Growth strategies for navigating a softening market

The hotel industry finds itself at a critical inflection point. After years of relying predominantly on pricing strategies to restore revenues and profitability in the post-pandemic era, the market is now responding to both this approach and broader macroeconomic headwinds. This article examines the practical approaches that can drive performance in an increasingly challenging landscape.

Previous analysis of Predictions and Trends in 2025 indicates global hotel revenue growth will plateau at 2-3% through 2025—unchanged from 2024 levels—reflecting a complex interplay of economic uncertainties, geopolitical tensions, and persistent inflationary pressures, particularly within service sectors. As financial markets, shareholders, and management teams intensify their demands for accelerated growth, industry leaders must now evaluate and implement more sophisticated strategies to meet these mounting pressures.

Success in this softening market demands more than following industry trends—it requires decisively outperforming competitors through increased market share and revenue growth. Our research reveals specific approaches that drive sustainable competitive advantage in each domain.

Our research identifies two critical pathways for driving growth in a softening market. First, organisations must fundamentally shift their strategic focus, reallocating resources to areas of highest potential return. Second, they must transform their commercial capabilities to maximise performance from these strategic investments. Success requires excellence in both dimensions—strategic repositioning alone will fail without robust execution capabilities, while operational improvements yield limited returns if not aligned with strategic priorities.

Strategic Shifts in Resource Allocation to Exploit Where the Demand is Greatest

Prioritise High Growth Markets

Navigating the global hospitality landscape demands a sophisticated approach to market prioritisation. Organisations must conduct a rigorous analysis of interconnected growth drivers, including GDP trajectories, middle-class expansion, exchange rate dynamics, and travel restriction trends. By developing a comprehensive monitoring framework that meticulously tracks demand share across markets, businesses can strategically allocate sales and marketing resources—optimising human capital, financial investment, and technological infrastructure to target highest-potential markets with surgical precision.

Focus on Customer Segments with the Highest Propensity to Buy

Strategic market penetration requires moving beyond generic segmentation to a data-driven identification of the most valuable customer groups. Within each target market, organisations must dynamically reallocate resources to focus on segments demonstrating the highest engagement potential. This approach demands a nuanced understanding of specific customer needs, enabling targeted strategies that maximise both immediate revenue and long-term market positioning.

Prioritise Business Segments to Reflect Greatest Potential

The current hospitality ecosystem presents a complex growth landscape. While leisure travel remains stagnant, corporate travel shows promising 3-5% growth potential, and the group and events segment demonstrates a robust 5-8% trajectory. Sophisticated organisations will develop a strategic business mix that carefully balances these divergent growth rates, implementing differentiated pricing strategies to optimise revenue potential across segments.

Acquire to Increase Share of Supply

In a market characterised by significant geographical and segment-specific growth variations, organic optimisation proves increasingly limited. Progressive organisations are pursuing aggressive expansion strategies through strategic acquisitions and partnerships. This may encompass acquiring new hospitality assets, developing destination hubs, or creating strategic partnerships—including joint ventures, brand collections, and shared loyalty programmes—that provide a rapid and lower-risk pathway to market expansion.

Innovate Products, Services, and Customer Experience to Improve Competitive Edge

Sustainable competitive advantage demands a transformative approach to innovation. By leveraging primary research to deeply understand evolving customer needs, organisations can develop a compelling brand narrative that attracts niche markets and cultivates guest loyalty. The emergence of key consumer behaviours—particularly the “search for value” and growing sustainability focus—presents strategic opportunities. Targeted investments in sustainable practices not only enhance brand appeal but simultaneously reduce operating costs, creating a dual-benefit approach to market differentiation.

Having established the strategic foundations for growth, organisations must then focus on optimising their commercial engine to capture these opportunities. Our analysis has identified ten key strategies that leading hotel companies can implement to enhance their revenue performance and competitive position. These approaches, when properly executed, enable organisations to maximise returns from their strategic investments while building sustainable competitive advantages.

Improving the Performance of a Company’s Commercial Engine

Here are the top ten strategies hotel companies can implement to improve their commercial engine and revenue performance. Each represents a distinct opportunity for value creation, and leading organisations typically pursue multiple approaches simultaneously, tailoring the specific mix to their strategic priorities and operational capabilities.

1. Improve Commercial Productivity

Sales serves as a critical lever in demand generation. By strategically leveraging technology and targeted training, organisations can:

• Enhance lead identification precision

• Develop granular customer preference insights

• Diagnose and mitigate sales pipeline bottlenecks

• Cultivate a more personalised, data-driven approach to sales conversion

The goal is to transform the sales function from a transactional process to a strategic value creation mechanism.

2. Increase Sales and Marketing Spend

Traditional annual budgeting processes often constrain organisational growth potential, particularly for businesses with perishable inventory. A more dynamic approach involves:

• Establishing a minimum return on marketing investment threshold

• Implementing an adaptive spending model that prioritises incremental demand generation

• Focusing on initiatives with high marginal contribution potential

For organisations with robust measurement and execution capabilities, an “uncapped” marketing investment strategy can significantly enhance revenue and profitability.

3. Innovate Pricing and Inventory Structure to Unlock Demand

Consumer value perception varies dramatically across market segments. Strategic unbundling of product offerings can:

• Enable more precise customer choice

• Align pricing with specific value attributes

• Mitigate the risk of perceived value erosion

Critical considerations include:

• Carefully deconstructing product components

• Ensuring transparency in total cost structure

• Maintaining a clear value proposition that prevents customer perception of being “short-changed”

Cautionary note: Excessive unbundling can destroy brand equity, as demonstrated by recent challenges in the airline industry.

4. Increase Revenue per Trip/Stay

The customer journey presents multiple value creation touchpoints:

• Demand inspiration

• Shopping and selection

• Booking process

• Pre-arrival engagement

• In-stay experience

• Payment and post-stay interactions

Sophisticated organisations leverage digital platforms and AI-driven personalisation to:

• Generate contextually relevant upsell and cross-sell opportunities

• Enhance guest experience

• Optimise revenue generation potential

5. Utilise Market Indicators to Improve Pricing Decisions

Traditional revenue management systems often rely exclusively on historical performance data. A more nuanced approach integrates:

Macro Indicators:

• Weather patterns

• Significant events

• Travel restriction dynamics

• Geopolitical developments

Micro Indicators:

• Shopping and booking velocity

• Real-time market demand signals

• Competitive pricing movements

By developing adaptive algorithmic models, organisations can make more sophisticated, forward-looking pricing decisions.

6. Identify Customers with a Propensity to Buy

An often-overlooked opportunity exists in the strategic alignment of revenue management insights with targeted marketing efforts:

• Aggregate demand prioritisation insights

• Leverage comprehensive customer data (existing and prospective)

• Develop predictive models of purchase propensity

• Create targeted engagement strategies

Key success factors include:

• Enhanced collaboration between marketing and revenue management functions

• Sophisticated data integration capabilities

• Advanced analytical modelling

7. Accelerate Speed of Digital Transformation

Digital technology continues to reshape consumer interactions across multiple dimensions:

• Shopping and selection processes

• Booking and purchase mechanisms

• Check-in/check-out experiences

• Service configuration and preference management

• Feedback and service request platforms

• Payment systems

• Loyalty programme interactions

Successful organisations view digital transformation not as a technical upgrade, but as a fundamental reimagining of customer engagement.

8. Broaden Market Reach and Distribution

Emerging markets, particularly in Asia, represent significant untapped potential:

• Rapidly growing source markets

• Substantial demand volumes

• Limited direct market presence for many Western organisations

Strategic expansion requires:

• Technological infrastructure development

• Digital media engagement

• Strategic travel trade relationships

• Localised market understanding

9. Personalise to Increase Appeal

Personalisation represents a sophisticated approach to customer engagement:

• Leverage existing customer data attributes

• Extend data capture beyond transactional interactions

• Develop a comprehensive, unified customer view

• Create dynamically tailored offers, channel strategies and incentive structures

The objective is to stimulate conversion through hyper-relevant, contextually aligned interactions.

10. Improve Operating Model to Better Execute with Speed and Discipline

Traditional organisational structures often create counterproductive functional silos. A more effective approach involves:

• Establishing cross-functional teams

• Prioritising enterprise-level objectives

• Fostering a collaborative organisational culture

• Creating flexible, adaptive execution mechanisms

Leadership must actively break down departmental barriers, ensuring that functional excellence does not compromise organisational effectiveness.

Looking Ahead

The path to growth in a softening market requires more than incremental improvements. Organisations must combine strategic repositioning with operational excellence whilst building technological capabilities that enable scalable growth.

Market leadership in 2025 and beyond is not about waiting for opportunity—it’s about creating it. Those who move decisively will capture market share and drive growth, even amid challenging conditions.

Want to transform these insights into actionable strategies?

Contact PACE Dimensions to discuss how our experienced practitioners can help your organisation develop winning strategies for the evolving hospitality landscape.

About PACE Dimensions:
We combine deep industry expertise with proven transformation capabilities to help hospitality businesses excel in an ever-changing landscape. From opportunity identification to change management, we guide organisations through every step of their transformation journey.