US Accommodation and Food Services Sector
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 770,895 establishments in the US accommodation and food services sector prepare meals, snacks, and beverages to customer order for immediate consumption or provide short-term lodging for travelers and vacationers.
Economic Sensitivity
The accommodation and food service sector is driven by discretionary spending and is vulnerable to economic downturns.
Labor Intensive, High Turnover
Food service and accommodation operations are labor-intensive, and the sector struggles with turnover.
Industry size & Structure
The accommodation and food services sector comprises 770,895 establishments that employ 14.1 million workers and generate $1.2 trillion in annual revenue, according to government sources.
- The accommodation and food services sector represents 3.3% of the nation's Gross Domestic Product (GDP) and employs about 10% of the country's workers.
- The sector is fragmented with the 20 largest firms representing 13.6% of revenue.
- In addition to employer establishments, the accommodation and food services sector has 491,800 owner-operated establishments with no employees. The subsectors with the highest number of nonemployer establishments are special food services (56%), restaurants and other eating places (23%), and traveler accommodation (11%). The owners of nonemployer firms typically perform the work and may outsource support functions like marketing and accounting.
- The leisure and hospitality sectors shed about 65,000 establishments in 2021, which equals about 6.9% of existing establishments, according to the Bureau of Labor Statistics. However, the sectors added about 93,000 new establishments, equivalent to 9.9% of existing establishments. As a result, the sectors had a growth rate of 3%.
Industry Forecast
US Accommodation and Food Services Sector Industry Growth
Recent Developments
Jan 13, 2025 - Avoiding Bankruptcy in 2025
- With the exception of the pandemic-year 2020, 2024 set a record for restaurant bankruptcies, which increased by more than 50% versus 2023, Nation’s Restaurant News reported in December. Challenges facing food service providers last year included rising inflation and the cost of living, which caused consumers to pull back on dining out. Also, higher labor costs – up 33% since 2020 – and persistent food price inflation squeezed restaurant profits. To avoid a repeat in 2025, Ragini Bhalla of credit report provider Creditsafe, advises restaurant operators “know their finances in and out,” adding restaurants should regularly forecast and monitor their cash flow and plan for the unexpected, including not getting paid on time, which impacts cash flow. According to a survey of small businesses by Barlow Research Associates, 51% of restaurants do not seek cash flow advice from an accountant or bookkeeper.
- On January 1, 21 states raised their minimum wage with more hikes expected later in the year, Supermarket News reports. Of those, 15 states and the District of Columbia currently have a minimum wage of $15 or higher or are phasing in scheduled increases to $15 or more, including California, Massachusetts, New Jersey, New York and Ohio. Washington State had the highest state minimum wage at $16.66 an hour as of Jan. 1. In addition, numerous city and county minimum wages increased on January 1 or later in 2025. While average wages for nonsupervisory employees employed in the accommodation and food services sector already significantly exceed the new boosts to the minimum wage, when the minimum wage goes up, wages a little higher on the income ladder tend to rise as well.
- Portion creep, which took off in the 1980s and led to the super-sized portions of today, may finally be reined in, thanks to a combination of economics, demographics, and climate science, The New York Times reports. Faced with rising food costs and diners turned off by sky-high menu prices, restaurants are trying to figure out how to offer smaller servings without upsetting customers. A new study by the Portion Balance Coalition at Georgetown University is underway to do just that, NYT reported in September. Meanwhile, some eateries are already shrinking offerings or launching snack-focused menus. According to the National Restaurant Association, 75% of US adults would opt for smaller-sized portions for a lower price, a trend which could help reduce food waste and improve restaurants' profits. Restrictions by some states on how much food can end up in landfills, is also driving the move toward smaller portions.
- The accommodation and food services sector was the fastest growing of 14 services sectors tracked by the Institute for Supply Management's Purchasing Managers' Index in November. Leisure and hospitality added 53,000 jobs in November, second only to healthcare and social assistance, according to the latest Bureau of Labor Statistics data. November’s gain was buoyed by employment in food services and drinking places, which trended up by 29,000. Sustained consumer spending – up 0.4% in October after rising 0.6% in September – is supporting demand for food service and lodging providers. A new survey commissioned by the American Hotel & Lodging Association finds that more than half (52%) of Americans plan to travel overnight for leisure in the next four months, with hotels remaining the top lodging choice for both leisure (45%) and business travelers (59%).
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