U.S. hotel profits under pressure from rising labor costs

Hotel profit growth slowed as rising labor costs put pressure on margins, with GOPPAR increases trailing inflation

At the end of the year, rising total operating expenses—especially labor costs—had the biggest impact on hotel profits. While GOPPAR (Gross Operating Profit Per Available Room) growth slowed to below inflation levels, strong demand helped drive total revenues, allowing for modest profit increases. Group bookings contributed to higher food and beverage (F&B) revenues, but not enough to offset rising labor costs and shrinking margins.

Key takeaways

• Rising expenses impact profits: Labor costs remain the biggest factor in margin compression;
• GOPPAR growth slows: Growth in profits is now trailing inflation, limiting financial gains;
• Revenue driven by demand: Increased hotel demand has been a primary factor in sustaining total revenue growth;
• Group bookings boost F&B revenue: However, this increase has not been enough to counteract labor cost pressures;
• Market trends: Miami led in GOPPAR (+$12) and TRevPAR (+$27), while Oahu saw the largest declines, likely due to labor strikes impacting demand.

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