing single-use plastics, and earning their LEED certifications.

Another hotel industry trend is that travelers (especially millennials) are looking more toward alternative accommodation options, whether that’s a rental house or villa, a mobile home, or hotels with a personality that reflect the local culture rather than standardized branding.

Hotels are responding to this by focusing on opening boutique hotels and facilities that bring unique elements to their decor, amenities, and even floor plans.

The hotel industry is a major player in the global and U.S. economies. In 2022, the global hotel industry was worth more than $4.548 trillion and is projected to see a CAGR of 7% from 2021 to 2025. In the U.S. alone, the hotel and motel industry is worth $177.6 billion, and the tourism industry is worth $545.11 billion.

Lockdowns in response to the COVID-19 pandemic in 2020 significantly impacted this industry. The worldwide travel and tourism industry contributed $4.671 trillion to the global GDP in 2020, which is just over half the amount it contributed in 2019 ($9.17 trillion).

In the U.S., over seven million leisure and hospitality industry employees lost their jobs during the first six months of 2020, compared to the just over five million that found themselves unemployed throughout all of 2019. Hotel occupancy rates also dropped by 33.3% from 2019 to 2020.

Eventbrite. “ Millennials: Fueling the Experience Economy. ” Accessed on February 16, 2022.

Medium . “ The Importance of Imagery on Hotel Websites. ” Accessed on February 16, 2022.

Frederic Gonzalo. “ Photos Impact Bookings More Than Reviews. ” Accessed on February 16, 2022.

Statista. “ Occupancy Rate of the Hotel Industry Worldwide From 2008 to 2019, by Region. ” Accessed on February 16, 2022.

IBISWorld. “ Hotels & Motels in the U.S. – Number of Businesses 2005-2027. ” Accessed on February 16, 2022.

Statista. “ Number of Hotel Rooms in the United States From 2017 to 2020, by Chain Scale Segment. ” Accessed on February 16, 2022.

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Statista. “ Market Size of the Tourism Sector in the United States From 2011 to 2020, with a Forecast for 2021. ” Accessed on February 16, 2022.

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Abby is a writer who is passionate about the power of story. Whether it’s communicating complicated topics in a clear way or helping readers connect with another person or place from the comfort of their couch. Abby attended Oral Roberts University in Tulsa, Oklahoma, where she earned a degree in writing with concentrations in journalism and business.

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The impact of technology on the hospitality industry

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Technology has had a significant impact on the hospitality industry, from improving efficiency and convenience for guests to transforming the way hotels operate. This article will explore the impact of technology on the hospitality industry, including emerging trends and innovations that are shaping the industry’s future.

Technology has revolutionized the hospitality industry, providing hotels and other businesses with tools and platforms to enhance the guest experience and streamline their operations. From mobile check-ins to in-room automation, technology has become an essential part of the industry, providing convenience, efficiency, and personalized service for guests.

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Mobile check-in and check-out.

One of the most significant technological advancements in the hospitality industry is mobile check-in and check-out. This allows guests to skip the front desk and check-in to their room using their smartphone.

Guests can also use their mobile device to check-out, view their bill, and even control room settings, such as lighting and temperature. This technology not only provides convenience for guests but also reduces the workload for hotel staff.

Keyless Entry

Another technology that has transformed the hospitality industry is keyless entry . This allows guests to use their smartphone to unlock their hotel room, eliminating the need for physical keys. This not only provides convenience for guests but also improves security, as lost or stolen keys are no longer a concern.

In-room Automation

In-room automation is another technology that is becoming increasingly popular in the hospitality industry. This technology allows guests to control room settings, such as lighting and temperature, using their smartphone or voice commands. In addition, hotels can use in-room automation to personalize the guest experience, for example, by automatically adjusting room settings based on the guest’s preferences.

Guest Data Analysis

Technology has also provided hotels with the tools to analyze guest data and provide personalized service. By collecting and analyzing data such as guest preferences, past stays, and spending habits, hotels can tailor their services to the specific needs of each guest. This can include personalized recommendations for restaurants, attractions, and activities, as well as customized room settings and amenities.

Chatbots and AI

Chatbots and artificial intelligence are also transforming the way hotels interact with guests. Chatbots can provide instant customer service and support, answering guest questions and providing recommendations.

Artificial intelligence can be used to analyze guest data and provide personalized recommendations, such as room settings and amenities. In addition, AI can be used to automate hotel operations, such as housekeeping and maintenance.

Virtual Reality

Virtual reality is another technology that is becoming increasingly prevalent in the hospitality industry. Hotels can use virtual reality to provide guests with immersive experiences, such as virtual tours of the property or destinations. In addition, virtual reality can be used to provide entertainment and educational experiences, such as virtual museums and art galleries.

Social Media

Social media has also had a significant impact on the hospitality industry , providing hotels with a platform to connect with guests and promote their brands. Hotels can use social media to engage guests, provide updates and information, and showcase their amenities and services. In addition, social media can be used to gather feedback and improve the guest experience.

Online Booking and Payment

Online booking and payment platforms have also transformed the way guests book and pay for their stays. Guests can now book their stays online, choose their room preferences, and make payment using a variety of payment options. This not only provides convenience for guests but also reduces the workload for hotel staff.

IoT and Smart Rooms

The Internet of Things (IoT) and smart rooms are also transforming the hospitality industry. IoT technology allows devices to connect and communicate with each other, providing hotels with the ability to automate and control various aspects of the guest experience.

For example, hotels can use IoT sensors to monitor guest room occupancy, temperature, and lighting, allowing them to adjust room settings to provide a more comfortable experience. Bright rooms take this technology a step further, providing guests with a fully connected experience that allows them to control all aspects of their room using a smartphone or voice commands.

Sustainability

Technology has also had an impact on the hospitality industry’s sustainability efforts. Hotels can use technology to reduce their environmental footprint, for example, by implementing energy-efficient lighting and heating systems or using water-saving fixtures. In addition, hotels can use technology to monitor and track their sustainability efforts, providing guests with transparency and accountability.

Technology has had a significant impact on the hospitality industry, providing hotels and other businesses with tools and platforms to enhance the guest experience and streamline their operations. From mobile check-in and keyless entry to guest data analysis and virtual reality, technology has transformed the way hotels operate and interact with guests.

As the industry continues to evolve, emerging trends and innovations, such as IoT and sustainability, will play an increasingly important role in shaping its future. By embracing these technologies, hotels and other businesses in the hospitality industry can provide memorable and enjoyable experiences for their guests while also improving their sustainability efforts and reducing their environmental footprint.

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Home » Home » PETER CRANIS: Economic Impact of Tourism on Brevard in 2023 Was $4.6 Billion, Visitor Spending $2.95 Billion

PETER CRANIS: Economic Impact of Tourism on Brevard in 2023 Was $4.6 Billion, Visitor Spending $2.95 Billion

By Peter Cranis, Space Coast Office of Tourism Executive Director  //  April 27, 2024

industry supports 46,000 direct and indirect jobs with wages of nearly $1.5 billion

BREVARD COUNTY, FLORIDA – We recently completed a Visitor and Economic Impact Study with 2,500 visitors being interviewed. This is the most comprehensive study we have done since COVID and it revealed some very interesting data.

First of all, the overall economic impact of tourism on the County was calculated at $4.6 billion with visitor spending at $2.95 billion. Overnight visitors accounted for nearly 3 million room nights in 2023 including hotel/motel and vacation rental.

The report also shows the industry supports nearly 46,000 direct and indirect jobs with wages of nearly $1.5 billion.

In terms of trip planning 63% of visitors saw something from the Space Coast Office of Tourism prior to coming – whether it was our website, social media, or other advertising/promotions we have done.

In terms of origin of visitors, 37% come from within Florida, 17% from the Southeast, 12% from the Northeast, 17% from the Midwest, 12% from the West, and 5% are from international markets, mostly Canada, UK and Germany. The split between flying here or driving is 54%/46%.

Visitors stay here 4.5 nights on average and are in travel parties of 3.1 people, 47% having children in their party. On average, each travel party spends $2,762 which is $197 per person per day, or $891 per trip.

In terms of accommodations, 36% stay in hotel motel, 28% with friends and family, and 26% in vacation rental. They stay in Cocoa Beach/Cape Canaveral (33%), Melbourne (14%), Titusville (12%), Melbourne Beach/South Beaches (10%), and Palm Bay (9%).

While here they engage in beach activities (68%), go shopping (61%) and sightseeing (48%), watch a rocket launch (41%), do some kind of outdoor activity (40%), go to Kennedy Space Center (29%), take an overnight cruise (25%), or participate in watersports (22%). Other things they do include going to a museum, the zoo, fishing, golf, play in a sporting event, or a business activity.

They enjoy being here and 93% said they would return here, 79% said within the next 12 months. Of those that took an overnight cruise, 91% stayed here overnight either before or after the cruise and 27% said they stayed both before and after. There are a lot more data points we collected, but these are the highlights. We will share more in future stories.

CLICK HERE FOR MORE INFORMATION

– Peter Cranis, Space Coast Office of Tourism Executive Director

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COVID-19 impact on the hospitality industry: Exploratory study of financial-slack-driven risk preparedness

The hospitality industry is regarded as one of the most affected by the consequences of COVID-19 pandemic, and the undefined persistence of the pandemic duration raises anxiety about the ability to recover from this dramatic situation. In this regard, the purpose of this exploratory study is to shed light on the COVID-19 risk preparedness of hospitality businesses, as driven by the financial slack holdings and persistence. The empirical findings confirm that their financial-slack-driven risk preparedness should be judged as relatively low. A majority of the examined hospitality businesses demonstrated low or insufficient financial slack holdings and recently have consumed their financial slack resources. Thus, the abilities of hospitality businesses to sustain the liquidity tensions that emerged after the COVID-19 outbreak are questionable. Facing this evidence, we draw conclusions about the necessary design of system interventions that could prevent bankruptcy in the hospitality industry.

1. Introduction

In the 21 st century, the world has been threatened by the risk of pandemic several times. Previous incidents, including outbreaks of the SARS and MERS coronaviruses, the avian and swine flues and very recently the Zika virus, have been perceived as severe threats to the continuity of numerous businesses, including those operating in the hospitality industry (and the whole travel and leisure-related sector). However, the current COVID-19 pandemic is unprecedented in the scale of its global impact and ‘ is affecting the DNA of hospitality at its core ’ ( Rivera, 2020 ).

At governmental levels, the COVID-19 pandemic has created an urgent need to ensure the sufficiency of healthcare systems and has led to the implementation of various intervention mechanisms directed at slowing the spread of the virus. These mechanisms imposed social distancing, bans on mass events, and numerous travel restrictions, for example, border closures. Thus, it is not surprising that travel and leisure-related industries, especially the hospitality industry, are at the top of the list of most affected branches of economies. However, slowing the virus spread prolongs the period of businesses discontinuities. In fact, it is difficult to predict the duration of the pandemic, which shifts this risk to undefined persistence and increases businesses’ anxiety.

The situation raises an important question on whether the hospitality businesses are prepared to sustain and successfully recover from the period of operating discontinuity caused by the waves of pandemic outbreak. The problem is obviously a relevant industry priority and is addressed in this study by exploring the extent of hospitality businesses’ risk preparedness from financial perspective. Facing the sudden outflow of customers and inability to generate cash inflows from sales, the hospitality businesses are exposed to high liquidity tensions, which imposes greater risk for their successful recovery. However, liquidity tensions are less problematic for firms that hold a buffer of available funds. Thus, the empirical investigation of risk preparedness performed in this study utilizes the concept of financial slack as a resource. In general, financial slack refers to uncommitted and high-discretionary liquid assets held by the company, in particular, the holdings of cash and marketable securities ( Daniel et al., 2004 ; Mishina et al., 2004 ; Bourgeois, 1981 ). In the context of risk preparedness, the buffering function of financial slack is critical; financial slack resources provide a cushion against the liquidity tensions caused by the disruptions of operating performance. In other words, the businesses distinguished by higher levels of financial slack holdings are regarded as those with better risk preparedness.

This study contributes to the existing literature on available slack holdings by exploring solely the situation of hospitality businesses. This is relevant, as prior works have confirmed financial slack holdings being related to firm and industry-specific characteristics (for an overview, see, e.g., Daniel et al. (2004) and McMahon (2006)) . Moreover, this study goes beyond the common methodical approaches that employ regression to find the determinants of liquid assets holdings. For hospitality industry such approach was adopted by Kim et al. (2011) on a sample of US restaurants or recently by Demir et al. (2019) on hospitality industries located in emerging countries. To better address the risk-preparedness context, this study expands the existing approaches, by developing a model to evaluate financial-slack-driven risk preparedness, which offers another relevant contribution. The model clusters the companies with regard to both the size of their financial slack holdings (sufficient or insufficient) and their slack behavior over time (slack consumption or slack accumulation). In this respect, this study supplements the identification of the determinants of liquid assets holdings.

This exploratory work contributes also to the existing body of literature on risk and crisis management in the hospitality industry. As pointed out by Paraskevas and Quek (2019) , the literature on risk and crisis management in travel and leisure-related industries (including the hospitality industry) has remained focused on understanding the crisis situations and on analyzing the recovery paths, often following a ‘crisis-by-case’ approach. Works that revise the recent epidemics (SARS or avian and bird flues) from the perspective of the hospitality industry confirm this statement (for instance, Chen et al. (2007) ; Chien and Law (2003) ; Wu et al. (2010) ; Chuo (2014) , and Tse et al. (2006) ). In this respect, a relevant contribution of this work is the emphasis on the relevance of liquid assets holdings in the effective recovery from disruptions, followed by the exploration of the factual recovery starting point from an industry oriented perspective. In this aspect, this paper also responds to the call for studies that help to better understand the resilience capabilities of businesses related to the travel and leisure sector and the factors that drive these capabilities. The call for this kind of research was addressed by Ritchie and Jiang (2019) and Mansfeld and Pizam (2006) , grounded in a summary of prior studies related to risk management in the travel and leisure-related industries.

In the empirical layer, the paper explores the situation of hospitality businesses that operate in four central European countries: the Czech Republic, Hungary, Poland and Slovakia. These countries are regarded as comparable on numerous dimensions of their economic performance, driven by the similar routes of the process of transformation from a command to market economy and European Union accession. These countries are also regarded as comparable in terms of the contribution of the travel and leisure sector to their GDPs and are judged as equally popular tourist destinations ( Krzesiwo et al., 2018 ). Moreover, facing the threat of the COVID-19 pandemic, the Czech Republic, Hungary, Poland and Slovakia implemented similar interventions, almost perfectly coordinated in time. Thus, the impact of the pandemic risk hit the hospitality businesses operating in these countries on a relatively comparable scale.

The remainder of this paper is structured as follows. Section 2 explains the conceptual framework of the study. In particular, it explains the assumptions of the proposed model of the analysis of financial risk preparedness, as driven by financial slack holdings and persistence. Section 3 develops research questions, whereas section 4 explains the research design and method. Section 5 presents the results and discussion. Section 6 concludes the study.

2. Conceptual framework

2.1. financial consequences of covid-19 disruptions from a hospitality business perspective.

In the 21 st century the world has been threatened several times by the risk of a global spread of an infectious disease. In 2009, the ‘swine flu’ (H1N1 virus) outbreak was first officially announced to be a pandemic by the WHO ( WHO, 2009 ). However, the hospitality industry was notably affected by the consequences of the epidemics of SARS (2002–2003), MERS (2012) in Asia, Ebola in 2013–2014 in West Africa and Zika in 2015 in Brazil and the Caribbean region ( MARSH, 2020 ). The literature related to risk management in the tourism and leisure sector has reviewed the consequences of a pandemic risk from a variety of perspectives (see, e.g., Yang et al. (2017) ; Ritchie and Jiang (2019) or Rosselló et al. (2020) for an overview). For instance, the impact of prior epidemics (SARS in particular) on travelers’ behavior and the related decline of demand in the travel and leisure sector was addressed by Kuo et al. (2008) ; Mao et al. (2010) ; McAleer et al. (2010) ; Rosselló et al. (2017) and Yang et al. (2017) . Chen et al. (2007) studied the impact of SARS on Taiwanese hotels’ stock performance, while Chien and Law (2003) examined hotel performance in Hong Kong. The problem of the impact of infectious disease spread on hotel occupancy rates was also studied by Wu et al. (2010) , following the spread of ‘swine flu’ (H1N1 virus). The impact of epidemics on various aspects of restaurant performance was addressed, for instance, by Chuo (2014) (self-protective behavior) and by Tse et al. (2006) (risk response to SARS).

The current COVID-19 outbreak, however, hit the global community on an unprecedented scale. On 31 December 2019, the first cases of the novel coronavirus disease were reported in Wuhan (China). Only two weeks later (13 January 2020), the first cases were reported outside China (in Thailand). To prevent the global spread of the virus, the Wuhan lockdown was announced 10 days later (23 January 2020), which was accompanied by travel restrictions to and from China imposed by numerous countries worldwide. However, these measures proved ineffective, and by the end of February 2020, COVID-19 has quickly spread in north Italy. Consequently, on 12 March 2020, the WHO announced the COVID-19 pandemic ( WHO, 2020 ). To limit the speed of the virus spread, numerous countries have implemented very severe measures, such as border closures and social distancing, which have in turn severely affected the whole travel and leisure industry. As of 20 April 2020, travel restrictions were introduced in 100% of worldwide destinations ( UNWTO, 2020 ).

The global lockdown and related travel restrictions have resulted in the discontinuity of operating activity of travel and leisure-related businesses worldwide. Following the recently published United Nations World Tourism Organization (UNWTO) scenarios, depending on the gradual opening of borders and limiting of travel restrictions, it is expected that in 2020, we will face a drop of 58–78% in international tourist arrivals, while international tourism receipts could plunge by 1 trillion US dollars. In the economic dimension, the overall impact in 2020 is expected to bring tremendous loss in export revenues from tourism and to place 100–120 million direct tourism jobs at risk ( UNWTO, 2020 ). These figures refer to the tourism and travel sector in general. However, as a majority of hospitality industries are tightly related to tourism arrivals, these figures also provide insight into the potential scale of the COVID-19 outbreak consequences in businesses operating in the hospitality industry. Moreover, these consequences are amplified by the social distancing measures implemented internally by the particular countries.

If we consider the impact of the COVID-19 outbreak from a risk management point of view, unique features of the pandemic risk need to be addressed. In the process of risk analysis, a common approach is to evaluate the impact of risk with reference to its probability (chance) and severity (outcomes) ( Aven, 2016 ; Oroian and Gheres, 2012 ). In the case of pandemic risk, we are able to model the severity of risk outcomes by addressing the consequences of the pandemic in terms of, e.g., number of fatalities. However, pandemic risk distinguishes with indecisive probability. Following the concept of Renn (2008) , the COVID-19 pandemic has also shown the relevance of other, less common features of risk, such as ubiquity (geographic dispersion), persistence (temporal extension of consequences), and reversibility (ability to recover after the damage). COVID-19 has spread relatively quickly around the whole globe, and it is currently impossible to reliably define its persistence. In fact, intervention strategies implemented by countries worldwide are directed at slowing the virus spread (which is relevant to the healthcare system sufficiency) and restricting human mobility, which is particularly harmful for the travel and leisure-related industries ( Linkov and Trump 2019 ). These intervention strategies, however, expand the duration of the pandemic to an undefined time interval. Finally, the COVID-19 pandemic distinguishes with questionable reversibility. The economic consequences of the virus spread and the related interventions have an impact on numerous dimensions of human activity, in particular the severe disruptions of the performance of numerous businesses, inevitably followed by bankruptcy waves, increased unemployment, and ultimately growing social concerns and anxiety. Not surprisingly, the strongest economies worldwide expect a deep economic crisis in the aftermath of the coronavirus pandemic.

Driven by the consequences of COVID-19 from a risk management perspective, in Fig. 1 , we present an illustration of the main directions of the COVID-19 outbreak impact on the performance of hospitality businesses. The presented model is framed within a breakeven-point analysis, which is essential for evaluating the rationale behind the operating activity of any business ( Brigham and Ehrhardt, 2011 ). The breakeven-point analysis remains focused on the relationship between sales revenues and total operating costs to clarify whether the business is able to produce a satisfactory operating profit margin. In this respect, the impact of COVID-19 on hospitality businesses is twofold. First, it significantly reduced the level of sales revenues due to the sudden decrease of demand and sales since the moment of businesses’ lockdown. If the businesses are allowed to return to operating activity during the pandemic, the expected sales revenues will be lower than previously expected, due to both the lower demand for hospitality services and the typically imposed restrictions that are related to the reduced number of customers. Second, during the period of discontinuity of operating activity (between the moment of lockdown until the moment of the return to operating activity), businesses need to cover their fixed costs. In the hospitality industry, these costs could be relatively high because they are related to the maintenance of the property or workforce. If the return to operating activity is possible under further restrictions, the operating costs could be even higher than previously expected and planned. In particular, new sources of costs could emerge related to the implementation of the necessary safety measures (e.g., disinfection or protection of employees). The ultimate outcome is a significant decrease in operating profit, which in turn negatively influences the profitability of the business. The discrepancy between the expected and real operating profit refers to the scale of its reduction. However, in real-life situations, these discrepancies could be far more severe, leading to operating losses.

The illustration of the main directions of the COVID-19 outbreak impact on the performance of hospitality businesses.

The period of discontinuity of operating activity is very severe because, due to reduced sales, there are no cash inflows, and at the same time, there is a necessity to pay the business’s obligations timely. This period is critical and could lead to severe liquidity tensions and bankruptcy threats. Thus, in Fig. 1 , we highlight that the period of operating discontinuity leads to the consumption of financial slack resources, if held. To better address this issue, however, we first need to explain the concept of financial slack and the interplay between financial slack holdings and risk preparedness.

2.2. Financial slack holdings and risk preparedness

Effective risk management should result in better risk preparedness by both the implementation of physical risk control measures and the preparedness of adequate financial recovery plans. The COVID-19 pandemic has shown the relevance of being financially prepared for operating activity disruptions. To a great extent, the ability to sustain and recover from the operating discontinuity is determined by the business’ ability to control the related financial consequences. In this respect, the prime source of internal aid is the holdings of financial slack resources.

In general, slack is defined as actual or potential resources held in excess of operational needs that could potentially help to sustain the business and adjust to any internal or external pressures ( Cyert and March, 1963 ; Nohira and Gulati, 1996 ; Zhong, 2011 ; Child, 1972 ; Dimmick and Murray, 1978 ; Mishina et al., 2004 ; Bourgeois, 1981 ). This definition of slack is consistent with the concept of ‘slack as a resource’ and addresses the utility of slack in the buffering (precautionary) function and in facilitating opportunities (e.g., Salancik and Pfeffer (1978) ; Baker and Nelson (2005) ; Mishina et al. (2004) ). However, according to the ‘slack as inefficiency’ view, slack is unproductive and thus costly ( Daniel et al., 2004 ; Stan et al., 2014 ; George, 2005 ; Tan and Peng, 2003 ; Bromiley, 1991 ; March and Shapira, 1987 ; Phan and Hill, 1955 ; Zhong, 2001; Almeida et al., 2002 ). Facing these two competing views, the discussion on the rationale underlying slack holdings and the optimal level of slack resources remains open in the academic debate ( Daniel et al., 2004 ; Natividad, 2013 ).

Following the ‘slack as a resource’ concept, financial slack is defined in the literature as the stock of liquid assets held by the business ( Mishina et al., 2004 ; Natividad, 2013 ). Thus, financial slack is often associated with so-called available slack, related to unabsorbed high-discretionary resources held as cash or marketable securities (the equivalent of cash) ( Nohira and Gulati, 1996 ; Bromiley, 1991 ; Beranek et al., 1995 ; McMahon, 2006 ).

Financial slack resources play a critical role in precautionary behavior, as due to its buffering function, financial slack determines the business’ risk-response abilities, if we consider liquidity tensions. Facing operating disruptions, the businesses may simply consume the holdings of financial slack to safeguard financial liquidity and dismiss the threat of bankruptcy (which was highlighted in Fig. 1 ).

In Fig. 2 , we provide a conceptual model that could support the analysis of risk preparedness driven by the buffering function of financial slack. The model merges two relevant dimensions of financial slack holdings. The first dimension is the actual size of financial slack resources as reflected by the holdings of liquid assets relative to total assets. The second dimension is related to financial slack behavior – accumulation or consumption. In the model presented in Fig. 2 , the highest degree of risk preparedness is attained by businesses that demonstrate financial slack holdings above the average levels and at the same time are distinguish by the ability to accumulate the financial slack resources over time. Accordingly, the lowest degree of risk preparedness is attained by entities that have relatively low (insufficient) slack holdings and at the same time demonstrate continuous consumption of existing financial slack holdings. The alternative situations (high holdings – consumed or low holdings – accumulated) signal moderate levels of risk preparedness ( Fig. 2 ).

Financial-slack-driven risk preparedness – conceptual heat map.

The model presented in Fig. 2 uses the traffic-light color system, which is a common color code in the illustration of risk heat maps ( Aven and Renn, 2010 ). Thus, the orange or red zones signal low risk preparedness and simultaneously a high degree of vulnerability to the consequences of businesses’ operating discontinuity, such as the liquidity tensions in the aftermath of the COVID-19 outbreak.

3. Research question development

It is beyond doubt that the COVID-19 outbreak and related lockdown has led to sudden and unexpected disruptions in operating activity of hospitality businesses worldwide. Thus, this exploratory study was designed to examine the risk-preparedness of hospitality businesses, driven by financial slack holdings and persistence, consistent with the conceptual framework presented in Fig. 2 . In this respect, this study explores the employment of financial slack in the buffering function, as a driver of precautionary behavior and as a relevant determinant of risk-response abilities.

The first research question addressed in this exploratory work is the following:

RQ 1. What is the degree of COVID-19 risk preparedness of hospitality businesses, in terms of their financial slack holdings and persistence?

This question is relevant, as the prior evidence on financial slack holdings does not provide clear guidance on the optimal level of slack and related slack behavior (accumulation or consumption). The reason is that holdings of financial slack are regarded as costly, as liquid assets are less productive ( Opler et al., 1999 ), which is consistent with the ‘slack as inefficiency’ view. However, in the risk-preparedness context, high financial slack is desirable due to its buffering function, which is consistent with the ‘slack as a resource’ view.

The problem of the tradeoff between the costs and benefits (in this buffering function) of liquid asset holdings (as financial slack resources) has resulted in numerous studies that attempted to lay foundations for theoretical and applicative concepts that could support setting the optimal level of financial slack ( Gentry, 1988 ; McMahon, 2006 ; Opler et al., 1999 ). These attempts addressed a variety of perspectives, and remained focused primarily on internally driven factors such as investment strategies, value creation abilities or conservatism of financial policies ( McMahon, 2006 ; Daniel et al., 2004 ). In this exploratory work, however, we address two issues that are critical for the development of efficient system intervention tools aimed at supporting the performance of the hospitality industry in the aftermath of COVID-19 consequences: businesses location and size. Thus, this study asks the second research question:

RQ 2. Is the degree of financial-slack-driven COVID-19 risk preparedness contingent on hospitality business’ location and size?

The business location (country) determines the most relevant drivers of the business’ operating environment. The possible contingency between the level of risk preparedness (driven by financial slack holdings and persistence) and business’ location is critical for the development of adequate system intervention tools, adjusted to these country-specific circumstances. The second item we address is the hospitality business’ size, as smaller companies are commonly regarded as more prone to the negative consequences of any disruption. Thus, smaller businesses tend to hold higher levels of liquid assets to smooth their cash flow volatility; there is empirical evidence in this regard (e.g., Ang, 1992 ; McMahon, 2006 ). The possible association between level of risk preparedness (driven by financial slack holdings and persistence) and business size is critical for tailoring the system intervention tools to the needs determined by the business’ scale of operating activity.

The third research question asked in this exploratory work addresses the interplay between financial slack holdings and a business’ performance. There is prior evidence that there is a direct association between the size of slack holdings and return on assets (ROA) or return on equity (ROE) (e.g., Smith and Kim, 1994 , and Zahra, 1996 ), which suggests that profitable firms tend to hold higher levels of financial slack. In other words, profitable businesses are able to accumulate financial slack resources over time. There is also strong evidence that there is a direct association between the size of slack holdings and borrowing capacity, captured by debt to assets ratios or liquidity ratios. Low borrowing capacity drives high financial constraints, and in these circumstances, firms are more prone to hold higher financial slack resources ( Acharya et al., 2007 ). Driven by this empirical evidence, this study explores the third research question:

RQ 3. Is the degree of financial-slack-driven COVID-19 risk preparedness contingent on hospitality businesses’ performance?

This question is relevant, as the COVID-19 outbreak has resulted in sudden discontinuity of hospitality businesses, impacting their ability to generate funds internally and negatively influencing their ability to obtain funds externally. The outbreak may also amplify the consequences of low borrowing capacity. By addressing the association of financial-slack-driven risk preparedness and the level of business profitability and borrowing capacity, the findings may potentially support the question on the desired duration of system interventions to be able to efficiently smooth the liquidity tensions of hospitality businesses.

4. Research design and method

Guided by the research questions, we designed our research as a gradual procedure, which is framed graphically in Fig. 3 . First, we clustered the hospitality businesses according to the degree of risk preparedness (with reference to the size and persistence of their financial slack holdings). Secondly, we explored whether the attained degree of risk preparedness is contingent on hospitality businesses location and size. The third stage was designed to capture the associations between the degree of risk preparedness and the performance of hospitality businesses. As liquid assets holdings are the main construct that determines the clustering scheme of risk preparedness, this stage was supplemented by the exploration of the of associations between the liquid assets holdings and the performance-related variables. Below we explain in detail the specification of the variables critical at each stage of this research procedure.

Design of empirical research.

Financial slack holdings. To determine the financial slack holdings, we followed the concept of slack as a resource ( Bourgeois, 1981 ) in its buffering function and ‘easy to recover’ approach ( Bourgeois and Singh, 1983 ). The financial (available) slack is associated with uncommitted resources that are maintained for immediate access. Thus, financial slack resources are empirically identifiable through the analysis of liquid asset holdings relative to assets (cash ratio) or alternatively by liquidity ratios or cash-inflow-based ratios ( Daniel et al., 2004 ). In this study, we follow the first approach (cash ratio); we measure financial slack holdings as the holdings of liquid assets (LQ) relative to total assets (A) ( Asimakopoulos et al., 2018 ; Combs and Ketchen, 1999 ; Bates et al., 2009 ; Kim et al., 2011 ). Liquid assets comprise cash and cash equivalents (held as short-term financial investments). Short-term investments are regarded as a ‘storage’ of liquidity and typically reflect the holdings of financial assets that could be easily and quickly converted into cash (marketable securities).

To distinguish between financial slack holders and nonholders, we compared the holdings of liquid assets relative to assets (as determined by LQ/A ratio) to the benchmark level established as the mean value of LQ/A for all companies included in the sample. This approach is justified by the observations from prior research that have confirmed the industry sensitivity to slack holdings ( Berger and Offek, 1995 ; Subramaniam et al., 2011 ). Accordingly, the mean value of liquid asset holdings relative to total assets (LQ/A ratio) was used to identify the cluster of hospitality businesses that can be distinguished by financial slack holdings above the average. To identify a cluster of the businesses distinguished by highly insufficient financial slack holdings, we additionally defined the bottom threshold equal to the first quartile of the LQ/A ratio. All businesses captured in between are regarded as a cluster of businesses of moderate financial slack holdings (see Table 1 ).

Financial slack holdings – specification of variables.

Financial slack persistence. To examine financial slack persistence, we used the data on the dynamics of the LQ/A ratio over time. In general, we classified as slack accumulators those businesses distinguished by an increase of liquid asset holdings relative to total assets (positive dynamics of LQ/A). However, to detect the persistence of financial slack accumulation over time, we analyzed the dynamics of the LQ/A ratio between 2016 and 2017 and between 2017 and 2018. Accordingly, if a business was able to increase financial slack holdings in two consecutive periods, it was assigned as a financial slack accumulator. In contrast, businesses distinguished by the negative dynamics of financial slack holdings (LQ/A) for two consecutive periods were classified as financial slack consumers. All other businesses were classified as inconclusive, as the direction of the dynamics of the LQ/A ratio was volatile in the two consecutive periods (see Table 2 ).

Persistence of financial slack holdings – specification of variables.

Risk preparedness. Further, driven by the conceptual framework presented in Fig. 2 , we defined the clustering scheme for demarcating between five degrees of risk preparedness (hereafter referred to as D_RP), based on the message behind the possible combinations of financial slack holdings and persistence. The details are presented in Fig. 4 . The cluster of very high (green zone) and high (yellow zone) risk preparedness captures the hospitality businesses of high or moderate financial slack holdings and slack accumulators or those with inconclusive persistence. The low (orange zone) or very low (red zone) clusters of risk preparedness capture the businesses of insufficient or moderate slack holdings combined with slack consumption or inconclusive slack persistence. The remaining combinations (amber zone) capture the businesses of moderate risk preparedness.

Matrix of the evaluation of the degree of risk preparedness (D_RP) – specification of clustering scheme.

Performance characteristics . Finally, to explore the associations between the degree of risk preparedness and performance of hospitality businesses, we examined the set of well-established financial ratios ( Table 3 ); see, for instance, ( Vivel-Búa et al., 2018 ; Hales, 2005 ; Brigham and Ehrhardt, 2011 ). We selected the financial ratios that are critical for monitoring the changes of companies’ borrowing capacity and profitability, as these aspects are the prime concerns in the aftermath of operating discontinuity. In general, the borrowing capacity of the business is primarily determined by its liquidity and solvency position. Accordingly, to control liquidity, we employed the current ratio of liquidity (CR), and to control solvency, we computed debt to assets ratio (D/A). Businesses distinguished by high levels of liquidity (CR) and low debt to assets ratios (D/A) demonstrate greater borrowing capacity ( Hales, 2005 ; Brigham and Ehrhardt, 2011 ). Profitability is measured with three basic ratios of return: on assets (ROA), on equity (ROE) and on sales (ROS), and by the analysis of the productivity of assets (PA). In general, higher levels of profitability ratios demonstrate better performance of the business ( Hales, 2005 ; Brigham and Ehrhardt, 2011 ). Additionally, we controlled the associations with sales revenues (SR), as the decrease of sales remains the direct consequence of the operating discontinuity.

The performance characteristics of hospitality businesses – specification of variables.

Holdings and dynamics of liquid assets are critical constructs in the clustering scheme for financial slack driven risk preparedness proposed in this study. Thus, we supplemented the empirical analysis by examining the associations between liquid assets holdings (LQ/A) and performance-related characteristics in the 2016–2018 time span. In this aspect, we follow the methodological approaches of a wide body of literature that aim at capturing the empirical determinants of cash ratio (LQ/A) by performing regression (e.g. Ozkan and Ozkan, 2004 ). For hospitality industry, regression for examining the determinants of cash ratio was applied by Kim et al. (2011) ; Ahmad and Adaoglu (2018) , or recently Demir et al. (2019) .

4.1. Data and sample selection

This exploratory study utilizes the data obtained from financial statements of hospitality businesses provided in the EMIS database (formerly known as ISI Emerging Markets, https://www.emis.com/ ). The EMIS database collects the financial entries of businesses operating in emerging markets, together with the major businesses’ demography characteristics (in this size, sector and location).

From the EMIS database, we obtained the data on the performance of the hospitality businesses operating in four countries: the Czech Republic, Hungary, Poland and Slovakia, to capture the country-effect. The reasoning behind selecting these countries was their homogeneity and comparability on several aspects relevant to this study. First, the Czech Republic, Hungary, Poland and Slovakia successfully underwent the process of transition from command to market economies and joined the European Union in 2004. As the members of the Visegrad Group (V4), these countries closely cooperate and are regarded as comparable on numerous dimensions of their economic performance ( Wyplosz, 2000 ). Moreover, these countries are perceived as equally popular tourist destinations ( Krzesiwo et al., 2018 ), in particular for winter sports, mountain walking and due to their historical heritage. Further, the percentage contribution of travel and tourism industry to GDP in these countries is relatively comparable (see the data provided in Annex, Table A1 ). Another reason for the exploration of hospitality businesses operating in V4 countries is that these countries were hit by COVID-19-related restrictions at nearly the same time, with similar interventions taken against the spread of the pandemic. The first COVID-19 infections were confirmed between the 1 st and 6 th of March, which was followed by the decision on border closures ca. 10 days later. In this respect, the hospitality businesses operating in the sampled countries were affected by the lockdown decisions and social distancing on a comparable scale. The travel restrictions should be regarded as potentially harmful for the hospitality industry in these countries, as the World Travel and Tourism Council ( WTTC, 2020 ) data for 2019 indicate a relative relevance of international spending related to tourism and travel activities in each of the sampled countries (54% in the Czech Republic, 76% in Hungary, 69% in Poland, and 51% in Slovakia).

From the EMIS database, we initially extracted data for all businesses actively operating in the period 2016–2018, providing travelers’ accommodations, lodging and other hospitality services (e.g., restaurants, other travel arrangements and reservation services). Under this request, we obtained 3290 observations (226 for the Czech Republic, 390 for Hungary, 206 for Slovakia and 2468 for Poland). Data for 2018 were the last obtainable entries. Thus, we assume that the situation observed in 2018 remained unchanged until the pandemic.

The obtained data were further verified to exclude all observations with missing or biased entries (e.g., entries for which the basic verification scheme for the balance between assets and liabilities was not maintained). The number of missing or biased records was considerably high in the subsamples of Czech and Polish hospitality businesses. Finally, we obtained a sample of 1154 hospitality businesses for further analysis of financial-slack driven risk preparedness (on non-parametric level), with complete data on slack holdings and persistence. For the empirical determinants of liquid assets holdings (cash ratio) we applied data for 2016–2018 time span, which initially offered 3436 firm-year observations. The descriptive statistics of the examined variables are provided in Annex ( Table A2 ).

The basic characteristics of sampled businesses, concerning size and location, are presented in Fig. 5 . To classify the businesses by their size, we followed the scheme recommended by the European Commission (2016) with respect to the number of employees. Accordingly, we distinguished between four business size categories: micro (employment up to 9 persons), small (employment between 9 and 49 persons), medium (employment between 50 and 249 persons) and large (employment of 250 persons or more).

The structure of sampled businesses by location (country) and size.

5. Results and discussion

5.1. financial slack holdings and persistence.

In the first stage of the empirical investigation, we conduct an entry exploration of the sampled hospitality businesses with reference to their financial slack holdings and behavior. On average, the sampled analyzed hospitality businesses hold 17.07% of their total assets as liquid assets (cash and cash equivalents), which is the mean value of the LQ/A ratio as on 2018. Holdings of liquid assets at a level higher than average was observed in 373 entities (nearly one-third of the analyzed sample, 32.3%), which defines the cluster of hospitality businesses with high financial slack resources. In the analyzed sample, there were 288 entities (25%) clustered as having insufficient slack holdings; their LQ/A ratio was below ca. 2.08% (the first quartile). All other businesses (493, or 42.7% of the analyzed sample) were classified as having moderate financial slack holdings. In Fig. 6 , we illustrate these values by placing the value of the LQ/A ratio for all observations, ranged from low values (0%) to maximum (100%). In addition, in Fig. 6 , we highlighted the mean and first quartile of LQ/A as the demarcation zones.

Holdings of financial slack in the analyzed sample of hospitality businesses.

To explore the financial slack behavior, in Fig. 7 , we illustrate the data on the dynamics of the LQ/A ratio for the analyzed sample of the hospitality businesses between 2016 and 2017 and between 2017 and 2018. These data were used to cluster the analyzed hospitality businesses in three groups based on the observed persistence of financial slack resources. In the analyzed sample of hospitality businesses, a majority (621, which is 53.8% of the observations) were captured as inconclusive, as the dynamics of liquid assets relative to assets was switching from positive to negative (330; 28.6%) or from negative to positive (291; 25.1%). However, the number of businesses identified as slack consumers (172; 14.9%) was considerably less than the number of businesses captured as slack accumulators (361; 31.3%).

Persistence of financial slack holdings in the analyzed sample of hospitality businesses.

5.2. Mapping the degree of risk preparedness (D_RP)

By combining the information on the size and persistence of slack holdings, further analysis was directed toward assigning the sampled hospitality businesses to the predefined clusters of risk preparedness. First, we analyzed the contingency between the size and persistence of financial slack holdings. A detailed contingency table is presented in Annex ( Table A3 ). The Pearson’s chi-square test confirms that there was a contingency between the holdings of financial slack and the level of financial slack persistence ( X 2 = 35.067 ; p < 0.000 ) . Data presented in Fig. 8 indicate that in the group of businesses with high financial slack holdings, the share of slack accumulators was visibly higher (41.8%) compared to the businesses with moderate or insufficient slack holdings (27.8% and 23.6%, respectively). This comparison clearly indicates that a relatively high percentage of slack holders was constantly sourcing their slack resources, by increasing the stock of liquid assets (relative to assets in total).

The contingencies between slack holdings and slack persistence.

Further, in accordance with the conceptual framework presented in Fig. 2 and methodical assumptions in Fig. 4 , we distinguished between five clusters of financial-slack-driven risk preparedness, ranging from 1 (very low risk preparedness) to 5 (very high risk preparedness). In Fig. 9 , we provide the numbers of businesses captured in each of 9 possible combinations of financial slack size and persistence, and their assignment to the given cluster of risk preparedness. In Fig. 10 , we graphically illustrate a percentage structure of hospitality businesses assigned to a given risk preparedness class. In Fig. 9 , Fig. 10 , we follow the color code consistent with the idea of heat map, moving from green (high risk preparedness), through yellow, amber, orange to red (low risk preparedness).

Number of hospitality businesses assigned to given degree of risk preparedness.

Overall structure of the degree of risk preparedness of the examined hospitality businesses.

This evidence suggests that the overall degree of COVID-10 risk preparedness of the examined hospitality businesses should be judged as relatively low (RQ1). The data clearly indicate that nearly 25% of the examined hospitality businesses fall into the cluster of very low or low risk preparedness, suggesting that one-quarter of the examined businesses are highly exposed to immediate liquidity tensions and a bankruptcy threat. The following 34% of the investigated sample was captured as having moderate risk preparedness. These businesses are also prone to liquidity tensions, as their financial slack holdings are either insufficient or recently highly consumed. A relatively positive observation is that nearly 40% of the examined businesses were captured as having good or very good risk preparedness. These businesses have maintained some flexibility during the period of operating discontinuity, as they possessed financial slack resources that could temporarily smooth the emerging liquidity tensions.

5.3. Risk preparedness and hospitality businesses’ location and size

We further explored the contingencies between the businesses’ degree of risk preparedness and their location (country of operating activity) and size to address the second research question asked in this study (RQ2). The data presented in Table 4 indicate that weak but statistically significant contingencies were observed between the degree of risk preparedness and businesses location but not their size (the Pearson’s chi-square test). The detailed contingency tables are presented in Annex ( Table A4 ) and summarized in Fig. 11 . In general, the percentage share of the hospitality businesses with high or very high risk preparedness remains comparable if we consider business size (Panel B). However, the cross-country comparisons clearly indicate that the percentage of businesses captured as having very low or low risk preparedness was relatively lower in the Czech Republic and Hungary, in comparison to Poland or Slovakia (Panel A).

Results of Pearson’s chi-square tests (contingencies between the degree of financial risk preparedness and businesses by location and size).

Notes: Statistically significant at **α = 0.01.

Structure of the degree of risk preparedness in the examined sample of hospitality businesses.

5.4. Risk preparedness and the hospitality businesses’ performance

To address the third research question asked in this study, we first explored the associations between the degree of risk preparedness (as a qualitative state) and hospitality businesses’ performance, by running non-parametric ANOVA (Kruskal-Wallis test) and establishing Rho Spearman correlations.

The Kruskal-Wallis test indicates that hospitality businesses captured in a given cluster of risk preparedness differed significantly on level of liquidity (the current ratio value). A closer analysis of mean ranks of the Kruskal-Wallis test (presented in Fig. 12 ) confirms that the businesses captured as having a higher degree of risk preparedness are distinguished by having better liquidity. This observation is also confirmed by the Rho Spearman correlation coefficient ( Table 6 ). With reference to the D/A ratio, the statistically significant differences were confirmed only between the businesses of very high (green zone) and low (orange zone) risk preparedness (with higher levels of D/A ratio observed in the cluster of low risk preparedness, which is consistent with the negative direction of Rho Spearman correlation coefficient for these variables.

Mean ranks of Kruskal-Wallis test for risk preparedness and selected performance characteristics of sampled hospitality businesses.

Notes: Statistically significant at ***α = 0.001; **α = 0.01; *α = 0.05

Rho-Spearman correlation coefficients.

Statistically significant at ***α = 0.001; **α = 0.01; *α = 0.05.

The data presented in Table 5 , indicate also that the hospitality businesses captured in a given cluster of risk preparedness degree differed significantly on their profitability – in particular, on return on assets (ROA), return on sales (ROS) and productivity of assets (PA). In the case of return on equity (ROE), statistically significant differences were observed only between the businesses of very high and low, and of moderate and low risk preparedness. The analysis of mean ranks of the Kruskal-Wallis test ( Fig. 12 ) indicates that the businesses of a greater degree of risk preparedness are distinguished by a higher level of returns or productivity of assets. The direction of these associations is also confirmed by the Rho Spearman correlations ( Table 6 ). As it can be seen in Table 6 , there is no correlation between degree of risk preparedness and sales revenues. However, the remainder profitability characteristics (return ratios ROE, ROA and ROS and productivity of assets in particular) are positively associated with risk preparedness, which indicates an indirect impact of the loss of customers and the related loss of sales revenues.

The results of the Kruskal-Wallis test (degree of risk preparedness and performance characteristics).

Notes: VH – very high risk preparedness (green zone); H – high risk preparedness (yellow zone); M – moderate risk preparedness (amber zone); L – low risk preparedness (orange zone); VL – very low risk preparedness (red zone); Statistically significant at ***α = 0.001; **α = 0.01; *α = 0.05.

In general, the results of nonparametric ANOVA show that hospitality businesses captured as having a greater degree of risk preparedness are distinguished by having better profitability and greater borrowing capacity (in particular, financial liquidity) positions. However, the long persistence of the COVID-19 outbreak consequences may lead to an evaporation of this advantage. Due to the loss of customers and related cash inflows, the storage of financial slack resources may also dry up in the better-situated hospitality businesses.

Liquid assets holdings are a main construct in the proposed clustering scheme of mapping hospitality businesses risk preparedness. In this respect, we additionally examined the determinants of liquid assets holdings as cash ratio (LQ/A). Following Kim et al. (2011) who studied cash ratio determinants for US hospitality industry, we applied WLS (weighted last square) regression as it can properly handle the problem of heteroskedasticity in cross-firm regressions. By applying the Breusch-Pagan test, we confirmed the heteroskedasticity (p < 0.000). Prior to estimating the WLS regression model, we established the pair-wise Pearson correlations between the variables (see Table 7 ).

Pearson correlation coefficients.

Notes: the performance characteristics in natural logarithm.

In general, liquid assets holdings (LQ/A) is positively correlated with productivity of assets (PA) and current ratio of liquidity (CR), and negatively correlated with debt to assets ratio (D/A), which is consistent with the prior observations on the relationships between degree of risk preparedness and the performance characteristics on non-parametric level.

Table 8 provides the results of WLS regression for the performance characteristics as the determinants of liquid assets holdings in hospitality businesses. The adjusted R-square value indicates that the model explains about 58,4% of the variation of liquid assets holdings in hospitality businesses. Following Kim et al. (2011) we performed two diagnostic tests to ensure there is no multicollinearity in our WLS regression model (VIFs < 10) and no autocorrelation which may occur with cross-time observations (Durbin-Watson statistics of 1.912. which indicates no serial correlation zone).

WLS regression model for determinants of liquid assets holdings.

Notes: The dependent variable LQ/A; all variables in natural logarithms.

Statistically significant at ***α = 0.001.

In general, the results of WLS regression are consistent with prior observations that businesses of higher profitability tend to hold more liquid assets. The sales-related characteristics (SR, PA, ROS or ROA) exert a positive impact on liquid assets holding in our model. This confirms that the sudden decline of sales revenues in the aftermath of pandemic may result in the inability to source the liquid assets holdings. There is also a relationship between the level of liquidity (CR) and liquid assets holdings, that suggests that the greater liquidity and the related borrowing capacity is stronger in hospitality businesses that distinguish with higher liquid assets holdings. The model found a positive association between the debt to assets ratio (D/A) as another indicator of borrowing capacity, which suggests that more financially constrained companies tend to hold more liquid assets. This is consistent with prior observations by Ferreira and Vilela (2004) , although the literature evidence is inconclusive ( Demir et al., 2019 ).

6. Concluding remarks

This study was designed to explore the degree of hospitality businesses’ risk preparedness for the consequences of COVID-19. The hospitality industry is undoubtedly one of the most severely affected by the coronavirus pandemic, as due to the system interventions taken against the spread of the disease, hospitality businesses were exposed to the severe consequences of operating discontinuities. This study explored these consequences from risk and financial management points of view by focusing on liquidity tensions in the aftermath of customer outflows and the related ability to sustain this critical situation and successfully recover from disruptions. The investigations explored the hospitality businesses’ risk preparedness as driven by financial slack holdings and persistence. The analysis has led to several conclusions that may potentially support the design of effective system interventions, as well as to enhance better managerial decisions on response and recovery routes.

6.1. Policy implications

Using sample data from hospitality businesses operating in four central European countries (Czech Republic, Hungary, Poland and Slovakia), the exploration has shown that the degree of financially driven risk preparedness is relatively low. The empirical analysis has confirmed that a low or very low level of risk preparedness was observed in the cases of approximately 25% of the analyzed hospitality businesses. These data indicate that one-fourth of the businesses are unable to sustain the immediate liquidity tensions that emerged shortly after the COVID-19 outbreak and thus are highly prone to bankruptcy. Moderate risk preparedness was observed in the case of a further 34% of the examined businesses. Thus, in general, nearly 60% of the examined businesses are vulnerable to the consequences of operating disruptions. This empirical evidence shows that there is an urgent need to implement hospitality industry-tailored solutions that could prevent consequences from the liquidity shortfalls.

This empirical evidence has shown that the degree of financial-slack-driven risk preparedness of the examined hospitality businesses was contingent on businesses location. It suggests that the design of system interventions directed at smoothing the liquidity tensions in the hospitality industry should be adjusted to the country-specific circumstances. The analysis performed in this study also indicates that the degree of risk preparedness is not contingent on the hospitality businesses’ size. Thus, possible intervention mechanisms should be equally weighted for all businesses, regardless of their size. These findings also indicate that the liquidity tensions faced by hospitality businesses in the aftermath of the COVID-19 pandemic may potentially hit businesses of different size on a similar scale.

6.2. Managerial implications

The study resulted in some observations relevant from the managerial perspective. In general, it was found that businesses captured as having a higher degree of risk preparedness were distinguished by having better profitability and borrowing capacity (in particular, liquidity position). These findings suggest that the businesses that currently demonstrate low and very low risk preparedness for sustaining the COVID-19 outbreak are far more exposed to the consequences of customer outflow (and the associated decrease in related revenues and profits) and the intensification of existing liquidity tensions. Managers who identify their individual businesses as of low risk preparedness should demonstrate a greater concern over controlling their operating costs and anticipating the potential difficulties in obtaining additional funding, if constrained. In these circumstances, managers should carefully consider the available system-level aid that could enhance the sustainability of their businesses. Finally, as particularly exposed to the bankruptcy threat, these businesses shall tightly monitor the innovations implemented by their competitors, to diminish the scale of customers outflow.

Facing the indecisive persistence of the COVID-19 pandemic, the situation may also significantly worsen in the group of hospitality businesses that currently demonstrate a relatively high or very high level of financial-slack-driven risk preparedness, as the COVID-19 pandemic is very influential on profitability and borrowing capacity. In this respect, the managers of the hospitality businesses that were able to safeguard the buffer of liquid assets shall be aware of the fragility of their competitive advantage. We observe that the countries manage with the persistence of pandemic, demonstrated by the consecutive waves of growing number of infections, by imposing some restrictions that affect the performance of hospitality industry. This study has shown that the restoration of slack holdings is particularly associated to the profitability or productivity of assets, which is driven by the ability to generate sales revenues. In this respect, the managers of the currently relatively well-suited businesses need to demonstrate prudential approach in their decision making.

6.3. Limitations and further research

The main limitation of this study is that due to the nature of the explored dataset, it reviews the risk preparedness observed at a single time point (end of 2018). This limitation has required the assumption that the contingencies observed as of the end of 2018 remained unchanged in the pre-COVID-19 period (end of 2019). Thus, further empirical investigations are required to confirm these observations as the data for 2019 are obtainable.

Another limitation of this study is the sample that explored the situation of hospitality businesses operating in four central European countries (Czech Republic, Hungary, Slovakia and Poland). Although the sample is homogeneous in the aspects relevant to this study, further inquiries will be made to verify the financial-slack-driven risk preparedness of hospitality businesses operating in other countries (in particular, those where the hospitality industry significantly contributes to the economy). The methodological approach developed in this study is supportive in this respect.

The findings of this exploratory work are also relevant for further inquiries addressing the details of system intervention mechanisms directed at limiting the negative consequences of the COVID-19 pandemic. Shortly after the COVID-19-related lockdown, the governments of some countries have implemented measures aimed at supporting entrepreneurs in mitigating the economic impact of the pandemic by addressing possible liquidity tensions. These measures embraced various solutions that support the maintenance of employees, loan instruments, deferral of loan repayments, and the release of taxation and social security obligations. However, there is a need to verify whether these overall intervention mechanisms were designed appropriately to meet the specific situation of hospitality industries, including in the temporal dimension.

This exploratory study also provides background for further research endeavors directed at a detailed analysis of the actual situation in the post-COVID-19 reality. In particular, further research will inevitably revise the scale of bankruptcy waves of hospitality businesses as liquidity tensions potentially emerge as one of the leading drivers. Moreover, by revising the situation of the hospitality businesses that were able to survive the COVID-19 consequences, in comparison to the disrupted ones, further studies may address the drivers of the successful recovery paths.

Acknowledgements

I gratefully acknowledge the insightful remarks and comments provided by the anonymous Reviewers and the Editors of the Special Issue.

Contribution of travel and tourism industry to GDP in the examined countries.

Descriptive statistics of the examined variables.

Notes: Descriptive statistics for variables as on 2016–2018 time span.

Contingencies between financial holdings and persistence.

Contingencies between financial slack persistence and businesses’ location and size.

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Does the fate of tourism hinge on land use?

PolyU’s School of Hotel and Tourism Management

How we use land is central to how our societies function. Societal progress therefore frequently involves changes in land use, and in modern civilisation this is generally accomplished by official legislation. As the authors note, “land use change through a formal and regulatory framework is relatively recent, dating back to the mid-17th century, and the more comprehensive regulations to the early 20th century”. Being inherently tied to distinct local features, the fate of the tourism sector is particularly closely intertwined with land use legislation.

The economic consequences of land use changes are conventionally gauged through regulatory impact assessments. In societies worldwide, tourism is a key pillar of the economy. According to the researchers, however, “despite the importance of land use in tourism, there remains a critical gap in the literature of the assessment of changes in land use regulations”. This lack of understanding contrasts with the well-established literature on the impact of land use legislation in other economic contexts, such as agriculture, and may lead to regulatory changes being made by policymakers who are blind to their potential effects.

In both the developed and developing worlds, the reallocation of land for touristic usage is intended to support the economy. However, it is often a source of conflict, which “usually involves citizens opposing tourism development, and businesses supporting it for the reasons of economic growth”. However, even when efforts to redirect land use towards tourism succeed, economic growth is not guaranteed. The authors draw particular attention to a dearth of research investigating how small tourism businesses respond to regulatory changes, and whether the effects are positive.

Small and medium-sized enterprises (SMEs) are the bedrock of tourism, accounting for 70% of businesses in the sector, and are especially important in developing countries. Lacking the power and resources of larger firms, they are also particularly sensitive to regulatory changes. Tourism SMEs, as the researchers observe, are generally “dependent on debt financing due to limited access to other sources [of funding]” and tend to rely on fixed assets as collateral. Land is a major type of fixed asset, and therefore land use changes directly intersect with tourism SMEs’ attempts to grow using external financing.

The researchers’ focal country, Namibia, is an African nation that has seen a boom in land use allocation for tourism. “In 1990”, the authors note, “when Namibia gained independence, the government inherited an unbalanced distribution of land ownership”. This situation initially stifled economic growth by restricting communities’ ability to tap the country’s huge tourist potential. In the last two decades, however, the state has taken legislative steps to remedy this, including increasing the amount of land with communal access. Such land can legally be used for commercial ends, notably including tourism.

Specifically, a 2002 law opened the possibility of touristic land use under the auspices of communal conservancies, a type of local body governed by communal authorities. “This resulted in the development of Communal Joint Venture lodges through a partnership between the communal conservancies and the private sector”, the researchers tell us. The 46 Lodges now operating in Namibia employ numerous workers from local communities and have been supported by international development agencies. However, the Lodges’ ability to secure market financing and thus cement their long-term viability remains unproven.

To delve deeper into the Lodges’ situation, Lin and coworkers performed an impact assessment to investigate “whether the changes in land use regulations in Namibia impacted the Lodges’ ability to source market financing to continue growing, and their financial performance to stay competitive”. In other words, can these public–private joint ventures – which effectively represent a home-grown Namibian form of tourism SME – attract hard-nosed investors and become genuinely self-sufficient hospitality businesses in a market economy?

Interviewing representatives of key stakeholders in Namibia’s tourism sector, including banks, government departments, investors and law firms, the researchers acquired a wealth of expert opinion on the relationship between land use regulation and Lodge financing. They also personally visited a number of Lodges to obtain financial performance data, encompassing “a relatively well-rounded profile of operations in communal conservancies”. These statistics bolstered the study’s qualitative findings by providing a window into the financial status of the Lodges.

From the interviews with stakeholders, four themes emerged regarding the barriers to providing financing for Lodges: “unclear business viability; lack of acceptable collateral; poor quality of project proposals and financial information; and availability of alternative financing”. For example, the Lodges’ viability as tourism enterprises was hampered by the unclear legal boundaries of the sublease arrangements between conservancies and investors, while the relatively short (10-year) lease terms gave investors little confidence in their long-term prospects.

The legal robustness of the joint venture agreements was another sticking point for investors. “There was no explicit legal basis for the transfer of land use rights in communal conservancies for commercial purposes”, the researchers point out. This gave investors doubts about whether land use agreements would actually be upheld, making leases an ineffective form of collateral for obtaining financing for the Lodges. Meanwhile, financial institutions expressed doubts about some of the investors, noting that they were often owner–managers or “lifestyle” investors with little business acumen, thus providing inadequate operational data.

In their early days, communal conservancies received support from international agencies, often on relatively lax terms. While this had once played a vital developmental role, the continued availability of such “soft” alternative financing was now seen by banks as a safety net, preventing the Lodges from presenting as viable to investors. Those who did choose to invest encountered a complex web of parties expecting payment, often becoming subject to both lease fees and the land taxes passed on by conservancies, dubbed by one investor as “paying [twice] for the same product”.

Among the many other hurdles to investment were human resource issues and the terms of partnership agreements. These overlapped in the widespread stipulation for lodges to “hire from within the community, and not necessarily seek out the best trained, most productive staff from elsewhere as other non-joint venture lodges could”. Such terms made sense for conservancies, which often gained little economic benefit other than employment of locals, but clashed with the needs of private investors as they impaired the quality of service offered by the ventures.

The study’s conclusion is stark. Even if well intentioned, “land use regulations can negatively impact the growth and competitiveness of small tourism and hospitality enterprises through increased risk, lower financial performance, and unclear legality”. The authors call for caution by lawmakers who rule on land use changes, which can be a double-edged sword. They also note that possible agency conflicts – such as those between the governors of and investors in Namibian Lodges – must be considered as part of a holistic economic impact assessment of such laws, which will be crucial for devising better regulations in future.

About the authors

Sharma, Amit, Messerli, Hannah, and Lin, Michael S. (2023). Land Use Regulations and Small Tourism Enterprises.  Annals of Tourism Research , Vol. 100, 103550.

Media, Hong Kong, SAR

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• How India's hospitality sector leads the charge for sustainability

Green hotels are an integral component of the growing eco-tourism movement, which emphasises promoting destinations and accommodations with minimal environmental impact.

• Pradeep Shetty ,
• ETHospitalityWorld
• Updated On Apr 23, 2024 at 01:05 PM IST

In recent years, India's hospitality sector has emerged as an active participant in embracing sustainability practices. With a growing awareness of environmental concerns and a commitment to responsible tourism, hotels and resorts across the country are increasing joining the efforts to reduce their carbon footprint and promote eco-friendly practices. Green hotels have gained recognition for their commitment to energy conservation, water preservation, and waste reduction. Green hotels are an integral component of the growing eco-tourism movement, which emphasises promoting destinations and accommodations with minimal environmental impact . India's diverse landscapes and cultural richness position it as an ideal hub for eco-tourism, and green hotels play a crucial role as facilitators of this transition. These establishments cater specifically to environmentally conscious travellers, offering sustainable travel options that align with their values and desire to reduce their carbon footprint. Advt This shift towards sustainability is driven by the sector's acknowledgement of its significant environmental impact. The hospitality industry is responsible for 1-2 per cent of global carbon emissions, a figure expected to rise. Therefore, it has become imperative for hotels and resorts to take action to mitigate their environmental footprint. The sector aims to reduce emissions by 66 per cent per room by 2030 and 90 per cent by 2050 to prevent emissions from surging along with the sector's expansion. One of the most notable aspects of this initiative is the adoption of renewable energy sources . Many hotels are investing in solar panels, wind turbines, and other alternative energy solutions to power their operations. By harnessing clean energy, these establishments not only reduce their reliance on fossil fuels but also lower their overall carbon emissions. Sustainable practices extend beyond energy conservation. Water management initiatives, such as rainwater harvesting and wastewater treatment, are increasingly common in hotels across India. By implementing water-saving technologies and promoting responsible water usage among guests, hotels are making significant strides in conserving this precious resource. In addition to resource conservation, waste management is another area where the hospitality sector is making significant progress. Many hotels have implemented comprehensive recycling programs and composting initiatives to minimise waste sent to landfills. Furthermore, eco-friendly amenities and packaging solutions are becoming increasingly prevalent, reducing the environmental impact of guest stays. The hospitality industry is witnessing an increase in the adoption of sustainable sourcing practices. Hotels and resorts are increasingly prioritizing locally sourced and organic ingredients for their food and beverage offerings. By supporting local farmers and producers, these establishments not only reduce their carbon footprint but also promote economic growth in the communities they operate in. Advt Modern travellers are becoming more conscious of the environment and the consequences of their decisions. As a result, they are actively seeking out eco-friendly accommodations, leading to a growing demand for "green hotels" in India. Recognising the pivotal role of sustainable practices in the hospitality industry, the Indian government has taken proactive measures to promote such initiatives. Policies and incentives have been introduced to encourage the adoption of sustainable practices among hotels and resorts. There are programs which aims to mainstream sustainability into tourism sector towards developing a sustainable, responsible and resilient tourism sector. These governmental initiatives serve as catalysts for the widespread adoption of sustainable practices within the hospitality sector, fostering a culture of environmental responsibility and innovation. In xonclusion, India's hospitality sector is taking role in adopting sustainable measures, setting an inspiring example. Through innovative initiatives and a commitment to environmental stewardship, hotels and resorts across the country are emphasising that responsible tourism is the need of the hour which are also economically viable. As the green revolution continues to gain momentum, the future of India's hospitality sector looks brighter and more sustainable than ever before. The author, Pradeep Shetty is president of FHRAI .

• By Pradeep Shetty ,
• Published On Apr 23, 2024 at 01:05 PM IST

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• Premium Statistic Operating status of Spanish travel agencies during COVID-19 March 2021
• Premium Statistic International outlets of Spanish travel agency franchises 2018-2022
• Premium Statistic Monthly headcount of travel agencies and tour operators in Spain 2019-2022

Food service

• Basic Statistic Monthly year-over-year growth of the food service revenue index in Spain 2019-2022
• Premium Statistic Year-over-year growth rate of food service channels' value in Spain 2020
• Premium Statistic Snacking and non-alcoholic drink sales growth in Spain 2020, by channel
• Premium Statistic Quarterly online transactions of restaurants in Spain 2014-2021
• Premium Statistic Monthly headcount in food and beverage service activities in Spain 2019-2022

Further related statistics

• Premium Statistic Hotel industry: sales and profits prospects for 2020 in Spain
• Premium Statistic Lodging businesses in Spain 2022, by region
• Premium Statistic Lodging businesses in Spain 2021, by activity
• Premium Statistic Average hotel price during Seville's Feria de Abril 2017
• Premium Statistic Spanish tourists in hotels in the province of Seville in Spain 2013-2018
• Premium Statistic Average daily rate (ADR) of hotels in Naples 2014-2019

Further Content: You might find this interesting as well

• Hotel industry: sales and profits prospects for 2020 in Spain
• Lodging businesses in Spain 2022, by region
• Lodging businesses in Spain 2021, by activity
• Average hotel price during Seville's Feria de Abril 2017
• Spanish tourists in hotels in the province of Seville in Spain 2013-2018
• Average daily rate (ADR) of hotels in Naples 2014-2019