Occupancy in the U.S. has fallen since the second quarter, slowing TRevPAR growth to near zero by August, the report said. Guests are spending more per stay, but there are fewer stays overall, leaving a top line that reflects ongoing cost inflation.
Hotels maintained rate discipline and on-property spending remains stable, suggesting pricing is not the issue. The market is entering a phase where demand, not cost control, determines profitability.
Labor costs steady, margins squeezed
Labor expenses have stabilized but remain high, HotStats wrote in the blogpost. Payroll cost per available room grew 4 to 5 percent year-on-year, outpacing revenue in most months. Even as wage growth slows, costs continue to compress GOPPAR.
Since April, hotel profit margins have declined as payroll costs take a larger share of revenue, the report said. HotStats data showed a growing gap between payroll and profit, indicating hotels carry more fixed labor than current demand supports.
Even as properties maintained service, revenue shortfalls reduced profit per labor hour.
The new profit divide
Unionized hotels carry an average labor cost ratio of 43 percent, compared to 33.5 percent for non-union properties — a 9.5-point gap that has widened over the last five years, HotStats said. GOP margins for union properties have fallen to 30.3 percent, compared to 36.5 percent for non-union hotels. Union properties face contractual wage increases and limited staffing flexibility, while non-union operators can better align labor with revenue.
HotStats said the result is that for every dollar of incremental revenue, non-union hotels retain 25 cents in profit, while union hotels lose 1 cent. HotStats data showed that a higher payroll share — 69 percent for union hotels versus 49 percent for non-union — has reduced flow-through.
The data also found that labor flexibility drives hotel profitability. With volume weakening and costs steady, the most successful operators adjust staffing to match demand. This doesn’t mean cutting staff — it means rethinking productivity.
Globally, revenue and profit are stabilizing, the report said. The Middle East leads all regions, while China faces headwinds from macroeconomic volatility and rigid costs. In the Americas, recovery is slowing, with the U.S. seeing falling group demand and declining profit conversion since the second quarter.
The widening labor and profitability gap between union and non-union hotels highlights the need for operational innovation, the report said. As costs rise, boosting profit margins now requires at least a 5 percent increase in total revenue.
In June, HotStats recommended that hotels use an updated competitive set to maximize revenue, control costs and maintain market position. Hotels that adjust their comp sets consistently outperform others by using real-time insights to guide pricing, labor and revenue strategies.
