In the U.S., expenses associated with operating a hotel outpaced revenue growth in 2023.
Data by CoStar shows U.S. hotel industry total operating expenses per available room increased by 9.4% year over year in October 2023.
Much of the growth in total operating expenses per available room was driven by the increasing cost of labor expenses that hotels experienced in the year. Labor expenses grew by 12.3%.
In 2023, it cost 7.5% more to staff a sold room compared to 2022. The greatest increase in labor costs per occupied room came from food-and-beverage labor expenses.
Food-and beverage activity grew and rebounded in 2023, with catering and banquet revenues jumping to 120% of their levels from the previous year, consequently raising staffing costs by 9.1%. Increased food-and-beverage spending is a direct result of rebounding group travel that is correlated with events and largely sourced from upper-upscale chain hotels within major U.S. markets.
These hotels have achieved growth rates that are equivalent to multiples of their other chain-scale competitors. The upper-upscale segment by far led the growth in 2023, with total revenue per available room increasing 15.5%, which is nearly two times the national average.
Despite growing labor costs nearly 18%, the chain scale still managed to achieve a $10 rate premium in gross operating profit per available room in 2023 compared to the national average.
In 2023, TRevPAR jumped well above the $200 threshold to $211.72 through October year to date, which is more than 8% above the 2022 level of $195.88.
Much of the growth in revenues this year is due to rebounding demand in the top 25 U.S. markets as well as a period marked by high inflation.
While TRevPAR did exhibit growth, the 2023 year-to-date number is well below the 2019 peak level of $230.
In March 2023, both TRevPAR and GOPPAR surpassed the 2019 level. However, the metrics inched further away from peak levels until the fall. Growth occurred in October, with TRevPAR and GOPPAR passing 2019 levels again.
Overall, only two months of the year surpassed the 2019 peak for GOPPAR, and after adjusting for inflation, no individual months exceeded the 2019 peak level for both TRevPAR and GOPPAR.
The top 25 U.S. markets achieved an uptick in weekday group demand, which induced profitability growth across the nation.
As compared to 2022, the top 25 markets grew TRevPAR more than three times as much as all other markets.
Despite growth in total operating expenses equal to the growth in revenues, these markets still achieved GOPPAR growth of 11%, an increase of $8.50, sustaining a 36% profit margin for the second year in a row.
One the other hand, markets outside of the top 25 did not grow revenues enough to cover the growth in expenses that 2023 brought. This ultimately led to a slight decline in GOPPAR and profit margins.