Hotels & Motels
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 44,700 hotel and motel companies in the US provide lodging for business and leisure travelers. The industry includes chains, franchises, and independent hotels. Franchise hotels are branded properties with independent owners. The franchise brand (Marriott, Hampton Inn, etc.) is known as the "flag." Large chains may offer franchises in addition to operating corporate-owned properties. About 72% of hotels are affiliated with a chain.
Large Capital Commitments
Building a new hotel requires significant investment in land, buildings, furnishings, and marketing expenses.
Integrating Technology
Hotels are rapidly integrating technology to improve their operational efficiency, mitigate labor shortages, and enhance the guest experience.
Industry size & Structure
A typical hotel employs fewer than 20 workers and generates about $5 million in annual revenue.
- The hotel industry consists of about 44,700 companies that employ 1.5 million workers and generate $221 billion annually.
- The industry includes chains, franchises, and independent hotels. Franchise hotels are branded properties ("flags") with independent owners. Large chains may offer franchises in addition to operating corporate-owned properties. About 72% of hotels are affiliated with a chain.
- Hotel categories are defined by price and the level of services and amenities offered. General classifications include luxury, upscale, midscale, and economy.
- Specialized hotels include resorts (which cater to vacationers) and extended stay properties (which include kitchens and additional space). Some corporate chains offer timeshare units, which give guests the option to stay at a particular property during a scheduled period.
- Large companies include Marriott International (Marriott, Renaissance, Courtyard, Fairfield Inn, Ritz-Carlton), Hilton Worldwide (Hilton, Doubletree, Embassy Suites, Hampton Inn, Homewood Suites), InterContinental Hotels (Holiday Inn, Crowne Plaza, Staybridge Suites, Candlewood Suites), and Best Western.
- Varying strength among flag hotels leads to varying levels of risk for new properties.
Industry Forecast
Hotels & Motels Industry Growth
Recent Developments
Feb 7, 2025 - No Taxes on Tips Policy Not So Simple
- Tipping fatigue has grown significantly since the pandemic, leading politicians from both parties to propose legislation exempting tips from taxes, an idea supported by out two-thirds of Americans, according to a poll from Ipsos. The proposal is popular among hospitality industry trade groups and tipped workers, but the economic implications of such a move are not so simple. It would only affect a small number of workers - the Yale University Budget Lab finds there are 4 million tipped US workers, or 2.5% of the workforce - only a third of which make enough to pay taxes at all. In addition, only federal income tax on tips would be affected. State income and payroll taxes would still be deducted. Yale estimates that such a proposal would cost the government about $100 billion in revenue over the next ten years.
- The extended stay segment of the hotel industry is targeting a more upscale market than the typical low-level brands that usually dominate the niche. After COVID shuffled consumer and business travel habits and service expectations in the long stay segment, companies including Marriott and Wyndham have looked to offer a more upscale offering with apartment-style accommodations. Industry leaders are targeting the business traveler who wants the perks of extended stay (in-room kitchens, laundry facilities, business centers) combined with high-end hotel fringe benefits. The new Apartments by Marriott brand includes all those same amenities but with private bedrooms and separate living areas. Expansion in the segment will be largely focused on densely-populated urban areas, and in partnerships with other hotel and online travel partners. Smith Travel Researchers and Tourism Economics both forecast that luxury hotels will have the most growth in revenue per available room in the industry in 2025.
- Producer prices for hotels and motels rose 3.2% in November compared to a year ago after dipping 0.8% in the previous November-versus-November annual comparison, according to the latest US Bureau of Labor Statistics data. Employment by the industry grew 1.3% year over year in October but remains below pre-pandemic levels. Meanwhile, average wages at hotels and motels rose 0.9% over the same period to $20.80 per hour, BLS data shows. The rising cost of goods and wages is putting significant pressure on hotel industry margins, industry sources say.
- Inflation – the key source of operational challenges for the hotel industry in 2024 – may be a persistent problem for hoteliers in the new year, according to Hotel News Now. High inflation is driving up wages, which has accentuated existing staffing problems, hoteliers say. Inflation has also increased costs of property insurance and workers compensation health insurance by significant amounts. Moreover, in 2024 nationwide strikes by workers demanding better pay and benefits amid low unemployment drove wages higher, but sometimes not enough to retain employees who could earn more in a different industry, leading to high turnover rates. "Our business is really predicated on two things: cost of labor and cost of goods,” explained Gregg Forde, president and COO at Island Hospitality, adding that last year inflation around goods and wage pressure was significantly higher and exceeded average daily room rate growth, squeezing hotel industry margins.
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