PESTEL analysis of the hotel industry
This detailed ‘PESTEL analysis of the hotel industry’ aims to evaluate some of the macro factors that influence the global hotel industry, with particular references to the USA, the UK, and the EU. Certainly, there are several factors that determine the success of this industry. Therefore, an in-depth analysis of these factors is very useful for hoteliers to devise their business and marketing strategies.
Political factors that may impact on the hotel industry
The hotel industry is a subdivision of the hospitality industry. Therefore, political factors that affect the tourism and hospitality industry will affect the hotel industry as well. For instance, if the U.S. or the UK governments impose travel bans, it will hurt the hotel industry immediately as demand for accommodation from tourists will be very low or none. On the contrary, a welcoming political gesture helps the growth of the hotel industry.
Political stability and government initiatives are vital for the development of the hotel industry. For instance, the UK government in 2019 announced a new deal dubbed as ‘Tourism Sector Dear’ which confirms its commitment to building over 130,000 new hotel rooms by 2025 with 75% being built outside of London (Stoyle, 2019). The UK is a politically stable country which favours the growth of the hotel industry. This growth is further fuelled by the government initiatives.
Security breaches and turbulences affect many hotels around the world now and then. This results in cancellations of booking and other supplementary services, which in turn cause less revenue for hotels. Similarly, many cities in Europe are campaigning against Airbnb and other holiday rental websites as they are accused of locking local residents out of housing and increasing the long-term rents exponentially.
Economic factors that may impact on the hotel industry
Economic environment influences the hotel industry in many different ways. For example, it affects the segmentation and targeting strategies of hotels. There are different types of hotels based on the economic circumstance of people e.g. luxury hotels, boutique hotels, and budget hotels. Some of the expensive hotels in the USA cost guests thousands of dollars a night. Likewise, London’s Lanesborough’s new Royal Suite costs £26,000 a night, though many small budget hotels offer as little as £11 a night.
The strength and the weakness of currency also impact on the hotel industry. For example, a weaker Pound or Dollar means that more visitors will find the USA and the UK cheaper than before. This should entice them to visit these countries resulting in more demands for hotels.
Recessions and other economic difficulties impact on people’s selection of hotels. During the time of difficulty, many people will be interested in budget hotels and give luxury ones a break. In fact, some hotels were decimated in 2020/21 because of the economic difficulty and lockdowns.
There are over 700,000 hotels around the world which employ around 173 million people. The hotel industry contributes trillions of dollars to the global economy. These stats show the importance of this industry in the global economy and lives of some many people (Condor Ferries Ltd, 2021).
Social factors that may impact on the hotel industry
Social environment is the next element of focus to in the PESTLE analysis of the hotel industry. Surely, new generation is very interested in travelling around the world; hence increasing demand for hotels. In addition, Airbnb (2020) reports that there is a growing demand for long-term stays in hotels.
Consumer preference in accommodation is changing rapidly. Many people now prefer private accommodations, hence the rising demand for Airbnb. Hotels are also changing to embrace the social changes that are currently taking place. Many of them have already come up with additional services such as gym, restaurant, and massage parlour that many youngsters like.
Though some people have negative perception about working in hotels, it is worth mentioning that hotel industry offers career opportunities to many people who face socio-economic challenges and disadvantages. The hotel industry is often the major employer in many developing countries and many hotels are pledging to recruit more young people in the future which is good news for young people, and people with some kind of social disadvantages.
Technological factors that may impact on the hotel industry
Hotels use technology in different ways to serve their consumers better. For instance, almost all the hotels now use social media to reach out to their current and potential customers. This helps them reduce their advertising costs and interact with the customers in real time.
Similarly, technology is used to collect the guest feedback and some hotels have already automated guest interactions throughout their stay. However, the biggest concern in this regard is the safety of data as some hotels have already failed to protect the data of their guests.
Environmental factors that may impact on the hotel industry
Hotels consume a lot of water, electricity, and gas and contribute to the shortage of these resources. Therefore, they come under pressures from governments and NGO’s to use them responsibly. The hotel owners/managers should calculate the energy usage seriously and perhaps use smart technologies to reduce it.
Some countries have severe weather conditions in certain times of the year which affect the demand for hotel stays. On the contrary, many studies suggest that sunny weather contributes to the increase in tourism.
Legal factors that may impact on the hotel industry
Legal environment is the last topic of discussion in the PESTEL analysis of the hotel industry. Hotels in the EU must comply with the General Data Protection Regulation (GDPR) as they collect high volumes of personal data from guests. Likewise, hotels in the UK must comply with the UK GDPR. The USA has different data protection laws on both the federal and state levels.
Failure to provide data safety may costs hotels millions of pounds. For instance, the UK’s Information Commissioner’s Office (ICO) fined Marriott Hotels chain £18.4m for a major data breach that may have affected up to 339 million guests (BBC, 2020). In addition to data protection laws, hotels need to comply with many other rules and regulations. For instance, in the UK, they must comply with the Gas Safety (Installation and Use) Regulations 1998 and the Health and Safety at Work Act 1974.
We hope the article ‘PESTEL analysis of the hotel industry’ has been helpful. You may also like reading PESTEL analysis of the hospitality industry. Other relevant articles for you are:
If you liked any of these articles, please feel free to share with others by clicking on the icons provided.
Last update: 25 April 2021
Airbnb (2020) Make the most of the growing demand for longer stays, available at: https://www.airbnb.co.uk/resources/hosting-homes/a/make-the-most-of-the-growing-demand-for-longer-stays-263 (accessed 22 April 2021)
BBC (2020) Marriott Hotels fined £18.4m for data breach that hit millions, available at: https://www.bbc.co.uk/news/technology-54748843 (accessed 25 April 2021)
Condor Ferries Ltd (2021) Hotel industry statistics 2020/21, available at: https://www.condorferries.co.uk/hotel-industry-statistics (accessed 24 April 2021)
Style, T. (2019) Where will the UK’s new 130,000 hotel rooms come from?, available at: https://www.savills.co.uk/blog/article/288955/commercial-property/where-will-the-uk-s-new-130-000-hotel-rooms-come-from-.aspx (accessed 24 April 2021)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.