Hotel Profitability Improves, Labor Costs Rise

November 8, 2022 |By msorhan-msorhan@mba.org

U.S. hotel gross operating profit per available room improved in September and now exceeds the pre-pandemic comparable, said STR, Hendersonville, Tenn. But the STR P&L data release for September noted the cost of labor per available room came in higher than the pre-pandemic comparable for the first time.

“[September] gross operating profit per available room was the strongest since June 2022, and profit margins came in higher than September 2019,” said Raquel Ortiz, STR Director of Financial Performance. “Profit margins have been strong for some time caused by lower employment levels and reduced services.”

Ortiz said total hotel labor costs have increased 5% this year, with nearly all hotel cost centers reporting higher expenses. “Labor costs moved ahead the 2019 comparable due to continued high levels of hospitality unemployment and more spending on contract labor,” she said.

STR reported 13 of the 25 largest hotel markets realized both gross operating profit per available room and total revenue per available room levels higher than 2019 comparables.

“Miami remains the front-runner when it comes to both gross operating profit per available room and total revenue per available room recovery,” the report said. Just three of the top 25 markets–Minneapolis, New Orleans and San Francisco–remain below 80% of 2019 GOPPAR levels.

“While San Francisco is showing some improvement, other business-centric markets, such as Chicago and New York City, saw gross operating profit per available room that was higher than the pre-pandemic comparable,” Ortiz said.

Hotel performance dipped in late October compared to mid-month but improved compared to 2019, STR said. Occupancy increased 5.2% compared to 2019 to 65.8% while average daily rates increased 21.4% to $152.94 and revenue per available room jumped 27.8% to $100.59.

Tampa reported the largest increases among the top 25 markets compared to 2019, reflecting a post-Hurricane Ian performance lift, STR reported. San Francisco was the only large market to post declines in ADR (-7.4% to $218.81) and RevPAR (-23.9% to $145.37).