After a strong start to 2025, the US hotel industry is showing clear signs of strain. Revenue growth is slowing, occupancy is slipping, and profit margins are tightening – especially for unionized properties where labor rigidity is weighing heavily on performance.
NB: This is an article from HotStats
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Across the first eight months of the year, total revenue per available room (TRevPAR) has barely kept pace with labor cost increases. While total revenue per occupied room (TRevPOR) remains positive, the gains are offset by a steady erosion in occupancy – the true indicator that demand is cooling.
Volume Weakens, but Spend Holds Up
Occupancy in the US has fallen consistently since Q2, dragging TRevPAR growth down to nearly flat by August. Guests are spending more per stay, but there are fewer stays overall. The result: a muted top line that can no longer mask the impact of persistent cost inflation.
Hotels have maintained rate discipline and on-property spending remains healthy, suggesting pricing strength is not the issue. Rather, the market is entering a phase where demand, not cost control, is the key determinant of profitability.
Labor Costs Steady — but Stubborn
Labor expenses have stabilized but at elevated levels. PayPAR (payroll cost per available room) continues to grow around 4.0–5.0% year-on-year, outpacing revenue in most months. Even as wages stop accelerating, they remain high enough to compress GOPPAR (gross operating profit per available room).
For operators, this means cost discipline alone is no longer enough. As revenues plateau, the challenge shifts from containing labor costs to extracting more productivity from each labor dollar.
Margins Squeezed as Costs Prove Sticky
Since April, hotel profit margins have slipped each month as payroll costs take up a larger share of total revenue. The data shows a widening gap between payroll and profit – a clear sign that hotels are carrying more fixed labor than demand currently justifies. This “cost creep” has been most pronounced through the summer months, when occupancy softened and labor intensity rose. Even as properties maintained service levels, revenue shortfalls meant each labor hour generated less profit.
