Anyone new to the hospitality industry may be asking “What is a hospitality sector?” since there are few industries that span as widely in the pursuit of taking care of their customers. Knowing what hospitality sectors there are and how they influence each other and even overlap, is a step toward making sense of the vastness of a global industry that is worth an estimated USD 3.4 bn and offered 289 million hospitality sector jobs globally in 2021.
This blog explains hospitality sectors, how they operate, and how you can use this knowledge to better position your hotel business for success.
Table of contents
The four hospitality sectors
Traditionally, the hospitality industry 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 industry also catering to people that are in fact at home, there are four distinct sectors of hospitality segments.
Food and Beverage
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 industry (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 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 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.
When solely considering the aspect of providing a place to stay, hotels neatly fall into this category.
Travel & Tourism
The travel and tourism sector of the hospitality industry 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. The many modes of transportation businesses included in this hospitality sector usually fall into the categories of air, rail, sea, car, or bus.
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.
Entertainment & Recreation
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.
Overlap exists in hospitality 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.
What segment 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 from rooms, your business spans more than one sector of the hospitality industry.
How your hotel can work with other hospitality sectors to boost business
Operating across sectors in the hospitality industry 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 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.