Think of 2025 as a tightrope act for hoteliers: revenue gains on one side, rising costs on the other.

Step too far in either direction, and balance is lost. Globally, profits are still moving upward, but the margin for error—literally—is shrinking fast.

Margins Under Fire Across Continents

The Middle East remains the outlier, setting the pace with strong growth and resilient profitability. Elsewhere, the picture is more complicated.

Europe’s slowdown is driven largely by Northern markets, where margins are slipping.

In the Americas, margin pressures affect most sub-regions, with Central America standing out as an exception, outperforming its peers and maintaining profitability.

The U.S. Case: When Costs Outrun Growth

Figure 1: Despite revenue growth slowing through Q2, steady labor cost increases continue to squeeze margins—pushing GOPPAR into negative territory by June.

In the United States, the story is one of revenue growth overshadowed by escalating costs. Payroll increases continue to outpace topline performance, eroding profitability across all brand scales. Operators are finding that even modest revenue gains can’t keep up with the steady rise in labor expenses.

Figure 2: In Q2, hotels that didn’t achieve at least 5% YOY TRevPAR growth generally saw GOP margin erosion as rising costs took their toll. While a few outliers managed to hold margins, the declines across many states were deeper than the gains—dragging the national average further down.

Luxury and ultra-luxury hotels, however, have found some footing on the tightrope. By driving guest spend beyond the room—particularly in Food & Beverage and ancillary services—they are absorbing more of the cost burden and protecting their margins against deeper erosion.

Beyond Payroll: The Double Squeeze

Labor costs aren’t the only force at play. Operated departments are fueling payroll expansion, while undistributed other expenses are growing faster than revenues. This “double squeeze” is leaving hoteliers little room to maneuver, compressing margins further down the P&L.

Figure 3: Undistributed expenses are also weighing on profitability, with categories like Repairs & Maintenance (+5.9%) and Utilities (+5.8%) outpacing TRevPAR growth. Notably, R&M costs are sensitive to supply chain disruptions and tariffs, making them a critical line to monitor as trade discussions evolve.

The Takeaway

Global revenue and profit are still climbing, but growth alone doesn’t tell the story. The real narrative is one of margin pressure:

• The Middle East continues to lead.
• Europe and the Americas wrestle with cost-driven declines.
• Central America defies regional headwinds.
• Luxury hotels in the U.S. leverage diversified guest spend to stay ahead.

If you want to explore how HotStats can help you benchmark against the right competitors, uncover hidden profit opportunities, and stay balanced on the tightrope, get in touch with us today: askus@hotstats.com.