Hospitality Industry: Sectors, Markets, and Trends

Our overview covers key aspects of hospitality, such as market size, main sectors, and major trends influencing the industry.

What is hospitality?

Hospitality, in its broadest sense, refers to welcoming, accommodating, entertaining, and feeding travelers and local customers. The industry encompasses a wide range of service-oriented businesses, such as

• hotels, hostels, and resorts,
• restaurants and bars,
• event planning companies,
• theme parks,
• cruises,
• travel agencies,
• wellness centers,
• nightclubs,
• casinos, and more.

The Cambridge Business English Dictionary takes a narrower view, limiting hospitality to accommodations and food and beverage (F&B) sectors. This corresponds to the acronym HORECA (Hotel, Restaurant, and Café/Catering), which is used in Europe and some other regions to refer to businesses offering food, drink, and lodging services.

Further, we’ll follow this narrow understanding of hospitality, focusing on its core aspects—providing lodgings for temporary stays and serving food prepared for immediate consumption. Both types of activities are often combined within the same entity (for example, a hotel or resort).

The state of hospitality, which is centered on creating welcoming and memorable experiences, largely depends on the broader travel and tourism industry.

The World Tourism Barometer reports that 1.52 billion tourists traveled internationally in 2025—an increase of 60 million from 2024, reflecting 4 percent growth. Europe led with 793 million international tourists in 2025—a 4 percent increase from 2024. Asia and the Pacific reached 331 million arrivals (a 6 percent growth). Meanwhile, the Americas recorded 218 million arrivals, reflecting a modest 1 percent rise over 2025.

Notably, Africa experienced the highest growth, with arrivals climbing 8 percent to 81 million. 

Increasing global travel drives demand for accommodations, dining, and related services. Consequently, the hospitality market is on a steady upward trajectory. It is expected to grow from $5.52 trillion in 2025 to $5.83 trillion in 2026 at a CAGR of 5.5 percent and to $7.48 trillion by 2030 at a CAGR of 6.4 percent.

Lodging sector

The lodging or accommodation sector of the hospitality industry includes all types of facilities that provide temporary lodging to guests. 

The global travel accommodation market is expected to expand from $979.05 billion in 2025 to $2.26 trillion by 2034, reflecting a CAGR of 9.59 percent. In comparison, as mentioned before, the entire hospitality market is projected to increase at a CAGR of 6.4 percent.

Hotels remain the dominant accommodation type, representing about 50 percent of the market. Short-term rentals (STRs) rank second. Smaller categories include 

• extended stay hotels, 
• corporate housing, 
• serviced apartments, 
• hostels, 
• vacation ownership properties, and 
• alternative lodging formats such as glamping and co-living spaces. 

In our overview, we’ll focus on the two most popular types of lodging.

Each type of accommodation caters to different customer needs, budgets, and preferences. For example, five-star hotels typically have full-service amenities such as restaurants, gyms, and conference rooms, while vacation rentals offer guests a home-like experience with longer stay options.

From a regional perspective, Europe continues to dominate the global accommodation market, accounting for approximately half of the market share, driven by the density of cultural tourism in France, Italy, the UK, and Germany.

Price-wise, the market can be divided into economy, mid-range, and luxury segments. Research findings vary—some sources indicate the economy segment remains the largest by share, while others place mid-range as the current leader. What is consistent across sources, however, is that mid-range and luxury are the fastest-growing segments, driven by travelers who prioritize comfort and experience. This shift in consumer preferences is one of the drivers of the accommodation market growth.

Another driver is the convenience of online booking platforms. Travelers increasingly prefer booking lodgings online because it allows easy price comparison, real-time availability checks, and streamlined booking processes. Additionally, online platforms offer promotional discounts and special deals during holidays or special occasions.

Hotel industry

A hotel is a commercial property designed to provide temporary accommodation to travelers. Hotels are categorized based on the quality, service, and amenities they offer. 

Star ratings indicate these categories and form traveler perceptions of what to expect from a hotel.

• One- and two-star hotels offer basic, budget-friendly stays.
• Three-star hotels provide added comfort, featuring on-site dining and amenities.
• Four-star hotels are upscale with premium services like concierge and fitness centers. Five-star hotels represent luxury, offering top-tier service, fine dining, and high-end facilities.

Several hotel groups dominate the industry. As of June 2026, Marriott International Inc. ranks first among lodging businesses by market cap (~$100 billion) with full-year 2025 revenue of $26.2 billion. 

Hilton Worldwide Holdings is second with a market cap of ~$77 billion and 2025 revenue of $12 billion. IHG follows with a market cap of approximately $23 billion.

Another parameter for measuring the size of a hotel group is the number of properties. China-based H World Group has historically topped the property volume list, with over 13,200 units in its worldwide portfolio.

As for hotel performance, it’s typically measured by three core KPIs: occupancy, average daily rate (ADR), and revenue per available room (RevPAR). For example, in the US, full-year 2025 occupancy was 62.3 percent, marking the first annual decline since 2020. ADR rose modestly to $160.54 (+0.9 percent), but RevPAR still slipped 0.3 percent to $100.02, reflecting softening leisure demand and economic uncertainty.

Globally, mature markets are expected to see RevPAR growth of 1-3 percent in 2026, driven by rate-led strategies rather than occupancy gains.

As for preferred booking channels, online travel agencies (OTAs) still have a slight advantage over hotel websites—$266 billion vs. $264 billion in gross bookings, respectively. Yet, by 2030, the situation is expected to turn in favor of direct bookings.

Short-term rentals

A short-term rental (STR) is a privately owned accommodation, such as a guest house, apartment, condo, or villa, rented out for a limited period, usually from a few days to a few weeks.

The global STR sector was valued at $149.2 billion in 2025. It is expected to outpace the broader accommodation market, reaching $362.4 billion by 2033 at a CAGR of 11.8 percent. Demand data reinforces this trend. Since 2019, U.S. demand for short-term rentals has increased by 62 percent, while hotel demand has declined.

STRs have gained popularity through online booking platforms that connect property owners (hosts) with travelers seeking alternative accommodations beyond traditional hotels. The three biggest players—Airbnb, Booking.com, and Vrbo—collectively grew their share of global STR revenue from 53 percent in 2019 to 71 percent in 2024.

This growth was driven primarily by Airbnb, whose share rose from 28 percent to 44 percent, and Booking.com, which expanded from 14 percent to 18 percent. Vrbo, by contrast, saw its share contract from 11 percent to 9 percent. 

The remaining 29 percent of bookings belong to smaller players — regional OTAs, property managers, and individual owners. 

Among the entire STR market, homes accounted for the largest share by property type, with 41.7 percent in 2025. The availability of multiple bedrooms, fully equipped kitchens, and dedicated living areas makes homes a preferred alternative to hotels, particularly among families and group travelers.

Regionally, North America led the global short-term rental market in 2025, accounting for 34.6 percent of total revenue. The US market is expected to reach $103.5 billion in revenue by 2030, growing at a 10.5 percent CAGR.

Food and Beverage services

The Food and Beverage (F&B) sector in hospitality includes all dining and drink-related businesses, serving both travelers and locals. It embraces a wide range of establishments, such as restaurants, bars, cafés, coffee shops, and catering services.

The global food service market is expected to grow from $4 trillion in 2025 to $5.46 trillion in 2030 at a CAGR of 6.2 percent. This is driven by several factors, such as health-conscious dining, culinary innovation, technology integration in restaurants, contactless services, and the rising popularity of digital ordering and delivery.

Food and beverage is a critical revenue stream for hotels, especially full-service and resort properties. In full-service hotels, F&B operations typically generate 20 to 30 percent of total revenue. In luxury and resort properties, that share often rises to 35–45 percent and, in some destination resorts, can approach 50 percent. 

Beyond revenue generation, F&B offerings—from in-house restaurants to room service—enhance guest experience and strengthen brand reputation. Given its strategic importance, let’s discuss F&B in the context of hotel services.

The global hotel F&B service market size is estimated at around $525 billion in 2026. It is projected to reach $1.25 trillion by 2035, with a 9.5 percent CAGR. One of the biggest drivers is the rise of culinary tourism. Studies show that food now plays a major role in travel decisions, with around 80 percent of travelers prioritizing culinary experiences when planning trips.

Hospitality industry trends

The hospitality industry is constantly evolving, shaped by changing consumer preferences and technological advancements. As travelers seek innovative experiences, hospitality providers must adapt to keep up with trends and meet consumer demands.

AI technology

Artificial intelligence is rapidly moving from an experimental feature to a core operational layer in hospitality, though adoption remains uneven. While 55 to 60 percent of hotels reportedly use at least one AI-powered tool, only about one-third have implemented AI strategically across the property. 

At the same time, nearly 87 percent of hospitality professionals already use AI in their daily work, showing that employees are adopting AI faster than hotels themselves.

In any case, the vast majority of hoteliers see AI as a competitive advantage and expect it to drive revenue gains and improve operational efficiency.

AI in hospitality and tourism market size is expected to grow from $20.4 billion in 2025 to $75.7 billion in 2030 at a CAGR of 29.9 percent, fueled by rising demand for personalized guest experiences and operational automation.

The key technologies driving this transformation are generative AI, predictive analytics, and IoT integration. AI applications in the hospitality industry fall into three areas.

1. Marketing and revenue (revenue management software, booking engines, marketing automation systems, reputation management tools);
2. Guest experience and engagement (chatbots, virtual assistants, contactless check-in);
3. Operational efficiency (systems for staffing, energy management, inventory management, maintenance, procurement, etc.).

Guest expectations are also driving this shift, as travelers increasingly prefer AI-powered and digitally enhanced experiences. Guest communication and chatbots are widely cited as the top use of AI. The following findings from HotelTechReport 2025 reflect this growing demand.

• 58 percent feel AI improves hotel stays.
• 70 percent prefer using chatbots for simple queries.
• 65 percent expect hotel technology to exceed what they have at home, seeking innovative and impressive tech experiences.

While AI is delivering measurable results for early adopters, full property-wide implementation remains the exception. Key barriers include the cost of investment, infrastructure challenges (integration complexity and fragmented data systems), and a lack of technical expertise.

Social media

Social media has become an essential tool in the hospitality industry, influencing traveler decisions and shaping brand perception. Platforms like Instagram, YouTube, Facebook, and TikTok serve as digital showcases, allowing travelers to share their experiences and businesses to highlight their unique offerings to a global audience.

Skift estimates that social media is the major source of travel inspiration for 57 percent of millennials and Gen Z. 

Reviews and ratings also play a crucial role in hospitality. An estimated 97 percent of travelers read reviews before booking a hotel, and nearly half cite online reviews as the primary factor driving their final decision. Given this reliance on digital validation, hotels are increasingly investing in influencer partnerships, user-generated content, and online reputation management to remain competitive.

Sustainability

Sustainability has become a trend among travelers as more people are seeking eco-friendly accommodations and experiences. This shift in consumer behavior is largely driven by increasing awareness of environmental issues, such as climate change, resource depletion, and pollution.

The rising trend of sustainable travel is pushing hospitality businesses to meet the expectations of today's conscious consumers while contributing to a more eco-friendly future.

Here are some insights from Booking.com's report on sustainable travel that demonstrate the growing demand for sustainable travel options.

• 75 percent of global travelers say that they want to travel more sustainably over the next 12 months.
• 57 percent intend to reduce energy consumption on future trips.
• 54 percent intend to use more sustainable modes of transport when traveling in the future.

Guests are increasingly seeking accommodations that prioritize environmental responsibility, making sustainability a competitive advantage. In 2023, 74 percent of travelers expected travel companies to offer more sustainable travel choices, and 59 percent even intended to filter their options for those with a sustainable certification the next time they book.

Accessible travel

Accessible travel refers to experiences, accommodations, and services that are fully usable and welcoming to everyone, including individuals with disabilities, seniors, and those with special needs. 

Major upcoming events like the 2032 Brisbane Olympic and Paralympic Games are accelerating accessibility investment. Hilton has adopted Website Content Accessibility Guidelines 2.1 Level AA to ensure a user-friendly experience for guests using assistive technology.