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Hospitality sectors: The four sectors in the hospitality business

  Posted in Resources  Last updated 25/01/2024

What are the hospitality sectors?

Hospitality sectors are the various professional areas that encompass giving particular services to customers, including food and beverage, accommodation, travel and tourism, and entertainment and recreation. This means that all hotels are part of one or all of the main hospitality sectors.

This blog explains the different hospitality sectors, how they operate, and how you can use this knowledge to better position your hotel business for success.

Table of contents

What are the five sectors of hospitality?

Traditionally, the hospitality sector is focused on providing services to people who are away from home. This immediately brings to mind what we all need in a day: nourishing in the form of food and drink, a safe place to spend the night, and a means to get to and from those locations.

In addition to this, a multitude of sights, activities, and events often provide a way to spend our spare time or a reason to leave the house in the first place.

While we know over time expectations have shifted towards the hospitality sector also catering to people who are in fact at home, there are four distinct sectors of hospitality segments.

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Food and Beverage sector

From restaurants to bars, and food trucks to museum cafés: as many discovered during the lockdowns of a global pandemic, supplying food and beverages to customers is as much a daily necessity, as it is a social experience. The food and beverage sector in the hospitality sector (typically referred to as “F&B”) has long evolved around customers’ needs and preferences by developing concepts that adequately cater to those needs. 

This includes the development of fast food outlets and drive-through options for speed and convenience.

It is worth noting that not all food and beverage businesses are standalone operations. Often, F&B services are provided inside a hotel, whether it be in the form of a breakfast buffet, a restaurant, or a bar. Many cafés or food outlets are located inside larger operations, such as on the premises of a museum or inside an arena.

Further differences exist in their business models, with some part of a larger business, such as a hotel’s own on-site restaurant, and others leased or operated under an agreement, such as a dedicated cafeteria inside a corporate employers’ office building.

As the F&B segment keeps evolving, trends that shape the sector most recently focused on delivering the experience off-site, to the customer’s location and using technology in smart ways.

Creative examples of the hospitality business include American startup “Wonder”: when you request a meal using their app, your food is cooked and plated in a van right outside your front door.

Accommodation sector

Accommodation or guest lodging is the hospitality sector in charge of overnight stays, whether that is one or many nights. It is a broad market, including anything from youth hostels to motels, economy to mid-market, luxury, long-stay hotels and serviced apartments, to resort hotels and professionally run Air BnBs. 

While guest experience has been at the heart of this evolution of different levels of service, it also provides relative clarity on target customers. The lodging sector is a dynamic one, with properties ranging from one room rented out in a person’s house via Airbnb to large complex-style hotels that offer a never-ending list of amenities.

When solely considering the aspect of providing a place to stay, hotels neatly fall into this category. 

Travel and Tourism sector

The travel and tourism sector of the hospitality sector can be seen as an indicator of how the other sectors are going to perform: the more people are enticed to explore as part of tourism campaigns and the more they are on the road to travel, the more of the other services they are going to need. 

For this reason, many hotel businesses now use a set of market forecasting tools that involve, for example, flight data. 

Overseas holidays, work trips, day trips, weekend escapes… all of these fall within the travel and tourism sector. All involve a roundtrip, though for different purposes, and all require a form of transport. So the first part of this sector includes:

  • Airlines
  • Car rental
  • Boats, ferries and cruise ships
  • Buses and coaches
  • Trains
  • Even spacecraft these days!

Travel, of course, happens not just for leisure, but also for business or to visit family and friends, which is reflected in the many types of guests a hotel, restaurant, or venue attracts.

Travellers and tourists also want to stay and explore once they reach their destination – so this sector also covers lodgings and recreation. Of course, people need to eat, bringing in food and beverage under this umbrella, too. 

If travelling for work, the meetings and events sector may also be relevant. 

Finally, travel agencies, tour operators, tourism organisations, travel wholesalers and other travel trade businesses fall into the travel and tourism sector.

Entertainment and Recreation sector

Where the other three hospitality sectors may somewhat rely on offering necessities to people away from home, the entertainment and recreation sector relies on disposable income. Anything that people do for enjoyment can fall into this category and in return also generate travel, such as a trip to see a concert in another city.

Recreation encompasses entertainment businesses and other businesses that provide activities designed to help people rest, relax or have fun. The list is long and includes:

  • Movies and theatres
  • Music and comedy acts
  • Zoos and museums
  • Spectator and participatory sports
  • Day spas
  • Casinos
  • Shopping precincts
  • Tours
  • Swimming pools
  • Amusement park

Overlap exists in businesses that can be an attraction and an F&B operation or, in the case of cruises, covering all four hospitality sectors: on-board food and beverage, cabins for accommodation, a ship as a means of transport between harbours and entertainment in the form of organised events, concerts and activities on-board the cruise ship.

Meetings and event sector

Meetings and events are an increasingly significant part of the hospitality industry, particularly in city locations. This sector covers:

  • Weddings
  • Trade shows and expos
  • Conferences and summits
  • Business events
  • Training seminars
  • Sporting events
  • Food fairs and markets
  • Farm shows and field days
  • Celebration dinners and fundraisers

While purpose-built centres have popped up to meet the demand within this sector, many hotels have also expanded their offerings to service this sector.

Image explaining hospitality sectors

What is the largest sector in hospitality?

While the accommodation sector certainly makes its mark in the hospitality industry, it’s the Food & Beverage (F&B) sector that takes the crown as the largest, boasting an impressive revenue of USD $76 billion. This sector encompasses everything from quaint cafés and gourmet restaurants to lively pubs, bars, fast-food drive-throughs, bustling nightclubs, artisanal bakeries, cosy coffee shops, and innovative food trucks.

However, it’s not just about the diversity of establishments. It’s also the evolving market trends and consumer preferences that really drive the F&B sector’s growth. Today’s consumers are seeking more than just a meal. They’re after unique dining experiences, which include a mix of diverse cuisines and culinary adventures. This shift has made the F&B sector a central player in the realm of food tourism, further solidifying its dominance.

The integration of technology has been a game-changer too. Online ordering systems, the rise of food delivery apps, and digital payment solutions have revolutionised how F&B services operate, enhancing their reach and operational efficiency. This technological leap is not just a trend but a fundamental shift in how the sector connects with its customers.

However, the F&B sector faces its own set of challenges, including the need to constantly innovate to keep up with changing consumer tastes and manage fluctuating commodity prices. Yet, with these challenges come opportunities – the rise of fusion cuisines, themed dining experiences, and the integration of cultural elements into dining experiences open new avenues for growth and creativity.

So why should hoteliers care? There’s a noticeable synergy between the accommodation and F&B sectors. Many successful hotels host renowned restaurants and bars, creating a symbiotic relationship where the success of one often fuels the other. This overlap is a testament to the interconnected nature of the hospitality industry. What’s good for F&B is also good for accommodation.

What does the ancillary hospitality sector include?

The ancillary hospitality sector is a diverse and crucial component of the broader hospitality industry, made up of a range of services that enhance and support the core offerings of primary hospitality businesses, like hotels. This sector includes:

Travel agencies

Travel agencies are the architects of tourism, designing and selling travel packages and providing expert advice on destinations. They play a pivotal role in arranging accommodations, flights, and itineraries, ensuring a seamless travel experience for their clients.

Tour operators

Tour operators create and operate guided tours, offering curated experiences that showcase the best of a destination. Their expertise lies in providing organised, hassle-free excursions that often include unique insights and access to attractions not easily available to independent travellers.

Event planning

Event planners are professionals who specialise in organising and managing events, ranging from corporate conferences and weddings to large-scale public events. Event planners coordinate every detail, from venue selection and catering to entertainment and décor, ensuring each event is memorable and executed flawlessly.

Transportation services

Transportation services encompass a wide range of offerings, from taxi and shuttle services to luxury car rentals and chartered buses. These services are integral to the hospitality industry, providing essential connectivity between different points of interest such as airports, hotels, tourist attractions, and event venues.

Cleaning services

Sometimes the unsung heroes of the hospitality world, cleaning services ensure that all hospitality spaces, whether it’s hotels, restaurants, or event venues, maintain the highest standards of cleanliness and hygiene. Their role is critical in creating a welcoming and safe environment for guests and patrons.

What sectors of hospitality service does your hotel fit into?

Operating a hotel is not one-size-fits-all. Any hotel can be considered a part of the accommodation sector (perhaps with the exception of The McKittrick Hotel in New York City, which is in fact an immersive theatre venue and F&B business), but many operate across two or more hospitality sectors. 

So vast are the opportunities that one does not have to look far to identify hotels that have embraced the opportunity of engaging their guests in as many ways as possible.

Hotels in Las Vegas on the main strip are great examples, with usually more than one F&B outlet, some forming part of an overground train network and almost all of them operating casinos and show venues.

With that in mind, it is less of a question of what sector a hotel fits into than it is a question of what sectors a hotel covers.

To easily identify these, take a look at your Daily Management Reports: if there are sources of income other than sector rooms, your business spans more than one sector of the hospitality business.

Example of how hotels can work with other hospitality sectors to boost business

Operating across sectors in the hospitality sector provides the benefit of convenience to guests and additional revenue opportunities to a hotel. 

While hotels can span across all four sectors, they do not have to. It is worth weighing up the risks of providing additional services and how they may affect the bottom line of the overall organisation.

A successful example within the hospitality business can be found again in hotels with casinos, which sometimes use low-cost rooms to attract guests to gamble, shop and eat, or free accommodation to high rollers that will return the investment through their gambling spend.

In this example, the hotels did not expand their operations by chance, but with a focus on their guests’ interests alongside their own profitability.

In place of building out additional services at a potential cost, any hotel operator is smart to also consider partnerships with local businesses that complement the hotel’s offerings.

This can result in the creation of special package rates or regular referral business and shuttle services between venues, all enhancing the guest experience and the bottom line of the participating businesses.

By Dean Elphick

Dean is the Senior Content Marketing Specialist of SiteMinder, the leading technology provider delivering hoteliers unbeatable revenue results. Dean has made writing and creating content his passion for the entirety of his professional life, which includes more than six years at SiteMinder. Through content, Dean aims to provide education, inspiration, assistance and value for accommodation businesses looking to improve the way they run their operations achieve their goals.

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