Skip to main content

Lodging Sector Squeezes Out Profit Growth

Phil Hall
Apr 29, 2019
Photo credit: Getty Images/Explora_2005

U.S. hoteliers recorded their ninth consecutive year of increasing profits in 2018, albeit amid rising labor costs, according to the 2019 edition of Trends in the Hotel Industry published by CBRE Hotels Americas Research.
Last year, the lodging sector saw its total operating revenue increase by 2.6 percent for the average hotel in CBRE’s survey sample. The survey also determined that managers were able to limit the growth in operating expenses to 2.8 percent, which enabled them to see a 2.3 percent increase in gross operating profits (GOP). However, the 2.8 percent growth in expenses is less than the long-run average of four percent over the past 40 years, although it is also greater than the 1.8 percent average annual growth rate achieved the past two years. In 2018, 59.2 percent of the properties in the Trends survey sample achieved revenue gains, but only 54.3 percent saw growth in their GOP.
Among the main challenges faced by the surveyed hoteliers last year were labor costs: Last year, the combined payments made for salaries, wages, service charges, contracted labor and bonuses increased by 3.1 percent, while employee-related benefits grew by 3.2 percent. Total labor costs equaled 50 percent of operating expenses through the GOP.
“With revenue growth forecast to slow down in the foreseeable future, owners and operators are beginning to wonder how much more juice is left to squeeze out of their operations,” said R. Mark Woodworth, Senior Managing Director of CBRE Hotels Americas Research. “2018 marked the first year since 2009 that expense growth exceeded revenue growth, thus resulting in a slight decline in the GOP margin. This is indicative of the struggle managers are having sustaining the effective cost controls that have been in place since the great recession.”

Apr 29, 2019
Angel Oak Layoffs Add To Growing List Of Non-QM Cuts

About 20% of its staff, or 75 people, were affected.

Industry News
Sep 28, 2022
Redwood Trust Names New Chief Investment Officer

Also announces planned CoreVest leadership transition to be completed on 3rd anniversary of acquisition

Industry News
Sep 27, 2022
Fannie Mae Pilot Program Seeks To Help Improve Renters' Credit

Renters, including historically underserved groups, will benefit from paying on time each month.

Industry News
Sep 27, 2022
Suffolk County Data Breach Puts Contracts On Back Burner

Cyberattack beginning Sept. 8 prevents title services from closing loans.

Sep 27, 2022
Nations Lending Opens Another Branch In Arizona

New Scottsdale branch welcomes Arizona native Christine McConnell as lead personal mortgage advisor.

Industry News
Sep 26, 2022
Nominations Open For Industry Titans Award

NMP Magazine to honor people who represent industry with professionalism.

Industry News
Sep 23, 2022