-
U.S. Hotel Performance 2024: Rising Operating Costs Dampen Profit Margins Despite Revenue Growth – Image Credit Unsplash+
- In 2024, U.S. hotels saw a 2.7% rise in Total Revenue per Available Room (TRevPAR) but a 1.1% decrease in GOP margins due to escalating operating costs.
- Labor costs were the main contributor to rising operating costs, accounting for $0.75 of every extra dollar in revenue in the U.S., according to the Profit Matters 2024 report.
The U.S. hotel industry experienced a diverging trend in 2024: while revenues rose, profit margins declined, making it the sole major global region to witness a profit contraction. This was revealed in HotStats’ recent Profit Matters 2024 report, discussed at the Hunter Hotel Investment Conference 2025.
Despite a rise of 2.7% in Total Revenue per Available Room (TRevPAR), U.S. hotels confronted a decrease in Gross Operating Profit (GOP) margins by 1.1 percentage points, indicating that profitability has been left behind in the wake of revenue growth. This decline in profitability was primarily due to the rising operating costs, particularly labor charges.
Flow-through performance, which refers to the percentage of revenue increment contributing to the profit, posed a significant challenge. The U.S. market experienced a negative flow-through result of -4%, implying that for every dollar increase in revenue, the operating costs expanded by $1.04, thereby compressing the profit margins.
The report also highlighted that revenue growth was primarily driven by the ultra-luxury and upper-upscale segments, which experienced a strong recovery in group travel and events and ongoing demand for high-end experiences. On the other hand, the midscale and economy hotel segments struggled as inflation-conscious consumers curtailed discretionary spending.
A critical factor contributing to the escalating operating costs was the continuous rise in labor costs. The report noted that in the U.S., labor costs accounted for $0.75 of each additional dollar of revenue. Additionally, utilities and maintenance costs also surged, further impacting bottom-line profitability.
In light of these challenges, profitability benchmarking has emerged as an essential tool for hotel owners and investors. As labor and general operating costs continue to outpace revenue growth, it has become crucial for stakeholders to track, assess, and manage their performance against industry standards to ensure sustainability and competitiveness in the market.
