The 1033 Hospitality Compass | January 2025

January, 2025 Issue: Navigating Trends in Hospitality & Tourism

Executive Summary: Hospitality in Transition

As the hospitality and tourism industries step into 2025, the landscape is marked by transformation, resilience, and complex challenges. Cities like New York are bustling once again, but the revival comes with logistical headaches, from increased urban congestion driving up operational costs to rising food prices squeezing already tight margins. Meanwhile, the debate over corporate diversity, equity, and inclusion (DEI) policies grows louder, raising questions about authenticity and accountability in leadership. For hospitality leaders, these shifts are not just hurdles but opportunities to adapt, innovate, and thrive.

This issue of The 1033 Hospitality Compass takes a deep dive into these pressing topics, offering guidance and actionable strategies to navigate them effectively:

• Urban Revival, Operational Realities: In New York City, the return of high-density foot traffic brings a surge in tourism and business activity, but the challenges of congestion and supply chain inefficiencies demand smarter logistics and tighter menu strategies.
• The Future of DEI: DEI isn’t a checkbox or a buzzword—it’s a commitment to fostering inclusive workplaces that drive innovation and employee engagement. We explore whether companies are genuinely embedding DEI into their culture or simply rebranding efforts to pacify detractors.
• Regional Strengths: From Virginia’s rise as a small-town tourism leader to Texas’s festival-driven economy along the IH-35 corridor, regional trends offer a blueprint for sustainable growth.

Each article combines national data, regional insights, and expert commentary to empower you with practical steps to address today’s challenges. We also look ahead to emerging opportunities in AI-driven guest engagement, sustainability practices, and workforce evolution.

At 1033Consulting , we believe every challenge is an opportunity to build something stronger. Whether you’re a hotel operator, restaurateur, or tourism leader, our goal is to provide the tools and insights to navigate the ever-changing hospitality landscape with confidence.

This issue isn’t just a compass—it’s your roadmap to success.

Rethinking Urban Hospitality in NYC

"Congestion Costs: How Rising Urban Challenges Impact Hospitality"

The streets of New York City are once again alive with energy. Tourists flood landmarks, locals crowd restaurants, and delivery trucks weave through dense traffic. While this revival signals a robust comeback for urban hospitality, it also underscores a harsh reality: congestion is more than an inconvenience—it’s a financial burden. For restaurateurs and hoteliers, the costs of navigating NYC’s bustling streets are mounting, with food prices rising by an average of 8% over the past year, according to the NYC Hospitality Alliance. This squeeze on margins is forcing operators to rethink everything from sourcing strategies to logistics.

The root of these challenges lies in the city’s infrastructure, which is struggling to keep pace with demand. Delivery vehicles face record delays as congestion returns to pre-pandemic levels, resulting in longer lead times and higher fees. While global supply chain disruptions are easing, urban-specific issues, such as the distance between city-based businesses and outlying warehouses, continue to inflate transportation costs. Compounding the problem is the growing difficulty of finding delivery drivers willing to navigate the chaos of NYC streets. Platforms have raised wages to attract workers, but these costs are passed on to businesses and, ultimately, their guests.

In this environment, adaptability isn’t optional—it’s essential. Menu engineering has emerged as a critical tool for controlling costs. By simplifying offerings and focusing on high-margin, easily sourced ingredients, operators can mitigate supply chain volatility while aligning with guests’ growing demand for seasonal and local items. Many businesses are also turning to partnerships with local producers and urban farms. A Brooklyn restaurant, for instance, cut its delivery expenses by 20% through a partnership with a rooftop farm in Queens. Beyond financial benefits, such partnerships enhance brand storytelling, appealing to environmentally-conscious diners.

Technology also plays a pivotal role in navigating these challenges. AI-driven logistics platforms are becoming indispensable, optimizing delivery routes and predicting traffic patterns to reduce delays. These systems not only lower costs but also improve reliability, which is critical in a city where time is money.

Paul Kirschbaum , Partner at 1033 Consulting, underscores the importance of innovation in tackling urban challenges: “Urban hospitality thrives on adaptability. Simplifying operations and using local supply chains aren’t just solutions—they’re necessities in this environment. Leaders who embrace these strategies will find themselves more resilient, both financially and operationally.”

Despite the hurdles, NYC’s hospitality operators have an opportunity to stand out by rethinking their approaches. Whether it’s leveraging local partnerships, adopting smarter logistics, or fine-tuning menus, those who adapt will not only survive but thrive. The city may be crowded, but with the right strategies, there’s still room for growth. After all, if you can make it here, you can make it anywhere.

DEI in Hospitality—Progress or Performative?

"The Future of DEI: Leadership Beyond Lip Service"

Diversity, equity, and inclusion (DEI) have long been championed as essential elements of modern workplaces, yet their evolution remains fraught with tension. While companies like 麦当劳 and others unveil rebranded initiatives under names like “Culture & Belonging” or “People & Inclusion,” critics question whether these efforts reflect genuine progress or simply a strategic rebranding to sidestep political debates. For an industry as inherently diverse as hospitality, the stakes are high. The question is: are DEI efforts moving the industry forward, or are we merely quieting dissent?

The roots of DEI stretch back to historic integration efforts in the U.S. Hospitality was among the industries that faced significant challenges during the Civil Rights era, when segregation policies excluded marginalized groups from dining rooms, hotels, and public spaces. Federal integration mandates enforced by Title II of the Civil Rights Act of 1964 sought to eliminate intentional discrimination, ensuring equal access to accommodations regardless of race. While these efforts successfully dismantled legal segregation, they also highlighted a persistent truth: legislation alone cannot cultivate cultural change.

Fast forward to today, and while intentional discrimination is both illegal and unethical, subtler forms of bias still permeate many workplaces, impacting team dynamics and customer experiences alike. DEI policies emerged not simply to comply with the law, but to address these underlying inequities, fostering environments where everyone feels valued and empowered. As Leslie Wootton of 1033 Consulting explains, “DEI isn’t a checkbox—it’s the foundation of a workplace where teams feel empowered to succeed. Leadership must embody these values for them to take root, whatever you're calling it.”

So, is the shift to terms like “Culture & Belonging” a step toward inclusivity or a retreat from the goals of DEI? Critics worry that removing the DEI label caters to those who misunderstand its purpose, equating it with affirmative action rather than recognizing it as a driver of innovation and employee engagement. Proponents, however, argue that the name is less important than the work itself—whatever you call it, the aim is progress.

Hospitality leaders are uniquely positioned to set the tone. As one of the most diverse industries, the day-to-day operations of restaurants, hotels, and tourism organizations bring together people from countless backgrounds. Whether DEI policies are called “Inclusion Strategies” or “Team Equity Plans,” their goal remains the same: to eliminate barriers, foster trust, and ensure everyone—employees and guests alike—feels they belong.

Some organizations are making significant progress in embedding DEI principles into their operations. While there are broader industry-wide efforts, specific examples highlight the transformative potential of these initiatives. Programs like those offered by the Virginia Restaurant, Lodging & Travel Association (VRLTA) focus on improving cultural sensitivity and guest service through targeted training. These efforts are designed to enhance the overall guest experience, particularly for international travelers, though specific data connecting these programs to measurable outcomes in guest satisfaction is still emerging.

In Texas, hospitality businesses are leading by example in workforce equity. According to the Texas Economic Development Corporation , a restaurant group along the IH-35 corridor implemented a mentorship program aimed at fast-tracking underrepresented team members into leadership roles. The result? A 35% increase in diverse managerial hires within a year. This model underscores how targeted investments in talent development can foster equity and improve business outcomes.

These examples illustrate the power of actionable DEI efforts to drive both cultural and financial success. Studies consistently show that inclusive workplaces outperform their peers: a 2020 麦肯锡 report revealed that companies in the top quartile for gender diversity were 25% more likely to achieve above-average profitability. When inclusion becomes part of the organizational culture, it not only enhances team performance but also strengthens guest relationships and boosts ROI.

The challenges remain, of course. Critics of DEI often claim it is unnecessary in today’s world or, worse, a liability. But discrimination—whether overt or subtle—remains a risk that no ethical business can afford. Beyond the legal implications, the reputational damage and financial losses caused by exclusionary practices can be devastating.

As we reflect on the past, from historic integration efforts to today’s discussions about reframing DEI, one thing is clear: progress doesn’t require perfect terminology, but it does demand intentionality. Whether you call it “DEI,” “Culture & Belonging,” or something else entirely, the goal is the same: to move forward. Hospitality leaders have a responsibility to lead this charge, not as a response to external pressure but as a commitment to fostering workplaces and guest experiences that reflect the values of equity, trust, and inclusion.

For an industry that thrives on connection and diversity, there’s no better time to ensure those values are embedded into every corner of the business. After all, inclusion isn’t just a moral imperative—it’s smart business.

Regional Insights: Virginia & Texas

Virginia: Peaks, Piedmont, and Ports

Virginia’s reputation as a top tourism destination continues to grow, driven by its diverse attractions and commitment to hospitality innovation. From the serene beauty of the Blue Ridge Mountains to the coastal charm of Chesapeake Bay, Virginia offers something for every traveler. Yet, it’s the smaller, lesser-known towns that are making waves as rising stars in the state’s tourism economy.

Take Danville, for example. Once an industrial hub, Danville is now a shining example of how small towns can reinvent themselves. Aided by strategic investments in boutique lodging and event-driven tourism, Danville has embraced its history while modernizing its offerings. The addition of properties like The Bee Hotel—a boutique hotel that nods to Danville’s industrial past while delivering upscale amenities—has made the town a destination for travelers seeking both charm and comfort. The revitalization of the downtown River District has also drawn visitors, with its blend of dining, shopping, and cultural attractions.

Piedmont, too, is thriving, particularly as a destination for wine tourism. Home to more than 300 wineries, Virginia ranks among the top 10 wine-producing states in the U.S., according to the Virginia Wine Board (VirginiaWine.org). Events like the Virginia Wine Summit have helped solidify the region’s reputation, drawing wine enthusiasts who contribute significantly to the local economy.

Even Virginia’s coastal regions are seeing a post-pandemic rebound, with ports like Norfolk and Virginia Beach welcoming cruise travelers and beachgoers. According to data from the Virginia Tourism Corporation, coastal visitation rose by 12% in 2023, bolstered by new eco-tourism offerings and family-friendly events.

Key Takeaway: Virginia’s success lies in its ability to combine its rich history with modern amenities. Small towns like Danville are demonstrating that leveraging heritage doesn’t mean being stuck in the past—it’s about using it as a foundation for growth. Whether it’s boutique lodging or wine-centric tourism, Virginia offers a blueprint for small towns looking to capture new markets.

Texas: IH-35’s Festival Economy

Texas’s hospitality industry thrives on the energy and excitement of its festivals, particularly along the bustling IH-35 corridor that connects Dallas, Austin, San Antonio, and beyond. Events like Austin’s South By Southwest (SXSW) and San Antonio’s Fiesta draw millions of visitors annually, creating a surge of economic activity for hotels, restaurants, and local attractions. Yet, as festival-driven tourism continues to expand, rural areas along the corridor are grappling with unique challenges.

Austin’s SXSW , for instance, generated $280 million in economic impact in 2023, according to Visit Austin . Hotels across the metro area reported 95% occupancy during the event, with average daily rates (ADR) reaching a staggering $350. While these figures highlight the financial potential of festivals, they also underscore the strain they place on local resources. Labor shortages—particularly in the service and events sectors—are a persistent challenge, leaving many businesses scrambling to meet the influx of guests.

Meanwhile, rural areas like Waco and the Texas Hill Country are seeing a different set of dynamics. Magnolia Market at the Silos in Waco continues to attract tourists year-round, yet smaller-scale festivals in these regions struggle to match the demand seen in urban centers. This inconsistency makes it difficult for rural operators to sustain a stable workforce or year-round engagement.

Key Opportunities:

• Cross-Training Staff: By equipping employees with a broad skill set, businesses can better adapt to the fluctuations of festival-driven tourism. For example, hotels along the IH-35 corridor have begun training front-desk staff to assist in food and beverage operations during high-demand periods.
• Collaborative Partnerships: Working with event organizers to create shared revenue models can help rural operators gain a foothold. For instance, a partnership between a local brewery and a Hill Country music festival boosted revenue for both parties by cross-promoting beer tastings during festival events.
• Year-Round Engagement: Rural regions are increasingly exploring ways to extend their tourism seasons. Waco’s new hiking and biking trails, coupled with family-friendly events like seasonal markets, are drawing more consistent visitation.

Key Takeaway: Texas’s festival economy highlights the immense potential of event-driven tourism but also reveals the need for balance. For rural areas along the IH-35 corridor, finding ways to sustain engagement outside of festival seasons is critical. Collaborative partnerships, cross-training, and creative off-season programming can help stabilize demand and build resilience.

The Power of Regional Hospitality

Both Virginia and Texas demonstrate the importance of leveraging regional strengths to build thriving tourism economies. In Virginia, small towns like Danville show how heritage and innovation can coexist, creating destinations that attract modern travelers. Meanwhile, Texas’s festival-driven economy underscores the value of large-scale events while highlighting the need for creative solutions in rural areas.

For hospitality leaders, the lesson is clear: whether it’s investing in local partnerships or training teams to adapt to demand, the key to success lies in flexibility and collaboration. By tapping into the unique characteristics of their regions, operators can not only navigate challenges but turn them into opportunities for growth.

Key Takeaways: Actionable Strategies for Hospitality Leaders

As the January issue of The 1033 Hospitality Compass draws to a close, here are the most critical insights to implement in the months ahead. These strategies are designed to help hospitality leaders navigate the complex challenges facing the industry while capitalizing on emerging opportunities.

1. Optimize Urban Operations Rising costs in urban markets demand innovative solutions. Simplify menus to focus on high-margin items that are locally sourced or easier to obtain. Invest in tech-driven logistics tools to optimize delivery routes, reduce costs, and improve efficiency. In crowded cities like New York, adaptability in operations can be the difference between thriving and merely surviving.
2. Authentic DEI Move beyond performative gestures by implementing actionable and measurable initiatives. Build trust through leadership training that empowers managers to recognize and challenge biases. Ensure that inclusion isn’t just a policy but a lived practice embedded in recruitment, team dynamics, and guest interactions. Whatever name you choose—DEI, Culture & Belonging, or Inclusion Strategies—the goal is clear: create equitable environments where everyone feels valued.
3. Small-Town Success Leverage heritage and local charm to attract travelers to emerging tourism markets. Investments in boutique lodging, wine tourism, and cultural experiences are paying dividends in regions like Virginia’s Danville and Piedmont. Small towns have an opportunity to position themselves as unique destinations by blending modern amenities with historical storytelling.
4. Festival Readiness For regions like Texas’s IH-35 corridor, event-driven tourism offers immense economic potential. Prepare for seasonal surges by cross-training staff, forming collaborative partnerships with event organizers, and creating year-round engagement strategies to stabilize demand beyond festival peaks.

Looking Ahead: Trends to Watch in 2025

The year ahead promises significant shifts in how the hospitality industry operates and engages with guests. Staying ahead of these trends will require foresight, adaptability, and a willingness to embrace innovation.

1. AI in Guest Engagement Artificial intelligence will redefine guest interactions. From AI-driven chatbots handling customer inquiries to predictive analytics improving personalized marketing, technology will enhance how businesses understand and cater to their guests. Operators should explore tools that integrate AI seamlessly into their operations while maintaining the personal touch that defines hospitality.
2. Sustainability Spotlight Guests are increasingly prioritizing eco-friendly practices when choosing where to stay and dine. Expect a greater demand for energy-efficient operations, locally sourced and sustainable menus, and visible commitments to reducing carbon footprints. Investments in sustainability aren’t just good for the planet—they’re good for business, with many travelers willing to pay a premium for greener experiences.
3. The Evolving Workforce Labor shortages remain a persistent challenge, but the solution lies in offering flexible schedules, hybrid roles, and meaningful career pathways. Employees want more than a paycheck—they want growth, purpose, and work-life balance. Leaders who prioritize these needs will not only attract top talent but also improve retention and team performance.

Let’s Navigate Together

The hospitality industry thrives on connection, and at 1033 Consulting, we’re here to ensure you stay ahead of the curve. From leadership development to operational problem-solving and workforce strategies, our tailored solutions are designed to turn challenges into opportunities.

Whether you’re looking to optimize your operations, build trust through authentic DEI efforts, or adapt to emerging trends, our team of experts is ready to guide you. As we like to say:

A conversation is always free.

Let’s chart a course to success together.