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
Jan 6, 2025 - Labor and Inflation Squeezing Margins
- 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.
- The hospitality industry is seeing a noticeable uptick in credit card chargebacks, Hotel Management reports. Factors leading to the recent rise in chargebacks – a major pain point for hotel and motel operators because they disrupt cash flow and increase in the workload for staff assigned to handle disputed charges – include the growing complexity of hotel charges, third-party booking errors, and fraudulent transactions, such as using stolen credit cards to book rooms. Effective strategies hotels and motels can use to prevent chargebacks and mitigate financial losses include using chargeback analytics software to identify patterns in chargebacks and understand why they are happening. Using an address verification service (AVS) to authenticate ownership of a credit or debit card used by a customer, and 3D Secure to add an extra layer of security to online transactions, can also help minimize chargebacks, according to HM. 3D Secure shifts fraud liability to the card issuer.
- Conferences and group events, which were slow to recover from the pandemic, are staging a comeback, providing a welcome boost to the hotel industry as leisure travel slows, The Wall Street Journal reported in October. Revenue per available room for group travel – generally defined as bookings of 10 rooms or more at pre negotiated rates – rose 6.8% for the first eight months of 2024 compared with the same period in 2023, according to data firm CoStar Group. Average daily room rates for nongroup travel have fallen slightly this year, while group booking rates increased 4%, per CoStar. “Group and convention hotels are having a moment right now,” C. Patrick Scholes, a lodging and leisure analyst for Truist Securities, told WSJ, adding “That is the greatest strength this year and likely next year in terms of revenue growth for the domestic hotel industry.”
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