Top Lodging Trends to Watch in 2022

Many trends set in motion by the pandemic will continue to gain momentum in the coming year. In the lodging industry especially, the soaring popularity of short-term rentals, consistent supply and labor shortages, standardization of remote work and growing expectations from guests throughout the last year have significantly reshaped business norms. The “new normal” is here to stay, and it looks wildly different than pre-COVID.

Below are some of the lodging trends that are expected to have a considerable impact in 2022:

1. Short-term rental marketplaces will experience widespread compliance regulation.
   Just a few years ago it was relatively straightforward for jurisdictions at the state level to ask marketplaces like Vrbo and Airbnb to remit lodging taxes on behalf of the host. Now these lodging giants are being targeted at the local level, ushering in the next big wave of compliance regulation. To wit, Virginia informed Expedia they now need to do what they were doing at a state level for 200 local jurisdictions within the Old Dominion. We expect many regions across the U.S. to follow suit in 2022.
    
2. Cities that cut short-term rentals will suffer from lost tax revenue
   Across the board, cities benefit from the tax revenue generated by lodging. As some cities struggle to balance the growing STR trend with louder complaints from full-time residents, tighter restrictions will bring economic impact. This coming year, more cities will see budget impacts as they restrict STRs and, in a big tradeoff, reduce the amount of lodging tax reaped from STR stays.
   
   Restricting STRs has a significant impact on local businesses as fewer tourists come to the region. This lack of visitors affects restaurants, retailers, tour operators, etc., which shows that a cut on short term rentals not only reduces lodging tax revenue, but it also impacts the local economy and sales tax revenue. Eventually, jurisdictions will need to analyze the financial impact short term rentals have on their overall budgets and local economy.
    
3. Technology for guest experience and host protection will be in greater demand
   Property managers will be looking to gain market share via hosts that want more optimizations tools, more revenue, and efficiencies they can’t access on their own. PMs and hosts will again turn to technology and implement smart tools that will not only provide hands-free touches and high-speed internet, but also provide a layer of oversight and property protection, such as noise and smoke alarm notifications, and other security tools that will alert the host to abuse of the rental.

4. Hotels will embrace smart technology to solve front and backend problems
   The hotel industry was hit with staffing shortages in 2021 while also having to quickly adapt to changing guest demands. Technology has been its saving grace, in tandem with increased reservations. If hotels want to stay competitive in 2022, they’ll need to integrate technology that provides the greatest ROI. Any efficient software that can lower labor costs and streamline processes will be a top priority for many hoteliers planning for the near and long-term. Front end technology will remain a necessity as guests are now accustomed to contactless check-in, mobile pool-side reservations, and more. On the back end, cloud-based business management apps will lead to streamlined systems and improved efficiencies in key areas like compliance, with the multitude of taxes, fees and other charges associated with a stay, and downside risk for getting it wrong. The digital transformation that began this year will be in full swing in 2022, with properties realizing the benefits of 21st Century technology.
    
5. Work from anywhere isn’t going anywhere
   
   The “work from anywhere” trend will continue through 2022 and become a common practice. Guests planning to work remotely and play will extend their length of stay, which will impact what STRs and hotels offer. Local businesses that once catered to rotating vs longer term guests will be impacted and will need to adapt. Tour operators will need to look at how to attract these longer term guests throughout the length of their stay instead of focusing on a “one and done”. Restaurants will need to market to these guests as a way to not only get them in the door but make them a repeat customer during their stay. Grocery stores, pharmacies, etc. will benefit from these long term stays as people view their stay as a different “home” rather than a quick visit. Other retailers can also capitalize on these long term stays by understanding the “standard” needs of these guests instead of viewing them all as tourists.

These longer stays also mean STR hosts will need to “up their game.” Families that are going to stay for a couple of weeks or longer will expect and look for more modern amenities – everything from work spaces in the house, to updated furniture and appliances, high speed internet and a broad spectrum of options on the TV. Hosts partnering with local businesses to provide a “directory” to their guests will be a way for both the host and local retailers to satisfy and benefit from these longer stays.

6. Exotic far-off destinations will continue to gain popularity
   As many Americans have delayed their international travel plans, many hotels and vacation rentals in exotic locations are seeing pent up demand from stir crazy travelers. The popularity of the Netflix show, The World's Most Amazing Vacation Rentals highlights the trend and draw of exotic locations. We expect this trend of unique, experience-focused travel to only continue to gain traction in 2022.

Keeping Pace With the Evolving Times

Technology is an increasingly key component of staying afloat amidst the storm of changes flooding the lodging industry. Heading into 2022, regulation will continue to tighten on STRs in many regions, and compliance will be much more strictly enforced across the board. Hotels, meanwhile, will need to make big changes to both their guest-facing and backend automation to satisfy increasingly discerning customers. These challenges all share a solution: a redoubled commitment to technology in all aspects of business. Automation solutions for compliance, whether lodging tax, business license and registration, or other compulsory requirements can ensure hosts and property managers don’t fly afoul of increased scrutiny from local governments. Digital transformation is clearly underway in the lodging industry, helping to streamline operations in addition to meeting new guest expectations.

2022 presents a great opportunity for hotels and vacation rental owners alike, but meeting the moment will require a mix of proactivity and diligence.

Pam Knudsen is an executive at Avalara, leading multi-tax teams including Lodging, Beverage Alcohol, Telecommunications and Sales & Use Tax. She serves as a leading voice in vacation rental tax compliance and regulation, in addition to bringing in-depth experience across software/SaaS technology as well as ERP systems. Pam joined Avalara in 2012.