10 hours ago
What Businesses Can Learn From Hotels' Response To Economic Shocks
Mark Holzberg has more than 30 years of experience in the hospitality technology space and is CEO of Cloud5.
The economic landscape in 2025 is expected to be shaped by new tariffs, inflationary pressures and unpredictable shifts in global trade. As businesses brace for these changes, many are looking for strategies to weather potential downturns, manage rising costs and keep customers engaged. As it was in 2009 and again in 2020, the hotel industry is on the front lines of this uncertainty.
For hotels, the threat of reduced travel, rising construction costs and changing consumer behaviors is real. However, the following responses to these challenges—honed over two previous periods of intense trial—offer valuable lessons that can serve as a playbook for any consumer-facing business navigating turbulent times.
Hotels are already witnessing changes in traveler behavior due to economic uncertainty. Reports indicate that hotel bookings in the U.S. have dropped 7.76% in the first quarter of 2025, compared to the same period in 2024.
Additionally, major U.S. hotel brands are adjusting their forecasts in anticipation of continued consumer cutbacks on discretionary spending. This trend is expected to lead to more localized travel, shorter stays and fewer luxury splurges. In response, hotels are once again turning to their economic downturn playbook. They are closely monitoring consumer behavior to revise pricing, create new packages and deals, focus on regional and local markets with more "staycations," promote amenities to diversify revenue streams and invest in technologies that improve operations and reduce costs.
Consumer priorities change quickly when financial pressures mount. Businesses across all sectors should stay close to their customers and continuously monitor their behavior. Whether through data analytics, customer feedback or direct engagement, companies should be prepared to quickly adapt their offerings. This means shifting focus from premium experiences to value-driven offerings, meeting customers where they are—both physically and emotionally—and delivering solutions and offerings targeted to the stated needs of the customer, adapting as those needs change.
Whether you're in retail, services or hospitality, knowing your customer's current needs is essential.
During the pandemic, many hotels adopted self-service options like contactless check-in. These solved a couple of problems—they served guests with near-complete social distancing and allowed hotels to cut costs while remaining operational with much leaner on-site staffing.
One thing that hotels didn't account for was how much guests would like these options. Five years later, contactless check-in is still widely used today with no sign of slowing down. A survey found that nearly 80% of travelers would be willing to stay at a hotel with a completely automated front desk or self-service kiosk.
This is a great, although somewhat unplanned, example of controlling costs without killing experience. For hospitality, it's about finding cost control options that are low risk to guest satisfaction. Contactless check-in is one, smart climate/energy-efficient technologies might be another and personalized housekeeping options yet another. These initiatives allow hotels to save money on labor and utilities without compromising on service quality.
Cost management is crucial, but it's equally important not to sacrifice the customer experience that drives your business. Instead of making blanket cuts to expenses, focus on areas where operational efficiencies can be achieved without affecting your core value proposition or the way that your customers experience your brand.
Know what's truly important to your customers and work from there. This might include investing in technology that streamlines operations, such as CRM systems, cloud-based tools or inventory management platforms. Businesses should look for areas where innovation and automation can deliver incremental cuts that add up to big savings without blowing the customer experience.
By the end of 2024, the hotel construction and renovation pipeline had reached a record high, signaling strong momentum in the industry. However, with international materials—primarily imported from China and Vietnam—accounting for 15% to 20% of total project budgets, rising costs and persistent global supply chain disruptions are putting that momentum at risk. What was expected to be a year of robust growth in hotel development now faces potential setbacks, as many hotel groups begin to defer major capital expenditures (CapEx), including large-scale renovations, luxury upgrades and new construction projects.
While the instinct is to draw back, hospitality's history shows that thoughtful CapEx projects that are executed during times of economic uncertainty can generate immediate value and position properties for higher levels of success once the storm has passed.
For example, improving guest technology systems, enhancing mobile check-in experiences, enhancing property Wi-Fi or adding amenities that appeal to local or budget-conscious travelers were all proven as strong investment opportunities for hotel brands during previous times of economic uncertainty.
While it might be tempting to halt all capital expenditures during times of uncertainty, businesses should approach these decisions with strategic thought. Rather than freezing all spending, prioritize investments that deliver short-term returns or those that directly improve customer engagement.
For instance, a retailer may decide to delay the opening of new stores but invest in optimizing its e-commerce platform. Similarly, a manufacturing company might hold off on new facility construction but prioritize upgrading equipment that improves operational efficiency.
The next few months will undoubtedly be challenging for businesses operating in the global economy. However, the lessons from the hospitality industry—particularly how hotels have successfully adapted to economic uncertainty in the past and are working to do so today—can offer valuable insights for businesses across all sectors.
By staying close to customers, controlling costs without sacrificing quality and strategically managing CapEx, companies can not only survive economic turbulence—they can thrive.
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