T&H industry leaders must demand a close to the innovation gap, and fast

The travel and hospitality (T&H) industry has spent the last few years rebuilding operations and restoring traveler confidence. Now the sector faces a new challenge: how to move beyond recovery and into reinvention. While both customers and partners highly rated the providers’ core service delivery capabilities, data from “HFS Horizons: Travel and hospitality services, 2025” revealed a shared concern: co-innovation, IP/R&D, and identifiable investments are not receiving the focus they desperately need.

This alignment between customers and partners should act as a strategic signal: both sides agree on where the gaps are, and these gaps directly threaten the industry’s ability to evolve.

Core services are stable, but not transformative: Across foundational service metrics, such as geographic reach, quality of service delivery, talent, and tech partnerships, service providers are consistently delivering to T&H firms. These strengths are particularly important in an industry with global operations and tight service windows. But consistency isn’t differentiation. In a post-pandemic world marked by shifting traveler behavior, rising costs, and digital-first expectations, T&H enterprises need more than solid execution. They need service partners that can help rethink business models and build long-term value.

Innovation gaps are the weakest link—a harsh truth that both customers and partners acknowledge: Customers and partners rated co-innovation, IP development, and investments significantly lower than core delivery areas. This isn’t a perception gap anymore, but a delivery gap. Everyone sees it, and that makes it all the more urgent. This industry is on the frontline of changing human behavior, from how customers plan and book to how they experience and review. It’s also dealing with mounting cost pressures, sustainability demands, and an increasingly digital-savvy customer base.

To meet enterprise needs, service providers must pivot from being delivery partners to innovation partners. That shift requires both mindset and muscle.

• Providers must create dedicated co-innovation hubs or labs with T&H clients. These should be staffed jointly, with shared KPIs and incentives. Ideas should be selected and developed based on their long-term impact, rather than short-term delivery milestones.
• It’s no longer enough to reuse generic accelerators. Providers should develop (or co-develop) IP specific to the travel lifecycle, such as intelligent routing engines, real-time rebooking platforms, loyalty analytics, and smart hospitality operations powered by AI. These must be integrated into delivery and evolve in tandem with the client’s business.
• Providers must show their commitment by investing in proofs-of-concept, vertical platforms, sustainability pilots, and shared data environments. This could include joint funding for innovation sprints, R&D partnerships with universities or startups, or capital backing for niche tech integration. Investments must be visible, reportable, and tied to outcomes.
• What gets measured gets managed. Providers and clients should create shared dashboards to track innovation metrics, including the number of co-ideated pilots launched, IP reusability, the impact of new services, and the ROI on joint investments. This makes innovation feel as tangible as SLAs.

The bottom line: Stop confusing operational success with innovation. T&H enterprises must demand more from their partners.

The T&H industry can’t afford to confuse operational performance with strategic transformation. Enterprises must demand these capabilities not as add-ons, but as core to the relationship. As the next era of travel won’t be built on recovery, reinvention is key.