Our hospitality industry remains robust, even as we have navigated some challenges in recent years, including inflation and supply chain issues. Ours is a fun and meaningful industry, for our guests and ourselves, which bears reminding. We are proud of what we do and thankful for belonging to hospitality.
While the industry pendulum is swinging upward and some issues remain, the overall strength is reflected in the AHLA 2024 State of the Hotel Industry report. Among the key takeaways: while average hotel occupancy in 2024 at 63.6% was short of the 65.8% rate seen in 2019, nominal revenue per available room at time of publication was expected to reach $101.82 in 2024, up 4% from 2023 and more than 17% over 2019.
While noting the impacts of labor costs and inflation, CoStar also recently reported that U.S. hotel industry profits grew in 2024, with gross operating profit per available room having increased 3.2% year over year in 2024, while total revenue generated per room rose 7.2% year over year.
Overall, with 5.7 million guest rooms in more than 64,000 hotels nationwide, hotels sold almost 1.3 billion room nights in 2024. Our industry is also directly responsible for 5.1 million jobs (and 9.2 million jobs total impact), meaning that 1 in every 25 American jobs depend on hotels.
Headwinds
This data reflects the vitality and staying power of our industry and its importance to the overall U.S. economy. That doesn’t mean that there are not concerns in the current economic environment.
While they can vary by market and property types, these pressure points, especially on the operational side of the ledger, includes areas such as labor availability and costs, those wildly increasing insurance costs, taxes and general supply costs. In the present environment, we face notably increased expenses, while RevPAR is expected to increase on the order of 2% in the coming year. However, as noted, the industry as a whole is profitable.
On the positive side, labor is normalizing and getting close to stabilization, as compared to two or three years ago when there were two hospitality openings chasing one applicant. While the industry now employs about one-quarter million less people than in 2019, the AHLA Report noted that hotels were projected to employ nearly 45,000 more staff in 2024 compared to the previous year.
Debt also remains expensive, making it harder to refinance properties or create a pro forma that justifies a potential acquisition. But, here, again, at least some normalization seems to be taking place. We don’t enjoy the higher sticker price, but costs are less erratic. The good news is that there is abundant capital ready to be deployed in the hospitality sector.
Location- and property-specific strategies
The antidote for this phase of the hospitality cycle is even greater attention to each property’s market competition, demand drivers, guest experience and feedback, staffing, amenity offerings, and operational factors.
We must know the territory. There can be wide differences among these factors depending on location, including in areas such as insurance and taxes, state and local minimum wage rates, or thresholds for salaried personnel, or labor availability and caliber. It is also important to understand and respect any given property’s priorities, including CapEx requirements, and its overall investment thesis.
However, the current pressures on expenses shouldn’t result in timidity. It is extremely hard, if not impossible, to save one’s way to profitability. Believing in one’s specific property and truly understanding its appeal and potential can help identify realistic revenue opportunities. Also, we must not relinquish industry-wide, as well as state and local, advocacy on important issues related to business competitiveness.
These strategies will reinforce what we have always known. We are a strong and indispensable industry, integral to the commerce and fabric of American life.
Rick Takach is chairman and CEO of Vesta Hospitality.
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