What will drive hotel profits in 2024

2022 and 2023 were strong years for U.S. hotels, but owners and operators may face tougher profitability conditions in 2024

Jan 15, 2024

In 2022 and 2023, U.S. hoteliers saw post-pandemic travelers accepting higher room rates, helping operators cover inflationary costs and debts. Despite strong demand, profit margins dipped by 1.3 percentage points in the past year, with ongoing pressure expected on gross operating margins in 2024.

Key takeaways

  • Hoteliers will closely monitor three key operational expenses: debt servicing, labor costs, and third-party distribution costs.
  • In the realm of labor, hotels have observed wage growth surpassing general consumer price inflation over the last seven months.
  • Distribution costs are also a critical aspect to keep an eye on. Hotels relying on leisure travelers may turn to online travel agencies if demand weakens, leading to an increase in the average cost of acquiring guests and potentially impacting profits.

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