How Hotels Managed Labor Costs in 2025

This article examines how, in 2025, hotels adapted their labor models to protect margins, with a focus on improved productivity and strategic scheduling.

An analysis by HotelData.com indicates that, in 2025, labor costs and trends significantly affected the performance of U.S. hotels. With high revenue expectations and tighter gross operating profit (GOP) targets, the industry faced challenges in maintaining profitability amid rising labor costs. 

Labor Realities in 2025

In 2025, U.S. hotels faced several labor-related challenges. Wage levels remained structurally higher than pre-pandemic norms, and forecasting accuracy became more critical than rate strategy. Efficiency, rather than headcount reduction, emerged as the key driver of profitability. These factors necessitated a disciplined operational approach to manage labor costs effectively.

Productivity Improvements

Between January and September 2025, U.S. hotels made significant gains in labor productivity. Department-level hours per occupied room dropped by 7-15% across key areas such as Guest Services, Housekeeping, and Management and position-level minutes per occupied room also improved by 6-15% for many roles. Despite rising average wages and labor costs per occupied room, more effective deployment mitigated the impact. Headcount grew by 4%, providing more stable coverage, while overtime acted as a controlled buffer rather than a runaway expense.

Labor Productivity by Hotel Type

Different hotel types exhibited varying levels of labor productivity. Extended-stay hotels achieved the highest productivity, with an average of 1.30 hours per occupied room. Select service hotels followed closely, averaging 1.44 hours per occupied room. Full-service hotels showed higher labor intensity, averaging 2.57 hours per occupied room, while resorts remained the most labor-intensive, averaging 4.48 hours per occupied room. These patterns highlight the influence of service models, guest expectations, and operational complexity on labor strategies.

Departmental Labor Productivity

Guest Services hours per occupied room decreased from 0.46 hours to 0.40 hours, indicating better staffing alignment with demand peaks and increased use of digital tools. Housekeeping hours per occupied room eased from 0.79 hours to 0.74, reflecting improved scheduling and forecasting. Management hours per occupied room declined from 0.09 hours to 0.08, showcasing leaner supervisory coverage and streamlined leadership structures.

Position-Level Labor Productivity

Position-level improvements complemented departmental gains. Room attendants reduced minutes per occupied room (MPOR) from 25.80 to 24.39, while assistant general managers and general managers also saw notable improvements. These changes demonstrate how hotels restructured work and streamlined task flow to maximize each scheduled hour, especially in supervisory and guest-facing roles.

Wages, Costs, and Overtime

Wage growth in 2025 remained in the low- to mid-single digits, with leadership roles experiencing the sharpest increases. Labor cost per occupied room (CPOR) rose by 5% on average across key positions. Overtime trends revealed that hotels adjusted staffing levels in response to demand, with frontline roles experiencing increased overtime while supervisory roles experienced reductions.

Headcount Stability

Throughout 2025, headcount grew by 9% from January to the late-summer peak, indicating stronger retention and more consistent scheduling. This stability reflects a workforce that is beginning to stabilize after several volatile years. Rather than relying on broad headcount cuts, hotels rebuilt teams to a sustainable baseline and focused on scheduling, productivity, and overtime as the main levers.

Implications for 2026

As hotels plan for 2026, the lessons from 2025 underscore the importance of integrating labor forecasting with booking pace and prioritizing efficiency over cuts. With average wages rising and cost per occupied room increasing, hotels must focus on sustaining productivity gains achieved in 2025. Service models will continue to evolve, requiring refinements to maintain guest satisfaction while reducing wasted hours.

Conclusion

In 2025, U.S. hotels faced a challenging revenue environment but maintained GOP margins close to those of the previous year. This was achieved through strategic labor management, including reduced hours per occupied room, improved minutes per occupied room, and controlled overtime. As the industry looks to 2026, labor efficiency tied to real-time demand forecasts will be crucial in turning operational discipline into a lasting performance advantage.