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
Jul 5, 2024 - Rising Payrolls
- According to the latest US Bureau of Labor Statistics data, hotel and motel employment rose 2.6% in April compared to a year ago, while average industry wages rose 2.3% over the same period to $20.76 per hour. Rising consumer spending, up 3.1% in March year over year, is helping to support rising payrolls at hotels and motels. The industry is somewhat seasonal, with employment, occupancy rates, and revenue generally peaking in the summer months.
- The US’s widening wealth gap is expected to be especially evident during this summer travel season, The New York Times reported in July. Wealthier households are more optimistic about their ability to take trips, and the services they are more likely to use — like full-service hotels — are flourishing, while budget hotel chains, by comparison, are expected to report a pullback, NYT reports. “If you go to upscale, you’re actually seeing growth there,” Adam Sacks, president of tourism economics at Oxford Economics, told NYT, adding, “A lot of that has to do with the different financial situations of different income groups.” Full-service hotels are expected to hike room rates by 2.1% this year, while midscale room rates remain flat and rates at economy hotels decline as low-income earners retrench, according to a forecast by hospitality analytics firm CoStar Group.
- A new 2024-2025 forecast from STR and Tourism Economics significantly downgrades the outlook for US hotels, reflecting lower-than-expected performance to date in 2024 and lower growth projections for the remainder of the year, Hotel Management reports. According to the revised forecast released in June, projected gains in average daily rate and revenue per available room for 2024 were downgraded by 1% and 2.1%, respectively. Occupancy for the year is expected to decline after the previous forecast projected year-over-year growth. For 2025, an occupancy growth projection held steady, but ADR and revPAR were downgraded by 0.8% and 0.9%, respectively. The higher cost of living is impacting lower- to middle-income households’ ability to travel, easing demand for lower-priced hotels, while the pricing power of upscale and luxury hotels has waned due to changes in mix and travel patterns and, to a lesser extent, economic conditions, per the revised forecast.
- Business travel is approaching pre-pandemic levels as businesses send employees back out on the road, The Wall Street Journal reported in April. Corporate travel is rebounding, with airlines reporting double-digit increases in revenue from corporate accounts in the first quarter compared to a year ago. Recent data from airlines and hotels suggest that the prediction that Zoom and other virtual meeting platforms would be the end of business travel was premature. Hotel giant Hilton Worldwide’s CEO said in an April earnings call that the resilient US economy and strong employment have helped shore up business travel, with demand from small and medium-size companies already above 2019 levels and large companies getting closer to that mark.
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