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
Recent Developments
Apr 5, 2024 - Rising Room Rates
- Daily room rates – already near all-time highs this past winter – are expected to rise again this year to cover escalating labor costs, The Wall Street Journal reports. Despite the lodging industry’s recent hiring spree to rebuild a labor force greatly diminished by the pandemic, hotels are projected to employ nearly 45,000 more employees this year, while still employing nearly 225,000 fewer people than the nearly 2.37 million employed in 2019, according to American Hotel & Lodging Association’s 2024 State of the Hotel Industry Report cited by WSJ. Moreover, hotels are projected to pay employees a record of more than $123 billion in wages, salaries, and other compensation in 2024, up from $118 billion in 2023 and $102 billion in 2019, to lure back workers.
- A hotel stay often begins and ends with parking, which can significantly impact the guest experience and the hotel’s bottom line, according to American Hotel & Lodging Association’s 2024 State of the Hotel Industry Report. Unlike other sources of ancillary revenue, parking has an extremely high profit margin that hotels can leverage to boost their earnings. According to a Towne Park study conducted in partnership with AHLA, taking a proactive approach to parking asset management can significantly accelerate revenue per occupied room (RevPOR) with independent hotels recording the highest RevPOR ($38), followed by luxury ($18), and upper midscale ($15). The industry is taking note The Wall Street Journal reported in February citing early results from a survey by real-estate brokerage firm CBRE that found parking revenue on a per-room basis rose 26% from 2019 to 2023.
- 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.
- 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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