A Look at the Hotel Industry in 2024

• The hotel industry faced significant challenges in 2024 due to rising inflation and ongoing labor issues.
• Despite some signs of easing inflation and hopeful labor outlooks, there are concerns that these problems may persist in 2025.

In his year-end analysis, Trevor Simpson of CoStar noted that the hospitality sector faced considerable challenges in 2024, primarily due to the intertwined issues of labor and inflation. These adversities resulted from the rising cost of goods and wages, significantly tightening hotel industry margins. This situation was particularly highlighted by professionals such as Gregg Forde, the president and COO at Island Hospitality, and Kerry Ranson, the president of operations at Raines.

Inflation significantly increased the cost of goods and labor. Forde stated that inflation was the primary driver of operational challenges in the hotel industry. Furthermore, inflation-induced wage pressure was higher than the average daily rate growth, which was evident in the increased costs of property insurance and workers’ compensation health insurance. Ranson echoed this sentiment, emphasizing the continued economic squeeze, particularly on profit margins.

Labor issues were also a defining challenge of 2024, with nationwide labor strikes seeing thousands of hotel workers demanding better pay and working conditions. The low unemployment numbers in the U.S. also tightened the job market for skilled workers. According to Gabriel Perez, COO of lodging at The Indigo Road Hospitality, qualified labor is scarce, causing a high turnover rate and labor shortages in the hospitality industry. Ranson added that even increased wages were insufficient to retain employees who could earn more in other sectors.

There are signs of easing inflation, with the Federal Reserve slashing interest rates in recent months. However, there is an ongoing concern that labor issues might persist in 2025. Ranson believes that the hospitality industry has failed to showcase the opportunities it offers to prospective employees. Despite providing competitive wages and significant career development opportunities, this has not translated into more hires. Richard Jones, the EVP and COO at Hospitality Ventures Management Group, added that even finding quality candidates for management and leadership positions has become difficult due to wage increases.

As a solution, some companies like Indigo Road are breaking away from industry norms to fill gaps and boost talent. They’re adopting strategies like hiring employees with requisite skills who can only work a few days a week. Forde emphasized the importance of retaining new hires and reducing the turnover rate as the main focus for hotel management companies in the coming year. Indigo Road and Raines are implementing various strategies like offering retention bonuses and promoting their culture to retain staff.