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 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.

Online Booking Channels Grow Powerful

The growing number of travelers who book lodging online 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 1.6 million workers and generate $184 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
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Mar 5, 2024 - Labor Costs Rose in 2023
                                  • Employment by hotels and motels grew 4.2% in December compared to a year ago, after rising 11.5% in the previous annual comparison, according to data from the US Bureau of Labor Statistics. Employment in the accommodation sector remains about 9% below its pre-pandemic high reached in early 2020, according to government data. Meanwhile, average industry wages hit a new high of nearly $21 per hour in December, a 3.4% change year over year, per the BLS.
                                  • The United States had the largest hotel project count of any country in the fourth quarter of 2023, with Dallas, Atlanta, and Nashville leading cities worldwide for the most projects in the pipeline, according to Lodging Econometrics (LE). The US reached a record 5,964 projects, or 693,963 rooms, followed by China with an all-time high of 3,788 projects (691,772 rooms). LE data shows Dallas had 193 projects (22,291 rooms) in the pipeline, while Atlanta had 151 projects (18,730 rooms); and Nashville had 123 projects (16,148 rooms). Globally, the hotel construction pipeline hit a record high in Q4. The potential for interest rate cuts this year and in 2025 sends “a positive but cautious outlook for US hotel development in the year ahead,” LE said in a January statement. Heightened travel demand, including business and group travel, is driving industry growth.
                                  • Younger travelers are gaining clout and the attention of the hospitality industry, The Wall Street Journal reported in January citing a new affordable hotel brand aimed at Gen Z and millennials. Plans are to open 50 hotels in the US and abroad by 2030 under a new “smart lifestyle” brand currently called Project HQ Hotels & Residences. The new brand is designed to draw in millennial and Gen Z (born between 1997-2012) guests by providing memorable experiences at more affordable rates, according to Wyndham Hotels & Resorts, which is partnering with hospitality developer sbe. Room rates are expected to range from $200-$250 a night. Wyndham CEO Geoff Ballotti said the company is catering to the growing demand it sees from younger travelers. Gen Z is estimated to have a global spending power of $143 billion and accounts for about 40% of all consumers, according to Business Insider.
                                  • The expiration of interest-rate caps, which protected the hotel industry from rising interest rates in recent years, is likely to make hotel lending more challenging in 2024, Hotel Management (HM) reports. With the rise in benchmark interest rates outpacing cash flow growth, hoteliers are facing a coverage squeeze. “A lot of the private hotel lending market is a floating-rate market,” says Loren Balsam, chief investment officer at Hotel Asset Value Enhancement, adding “When the benchmark rates accelerated as quickly as they did, a lot of people were protected for some period because they bought interest-rate caps.” However, as protection on deals closed in 2021 and 2022 expires the cost of replacing interest-rate caps has soared. And because there are fewer lenders in the market today than there were 12 months ago, there are fewer willing to make construction loans or lend on hotels, according to HM.
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