Hotels & Motels NAICS 721110

Apr 22, 2026 - High Demand But Rising Costs Creating Tricky Travel Market

• Domestic travel demand is strong, but rising costs are making consumers more price-conscious, according to a travel report from TakeUp. About 56% of travelers plan to keep their trip levels the same and 28% expect to travel more, yet 42% say they’re more sensitive to prices than last year. Even small increases - around 10% above expectations - can push people to reconsider booking a trip. Instead of canceling, many travelers simply adjust: 43% would switch to a different type of stay, 31% would shorten their trip, and 27% would choose a new destination. The dynamics are creating a split market, with budget travelers cutting back while higher-end travelers keep spending. For hotels and operators, the challenge is no longer demand but capturing it, as traditional pricing models fall short. Many are now using AI to track real-time behavior and fine-tune pricing to stay within the range where travelers will still book.
• The US hotel industry faces serious long-term workforce challenges as immigration reaches historic lows, with the US Census Bureau confirming net negative migration across every metro area in 2025 - the most in at least 50 years. Hospitality relies on immigrants for roughly one-third of its 8 million direct jobs, and the industry ended 2025 with 98,000 fewer workers than in 2024. An American Hotel and Lodging Association survey found 65% of hoteliers flagging labor costs as a top concern, with half reporting their properties are understaffed. Immigration experts warn the worst may still be ahead: if courts uphold the administration's terminations of Temporary Protected Status, one Cornell professor described the potential fallout as "a tsunami wave that is coming, but has not hit yet." Economists caution the labor shortage won't simply shift jobs to US-born workers. Instead, it will ripple through the broader economy, driving up wages and raising costs for consumers across the hospitality sector.

• The travel industry's middle market is where the real competition is happening, and hotels can't afford to ignore it. Airlines have raised the bar with more comfortable, moderately priced products, and travelers are arriving at hotels with higher expectations as a result. Someone who paid for extra legroom and a better meal in the air isn't going to settle for a forgettable room on the ground. Hotels are responding through better room design, flexible pricing models, upgraded food and beverage, and wellness amenities that feel like upgrades rather than luxuries. Brands like Hyatt and Accor are already leaning in, but the industry is still catching up. The business case is solid - incremental enhancements can drive more guest spending without massive capital investment - but if expectations rise faster than pricing power, margins will feel it. Mid-tier is no longer stable ground, and winning there means rethinking what value actually looks like.
• Hotel salaries continue rising, as total compensation, wages and benefits paid by US hotels grew to $127 billion in 2025, per the American Hotel & Lodging Association (AHLA), and are projected to reach about $131 billion in 2026, a roughly 3% year-over-year increase. Hoteliers say rising labor costs - alongside higher property taxes and insurance - continue to pressure net operating income. Overall, hotel labor costs have increased 15.3% from 2019 to 2025, outpacing the 12.8% growth in operating revenue over the same period. Union activity remains notable, with thousands of hotel workers striking in recent years over wages, and major union contract negotiations (such as in New York City) expected to be a key focus in 2026. Salaries, wages and payroll now account for more than 32% of total hotel revenue, according to the AHLA.