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 43,500 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 73% of hotels are affiliated with a chain.
Large Capital Commitments
Building a new hotel requires significant investment in land, buildings, furnishings and marketing expenses.
Online Booking Channels Grow Powerful
The growing number of travelers who turn to the Internet to book lodging has forced hotels to alter how they do business.
Industry size & Structure
A typical hotel employs fewer than 20 workers and generates about $4 million in annual revenue.
- The hotel industry consists of about 43,500 companies that employ 1.4 million workers and generates $166 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 73% 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 time share units, which give guests the option to stay at a particular property during a scheduled period of time.
- 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
May 4, 2023 - Franchisees Push for Change
- Franchisees are finding a sympathetic ear among state legislators and federal regulators in pushing for new laws and rules, The New York Times reports. A report from the Government Accountability Office published in April finds that franchisees “do not enjoy the full benefit of the risks they bear.” The report cites interviews with dozens of small-business owners who said they lacked control over basic operations that determined their ability to earn a profit. Still stinging from revenue lost during the pandemic, discontented hotel franchisees are pushing back against hotel brands’ loyalty programs and other policies they say tie their hands and hurt business. The Federal Trade Commission in March issued a request for information about the ways in which franchisers control franchisees, which could result in additional guidance or rules. Franchisers are resisting a wave of proposals that seek to limit their power.
- The hotel construction pipeline is growing in the top 25 US markets, Hotel Management reported in May citing a new report from Lodging Economics (LE). According to LE’s Q1 2023 US Construction Pipeline Trend Report, Dallas tops the list of markets with the construction pipelines with record-high project and room counts of 184 hotels and 21,810 rooms. Next on the list are Atlanta with 144 hotels (18,242 rooms), Los Angeles with 118 hotels and (19,066 rooms), Phoenix with 117 hotels (16,100 rooms), and Nashville with 115 hotels and 15,354 rooms. New project announcements have been slow to return to pre-pandemic project counts. However, construction starts in the total US pipeline rose 2% by projects and 30% by rooms year over year.
- With occupancy rates stuck below pre-pandemic levels, there’s concern that hotels that rely on business travel and hosting conferences could encounter refinancing challenges in the future, The Wall Street Journal reported in March. While leisure travel has rebounded since the second half of 2022, the recovery has been much less robust for facilities with large meeting rooms that rely on business trips and conferences, partly because many meetings are now held remotely, according to WSJ. Stubbornly low occupancy rates for business-focused hotels have driven down their property values. As a result, banks are tightening their lending standards and asking hotel owners to put up more capital before agreeing to refinance their loans. Borrowers saddled with lots of debt might not be able to meet the requirements. Heavy debt loads, coupled with rising interest rates and fears of a recession, are clouding the outlook for business-focused hotels.
- Post-COVID, there’s a lot less service included in the full-service hotel experience, Cayuga Hospitality Services (CHS) reported in March. Amenities including bell service, turndown service, and trash pickup have largely vanished, with housekeeping now typically provided only on demand. Ongoing COVID concerns, staffing challenges and, possibly, profit-taking business decisions are among the potential reasons hotels are cutting back on guest services, according to CHS. Indeed, occupancy rates remain depressed – especially at hotels that cater to business travelers and functions – and the average daily room rate is up, as is revenue per room. As a result, the lodging sector is making more room revenue than in 2019 while servicing fewer people. While that may reduce stress on hotel operations, many of which continue to face staffing shortages, hotel guests are getting less for their money.
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