In 1996 and 1997 hotels throughout the world were experiencing surging revenues and profits. The last several years have seen the US lodging industry in the best shape of its life, and the industry has also been booming in most of Europe. In 1996 global hotel revenues reached $255 billion. Close to $80 billion of this was generated in the US. Industry-wide pre-tax profits in 1996 were an all-time record $11 billion.

There are several characteristics which exemplify the state of the hotel industry worldwide over the last several years

• Consolidation - This is the most dominant trend in the industry in the last several years. The Starwood acquisitions of Westin and Sheraton, the Doubletree and Promus merger deal, the Marriott acquisition of the Renaissance Hotel Group, and the merger of Hilton and Hilton International are several of the major deals in the last several years. The large number of hotel companies relative to other travel industries, the globalization of the industry, and very low capital costs seem to be driving this consolidation. Not only has the consolidation created hotel companies with greater brand portfolios and greater global reach, but has also introduced new owners and new money.
• Increased globalization - The consolidation has increased the reach of many hotel companies, such as Marriott International, who recently purchased Hong-Kong based Renaissance Hotels. In addition to the global growth through acquisition, many US-based hotel companies are expanding their brands worldwide. In 1996 there was a rapid spread of US-based economy and mid-priced franchised hotel chains worldwide. This trend follows the recent spread of US-based fast-food chains around the globe.
• The introduction of the "financier" - There has been a recent movement to a hospitality industry driven by financiers rather than hoteliers. Hoteliers can be broadly defined as internally focused and financiers as more focused on earnings and company growth. Although some say it forecasts a more difficult negotiating environment for travel buyers, and even potential disaster in a down cycle, others herald the transition as a positive step towards a stronger and more successful industry. Wall Street only recently has developed an interest in an industry it long considered too risky and unstable.
• Recovery of the US hotel industry - Between 1986 and 1992, the US hotel industry lost approximately $14 billion. Most of the problems were the result of overbuilding caused by a tax law that encouraged investment in construction as a tax shelter. This overcapacity plagued the industry for most of the late 1980's and early 1990's. By 1994, hotel operators were experiencing renewed profitability. Most of these operators cite operating cost controls, higher room rates, and restructuring of real estate debt.

The role information technology plays within the hotel industry continues to evolve. In 1996 it was estimated that hotel companies in the US and Europe spent an average of 2.5% of their revenue on information technology. Slightly less than $2 billion was spent in the US and $2.5 billion in Europe.

• Changing IT spending patterns -The recent introduction of "financiers" to the industry has helped change the spending patterns of hotel companies in recent years. In the 1980's and early 1990's, although the hotel industry was spending several billion dollars on technology, most of that spending was kept in-house. Many hotel companies felt their proprietary technology was a key point of differentiation. The spending done with outside vendors was extremely fragmented, and no single vendor held a dominant position. The "new money" coupled with the industry consolidation has driven an increased appetite for spending with outside systems integrators, outsourcers, and software developers.
• Using IT to enhance the customer experience - Many of the innovations with technology have been driven by the industry's need to enhance the customer experience. Smart Cards, Check-In Kiosks, and the proliferation of loyalty programs are all examples of hotel companies trying to get closer to their customers. Most industry insiders see the greatest benefit from enhancing loyalty programs to customize services for frequent travelers. It is estimated that it costs six times as much to get a trial customer as it does to keep a current one, so using technology to enhance the customer experience can increase revenue and enhance global brands.
• Need for systems integration - Because many hotel companies internally developed and purchased disparate systems, they now face a need for systems integration. The need for integration has been increased by the consolidation within the industry, and the need for these companies to have one integrated system to effectively implement such advances as customized services through guest loyalty programs.
• Changing distribution - Distribution costs continue to be high in the hotel industry. The internet/intranets, and the changing roles of GDS's will likely cause changes in the way hotel rooms will be distributed in the next several years.