As hotel investors convene at the Hunter Hotel Investment Conference 2025, new insights reveal that rising operating costs in the US market - particularly labor - are squeezing hotel profit margins.

Despite revenue growth, U.S. hotels saw GOP margins decline by 1.1 percentage points in 2024, making it the only major global region to experience a profit contraction.

Profitability Pressures: Revenues Up, but Margins Down

U.S. hotels have seen Total Revenue per Available Room (TRevPAR) rise by 2.7% in 2024, but profitability has lagged behind. Profit Matters 2024 reports that GOP margins in the U.S. declined by 1.1 percentage points, making it one of the most affected regions alongside the Caribbean.

Flow-through performance was particularly challenging. As the report states, “The United States struggled the most in this respect, as the flow-through result turned negative, at -4%. The market saw a GOP reduction of USD 0.04 for every USD 1 of revenue increase (or, conversely, that every dollar gain in the top line was met with a USD 1.04 expansion of costs).”

This means that despite revenue gains, escalating costs more than offset the additional income, resulting in compressed profit margins. The strongest revenue growth was driven by ultra-luxury and upper-upscale segments, buoyed by a continued appetite for high-end experiences, and a strong recovery of group travel and events. Meanwhile, midscale and economy hotels struggled as inflation-weary consumers cut discretionary spending.

The most significant hurdle? Labor costs. In the Americas section of Profit Matters 2024, “A Motley Crew in the Americas” highlights that, “The biggest hole in the bucket in these two markets was the continued escalation of labor costs, which accounted for USD 0.75 [in the U.S.] and USD 0.50 [in the Caribbean] of each extra top-line dollar respectively.”

Meanwhile, utilities and maintenance costs have also increased, further eroding bottom-line profitability. With labor and general operating costs outpacing revenue growth, profitability benchmarking has become more critical than ever for hotel owners and investors

Revenue Diversification is the Key

With cost inflation hindering profitability, revenue diversification is now a top priority for hotel investors. The most profitable hotels are maximizing ancillary revenue streams to offset expenses: Hotels are monetizing parking fees, wellness packages, and premium experiences to drive incremental revenue, while Select-service and limited-service hotels have maintained GOPPAR growth by controlling expenses and optimizing non-room revenue streams

Amid flow-through issues and rising costs, hotel investors must move beyond RevPAR-focused performance models and embrace profit-first benchmarking strategies.

How Investors Can Navigate the New Market Reality

As interest rates are still elevated and operational costs climbing, investors are shifting their focus from topline growth to margin protection. Insights from HotStats show that successful investors are taking the following steps to safeguard profitability:

• Benchmarking financial performance against competitors to identify cost-saving opportunities.
• Optimizing labor utilization by rebalancing staffing levels and improving scheduling efficiency.
• Enhancing pricing strategies and ancillary revenue streams to improve GOPPAR and TrevPAR .

Elevate Your Game by Turning Data into Profit

Understanding profitability in today’s hotel market requires a deeper look beyond top-line revenue. Operational benchmarking and Market Insights help owners and investors see where costs are rising, how margins compare to competitors, and where opportunities exist to improve efficiency.

By analyzing detailed P&L data across thousands of hotels, industry professionals can gain a clearer picture of:

Expense trends and cost efficiencies – Identifying areas where operational costs may be outpacing industry norms.

Revenue and margin comparisons – Understanding how different segments and properties adapt to shifting market conditions.

Market performance insights – Tracking trends across regions and asset classes to make informed investment decisions

The strongest hotel operators and investors are not just tracking revenue—they’re optimizing profitability and positioning their assets for long-term success. The question is: How does your portfolio compare? Where can you elevate your game?

For a deeper dive into the latest financial trends in the U.S. hotel market, explore Profit Matters 2024 at Profit Matters and HotStats benchmarking solutions at www.hotstats.com.