4 Key Trends for Retail and Hospitality Leaders in 2025

The last several years have been anything but ordinary for retail and hospitality. From congested supply chains to a 40-year inflationary high and changing customer buying behaviors, consumer-facing industries have encountered constant disruption-and yet, many have managed to come out on the other side stronger.

Today, buoyed by consistently strong consumer spending, they're posting impressive results: In 2024, hotels' revenue-per-available-room has trended even higher than the all-time records set in 2023. Meanwhile, restaurant sales are expected to top $1 trillion for the first time this year, and retail sales also continue an upward march.

But this doesn't mean the future's horizons are clear. Operators are confronting significant challenges in the form of higher operational costs, volatile macroeconomic conditions, and fluctuating consumer demand. And while consumers overall have continued to spend at a rapid clip, recent data suggests that lower-income shoppers are pulling back on travel and discretionary purchases as they face higher rent and grocery prices.

As consumer demand continues to yo-yo, retail and hospitality operators must be more aware of those market fluctuations. Particularly, businesses will have to manage staffing and expenses while keeping customers happy. Looking ahead to 2025, here are the four major trends that will shape hospitality and retail, as explained by key market leaders.

3 in 4 customers say they are more loyal to stores with consistent customer service and experiences.

1. Enhancing Customer Experience Across Channels

In an era of on-demand services, hospitality and retail organizations have no choice but to constantly innovate to keep up with sky-high customer expectations. "The customer now is demanding that we as industry people have the products and services at the exact time they want them," Keith Pickens, managing director of retail and hospitality at Workday, said at Workday Rising, the company's flagship customer event. If customers were once willing to give brands a few chances, they now have a "zero tolerance" policy, Pickens added.

So how can retail and hospitality leaders deliver what today's customer wants? The answer comes down to a strong omnichannel strategy and the ability to offer seamless experiences across brick-and-mortar and online.

Picture a retail customer who goes into a store and buys a sofa. On the way to their car, they realize they've forgotten to order a lamp. They return to the store to place the extra order, but the total cost is under the free-shipping threshold. "They think: 'Shouldn't I be getting free shipping if I just spent $1,000 on a sofa?'" says Duleep Rodrigo, U.S. sector leader for customer and retail at KPMG. Industry leaders need to stay ahead of that expectation curve by asking, "How can I drive better customer engagement and a better customer experience?" Rodrigo explains.

Customers also are increasingly looking for rich, in-person shopping experiences. "The in-location experience is coming back," Pickens says. "People want to socialize, touch products, and talk to people"-and these interactions can have a tremendous impact on organizations' bottom line. In fact, 3 in 4 customers say they are more loyal to stores with consistent customer service and experiences. Hospitality and retail leaders will need to re-examine how they think about their stores and the role of automation in enabling workers to spend more time on customer-facing issues.

"The in-location experience is coming back. People want to socialize, touch products, and talk to people."

2. Accelerating Tech Adoption to Streamline Workflows

As they balance elevated consumer and guest expectations and a tight labor market, hospitality and retail leaders need to react nimbly to drive growth. For KarYeng Liew, executive director, total rewards and HR technology at the Panda Restaurant Group, this comes down to focusing on "how technology can simplify, automate, and give us insights that lead to innovation."

Modernizing systems to create a single source of real-time data can help hospitality and retail leaders increase efficiency and generate actionable insights that drive operational excellence. By integrating workflows, optimizing inventory management, and streamlining scheduling, these sectors can achieve all-important productivity gains in an era of rising labor costs.

At the supermarket company Hy-Vee, the Workday integrated platform has been critical to automating routine tasks and streamlining workflows. "This allows us to shift our team's focus to the things that matter most, eliminating or reducing all the manual processes, and then streamlining and engaging our customer or employee experience," says Becky Olsen, Hy-Vee's director of HRIS technology.

3. Bolstering the Next Generation Workforce

Although labor shortages have eased over the last year, attracting and retaining talent remains a big issue for hospitality and retail organizations. According to research from McKinsey, 72% of retail employees who left their jobs over the past three years have left the industry altogether. As such, leaders need to reckon with how they can better meet workers' needs.

To engage and retain employees, hospitality and retail leaders need to move away from a transactional approach that leaves people feeling like a cog in the company's wheel. Instead, leaders should engage workers by addressing their top priorities-including better pay, training, and flexibility.

"Across the board, we are seeing a lot of companies focusing on training and developing people at all levels: associate, store operations, back office, all the way through middle management," Rodrigo says. Gathering and analyzing data on employee tenure and feedback can also help employers' efforts to identify trends and support retention.

In 2025 and beyond, organizations will need to answer two fundamental questions: "Why are employees coming to work for the brand? And how can we retain them?" Pickens says. By taking an increasingly personalized approach to workforce management, focusing on skills development and using technology to reduce employee time spent on low-value tasks, hospitality and retail leaders can maximize their teams' engagement, satisfaction, and productivity.

72% of retail employees who left their jobs over the past three years have left the industry altogether.

4. Harnessing the Operational Productivity of AI

AI has tremendous potential to enhance both the customer and the employee experience-and retail and hospitality leaders are taking action to harness the full extent of its capabilities.

On the consumer side, AI assistants will increasingly be able to offer shopping guidance and personalized recommendations tailored to individual preferences. In food service, leaders expect AI to make a splash when it comes to demand forecasting and service speed. And in terms of hotel accommodations, managers can use AI to automate manual processes like scheduling or timetracking, giving them more time to address employee and guests needs.

"We're always trying to forecast demand, understand customer traffic patterns, and develop predictive ordering," says Mark Rowe, corporate controller at fast casual chain Whataburger. "Mastering that so we can actually cut 10 seconds off of a wait time will be big for our customers."

AI is also enhancing both business operations and employee experience. Today, AI assistants help identify issues and optimize the use of data for innovation and resource efficiency. They're also being deployed to automate and optimize operations. Retailers like Walmart and Target have leveraged generative AI to do everything from improving product catalogs to offering teams fast access to best practices and quick answers to common questions.

AI may have particular advantages when it comes to scheduling, especially for 24/7 operations with shifting demand patterns and staffing needs. At Hy-Vee, Olsen foresees that in 2025, "Algorithms will predict staffing needs and work schedules, and ensure that the right resources are in place at the right time."

Whether the goal is to optimize staffing, support business operations, or enhance both customer and employee experience, automation can play a critical role in building the foundation for the hospitality and retail sectors' sustainable success. The difference between success and failure will come down to having a trusted partner.