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STR: U.S. hotel profits hit all-time high, labor costs outgrowing revenues

May 20, 2019 Hotel Trends No Comments Email Email

Results from STR’s 2019 HOST Almanac show that U.S. hotel industrywide house profit reached a record-breaking $80 billion in 2018 even as labor costs grew at a higher rate than revenues.

STR’s HOST (Hotel Operating Statistics) P&L program compiles data from more than 10,000 hotels annually. Those properties comprise more than 2.3 million rooms around the globe.

U.S. revenues topped an estimated $218 billion in 2018, which was an increase of $10 billion from the previous year. Just like the industrywide house profit, the total revenue figure was an all-time high for the industry.

Overall, gross operating profits (GOP) increased 2.8% on 2.9% total revenue growth.

“Although expenses continued to outpace revenue in terms of growth, 2018 produced stronger profits than expected.” said Joseph Rael, STR senior director of consulting & analytics. “As we’ve noted in recent performance results, maintaining profitability will be a challenge moving forward with flattening occupancy levels, diminished pricing confidence and low unemployment creating a smaller talent pool and higher wages.”

Full-service hotels grew house profit 3.2%, while limited-service properties experienced a slight profit increase of 1.1% from levels achieved in 2017. Among the class segments, Luxury hotels achieved the greatest profit increase (+5.3%), while Midscale/Economy saw a profit decline of 0.5%.

For the fifth year in a row, miscellaneous income (including resort and cancellation fees) led all revenue departments with 11.3% growth, which is the largest increase in miscellaneous income among the last five years.

Top Markets
For the second consecutive year, STR modeled industry profitability for all U.S. hotels to cover industrywide departmental revenues and expenses as well as individual segments and markets. Based on the model, STR estimated total U.S. F&B revenues of $40 billion (up $2 billion from 2017), other department revenues of $7 billion and miscellaneous income of $6 billion. Las Vegas led all markets with nearly $14 billion in total revenue (excluding gaming), while New York City ranked second at $12 billion. Los Angeles,Washington, D.C. and Orlando rounded out the top five with total revenue all in excess of $6 billion.

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