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What is the hospitality industry? Learn about the hospitality industry and services it has to offer. See how the economy plays a role.Updated: 11/21/2023
Table of Contents
- What Is the Hospitality Industry?
- Areas of the Hospitality Industry
- Levels of Service in the Hospitality Industry
- Economics of the Hospitality Field
- Lesson Summary
- FAQs
- Activities
Additional Questions
- What is the hospitality industry? Your answer should address the main goals of the industry.
- Why does the hospitality industry as a whole struggle during recessions and thrive during strong economic periods? Your answer should involve a discussion about the importance of discretionary income in the industry.
- There are three broad areas within the hospitality industry. List and describe these three areas. In your description of these areas, be sure to discuss the services that are provided in each. Additionally, for each of the areas, discuss at least three examples of types of businesses that would fit into the respective area.
- What primary focus do all three of the areas of the hospitality industry have in common? Why is this focus so important for a firm in the industry to be successful?
- What is the AAA Diamond Rating System? Why do hotels and restaurants strive for good ratings through this system? What would be the problems associated with them getting low ratings through this system?
- Assume a study was released to the public that ranked Washington, D.C. as the best place in the United States to visit for vacation. What would be the impact on the hospitality industry in the District of Columbia? Why? What about the impact on other nearby tourist destinations? Why?
What is the role of the hospitality industry?
The role of the hospitality industry is to provide unique, professional, and memorable experiences for consumers during their free time, at a cost. The focus of the hospitality industry is the customer and giving them the best experience possible. The hospitality industry relies on the national economy to be successful. It contributes nearly 2% of the national gross domestic product (GDP) to the United States.
What is meant by the term hospitality industry?
The hospitality industry is a broad group of businesses that provide services to customers. It relies on discretionary spending by consumers as well as the consumer's availability and free time. There must be a demand for leisure activities for the industry to be successful because the experiences which the hospitality industry provide are not necessities of life.
Table of Contents
- What Is the Hospitality Industry?
- Areas of the Hospitality Industry
- Levels of Service in the Hospitality Industry
- Economics of the Hospitality Field
- Lesson Summary
Within an economy, many industries exist to stimulate and grow the nation. Primary industries harvest raw materials from the earth. Secondary industries manufacture the raw materials into finished products. Tertiary industries, also called service industries, provide consumers with intangible work and services that the average person would not be able to complete on their own. Quaternary industries are those which provide information and technology services. While each industry type plays an important role in society, this lesson will focus on an important division of service industries called the hospitality industry.
What is the hospitality industry? The hospitality industry is defined as a broad group of businesses that provide services to customers. Its focus is to provide customers with unique and satisfactory experiences for a cost. The hospitality industry is uniquely distinct since it depends on discretionary spending of customers, meaning that there needs to be a demand and interest in the service being provided for customers to spend money and the industry to be successful. Further, the hospitality relies on consumers having free time to spend on these experiences.
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When families take a vacation, they utilize almost every aspect of the hospitality industry. Some examples of hospitality services include being transported by an aircraft and its crew, staying at a hotel, going out for a elegant dinner, and participating in tourist attraction activities. None of these activities are necessary, but the consumer has chosen to spend both their money and free time at these experiences. Likewise, these services could not be provided by the consumer on their own.
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The hospitality industry and tourism have a well-defined and interrelated relationship. There are three main areas of the nearly $80 billion hospitality industry which all work together to create memorable experiences for the consumer. They are:
- Accommodations: Lodging is an important service for consumers when they travel. Hotels, motels, hostels, and bed and breakfasts are examples of accommodative services.
- Food and beverage: Whether travelling far or staying close to home, consumers often enjoy dining at unique, fancy, or cultural locations to experience something different than usual. Restaurants, fast food chains, and other dining establishments are part of the hospitality industry. They may be located at hotels or at a standalone location.
- Travel and/or tourism: Modes of transport are included in the hospitality industry so that consumers may arrive at other leisure activities. Airlines, trains, and cruise ships provide transportation and in some cases are a vacation on their own.
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What is the main objective of the hospitality industry? All branches of the hospitality industry have a sole focus on the customer. Providing quality customer service and a memorable experience means that customers will be likely to return and have the experience again. This leads to future stimulation of the leisure market. Since these experiences are not a necessity and come at a cost to the consumer, making a positive impression is important for businesses within the hospitality industry to remain thriving. For instance, a plumber does not need to necessarily provide quality service because consumers need water, but hotels do need to make a lasting impression since hotels are not a necessity of life.
In the hospitality industry, different levels of service exist as a result of various rating systems. These systems help influence the consumer's decision on where to go or what hospitality services to experience. Hotels and restaurants are rated using the _AAA Diamond Rating system, a five-diamond quality scale. A five-diamond rating means that a hotel is top quality having met certain cleanliness, quality, and comfort criteria to achieve that level. Certain services must also be offered at the hotel, including spas, fitness rooms, and business centers, for it to be considered five-diamond.
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Four-diamond leisure experiences are rated just under five-diamond experiences, but still deliver excellent service. For a hotel to be rated four diamonds, it must continue to meet quality standards. A common reason for only receiving four diamonds is the omission of certain services such as those a five-diamond hotel would be required to have. Lower tier properties are considered average or below desired standards. Staff may not work as hard to ensure the best experience possible and therefore not create as impressionable an experience. For example, a lower-rated hotel may not provide staff to carry a customer's bag to their room or provide room service options.
Airlines and other modes of transportation are rated using a World Airline Star Rating. Similar to the AAA Diamond Rating system, this is a five-star system that is based on the quality of services provided. A five-star rating denotes high quality service and performance, on-time arrivals, and significant standards such as cleanliness and a positive crew interaction.
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The hospitality field is heavily reliant on the state of the national economy, just as the national economy receives nearly 2% of its gross domestic product (GDP) from the hospitality industry. Consumers must possess the money to spend on leisure services. In a poor economy, the decision to spend money on intangible services for more enjoyable experiences may be foregone for supporting more necessary aspects of life such as paying mortgages or putting food on the table. Declining economies hurt the hospitality industry. If the national economy is doing well, the hospitality industry is more likely to thrive.
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Other factors such as the political or social state of a region may also be impactful to the hospitality industry. High levels of conflict or uncomfortable situations may deter leisure travelers or tourists from visiting a location, which has an impact on the hospitality services in that area. The availability of workers also has a role in the success of the hospitality field. Skilled workers are required for a service to be provided in a high-quality and professional manner. A lack of skilled workers may present challenges to the industry and cause some establishments to consolidate or shut down.
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The hospitality industry is a broad group of businesses that provide services to customers. It is a smaller division of the service industry, sometimes also referred to as tertiary industries. Hospitality services depend on the discretionary income and free time of customers, meaning that a demand for the experience needs to exist and consumers must be willing to pay for the experience. Hospitality services are not a necessity of life; they are often experienced for leisure or enjoyment. The three main areas of the hospitality industry are accommodations, food and beverage, and travel and tourism. All branches of the tourism industry focus on the customer.
There are different levels of service within the hospitality industry, which are decided by rating scales. Hotels and restaurants are rated by the _AAA Diamond Rating scale. A five-diamond rating means that specific criteria were met to create an experience with excellent service and professionalism. Certain amenities are also provided at five-diamond locations, including spas and business centers. The hospitality industry is heavily reliant on the nation's economy. If the economy is thriving, then businesses within the hospitality industry can also do well. Skilled workers are also needed for hospitality services to remain successful.
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Video Transcript
Defining the Hospitality Industry
Have you ever stayed at a hotel, flown on a plane, or eaten at a restaurant? If so, you have experienced the hospitality industry. The hospitality industry is a broad group of businesses that provide services to customers. It's focused on the satisfaction of customers and providing specific experiences for them. The hospitality industry is unique because it relies so heavily on discretionary income and free time. Think about your last vacation. You didn't necessarily need to go on the trip, but you did because you had both the free time and the extra money. In this lesson, we'll look at different areas of the hospitality industry, its strong focus on customers, and levels of service provided, as well as economics of the industry.
Areas of the Hospitality Industry
The multibillion dollar hospitality industry has three primary areas. The first area is accommodations, which includes hotels, motels, bed and breakfasts, and other lodging businesses. The next area is food and beverage. This area comprises restaurants, fast food chains, and other establishments that provide food and beverages. Food and beverage providers might be located in hotels or be standalone facilities. The last area of the hospitality industry is travel and tourism, which includes airlines, trains, and cruise ships.
Customer Focus & Levels of Service
The various areas of the hospitality industry have one common focus: the customer. As noted earlier, the hospitality industry provides services that people use when they have free time and extra money, thus providing a high level of customer service is very important, since the services provided are not necessities. For example, an electricity company doesn't necessarily have to provide excellent service to its customers because customers are still going to pay. They need to have electricity, but staying at a hotel or buying an airplane ticket isn't always a necessity.
Different levels of service are provided within the hospitality industry. Hotels and restaurants are both rated using the AAA Diamond rating system. A five-diamond hotel or restaurant is considered top of the line, having met certain cleanliness, quality, and comfort criteria to achieve that level. There are also certain services that have to be offered, such as a spa at a hotel, to be considered five-diamond.
So while all of the hospitality industry is focused on providing services, there are a range of service levels that can be provided. When going to a four-diamond or five-diamond property you would expect to get excellent service. You would want the employees to treat you exceptionally well and expect to receive quality accommodations and food. At a lower tier property, you might not receive the same level of service. While the employees likely will be friendly, you might not have someone to carry your bags to your room or receive the same dining options at the restaurant.
Economics & Key Factors
The hospitality industry relies heavily on the economy. Remember, customers need to have discretionary income in order to go out to eat, travel, and stay at hotels. So if the economy is thriving, the hospitality industry typically is as well. But if the economy is struggling, it usually means fewer people are able to travel and spend money within the hospitality industry.
Other factors can impact the hospitality industry as well. The political state of the country or area a person is traveling to can also have an effect. For example, high terrorism alerts might deter travelers from going to specific areas because they do not feel safe. Another factor that impacts the hospitality industry is the availability of workers. Skilled workers are needed to provide excellent service and run a hospitality establishment well. A lack of such workers can present challenges.
Lesson Summary
The hospitality industry is a broad group of businesses that provide services to customers. The industry can be broken down into three basic areas: accommodations, food and beverage, and travel and tourism. All of these areas are customer-focused, but they sometimes provide different levels of service. The economy, an area's political state, and the availability of workers are all factors can impact the hospitality industry.
Learning Outcomes
When you're finished with the video, you should have the tools to:
- Recall what the hospitality industry is
- Explain the areas of the hospitality industry
- Discuss the levels of service provided by the hospitality industry
- Describe how the economy and other factors impact the hospitality industry
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