Dive Brief:
- U.S. hotel industry profits grew in 2024, though increased labor costs and inflation limited growth, according to new data from CoStar.
- Gross operating profit per available room increased 3.2% year over year in 2024, while total revenue generated per room rose 7.2% year over year and EBITDA per room increased 2.5% year over year, according to CoStar. Labor costs simultaneously increased 11.2% year over year in 2024, impacting hotel profits, CoStar noted.
- Despite limiting factors, hotel profits in most major U.S. markets increased in 2024, and demand growth shows promise to drive total revenues going forward, according to Raquel Ortiz, senior manager of financial performance at STR.
Dive Insight:
Growth in total operating expenses, particularly labor, had the biggest impact on hotel industry profits in 2024, according to Ortiz. Labor costs remained well above all other bottom-line metrics in the year, CoStar reported.
The American Hotel & Lodging Association previously projected that, amid high-level inflation in 2024, U.S. hotels would pay employees a record $123 billion in wages, salaries and other compensations in the year, up 4% from 2023 and 20% from 2019. Throughout the year, though, hotel workers across the country maintained that their wages did not keep up with the rising cost of living.
Despite rising operational costs, most of the top 25 U.S. markets were able to grow profits in 2024, per CoStar. Miami posted the greatest increase in GOPPAR (+$12) and TRevPAR (+$27), followed by Dallas and Nashville, Tennessee.
Oahu, Hawaii, experienced the largest drops in both metrics, “likely due to lower demand caused by the labor strikes,” according to CoStar. In September, some 2,000 workers at Hawaii’s biggest hotel, Hilton Hawaiian Village in Honolulu, walked off the job. In November, the workers ratified a contract with the hotel, securing “significant” wage increases, according to hospitality union Unite Here.
Promising demand growth has been the “key to driving total revenues, which have been the best defense against high expenses and allowed for hotels to increase profits,” Ortiz said in a statement.
An increase in group travel has helped improve food and beverage revenues, particularly, though not enough to mitigate the labor cost growth that has impacted margins, she added.
In November, Marriott CEO Anthony Capuano called the continued strength of group travel “a really encouraging sign.” Other hotel CEOs have echoed that strong group demand will be advantageous for the industry in 2025.
