Hotel asset managers overseeing U.S. properties are reporting mounting profit pressure even as revenue confidence holds, according to CoStar, the commercial real estate research firm.

The disconnect comes as operators and owners move past the steepest years of pandemic recovery into a cost environment that has shifted faster than top-line growth. Asset managers—third-party operators hired by ownership groups to maximize financial returns—now face a structural challenge: generating acceptable GOP (gross operating profit) margins in markets where RevPAR gains do not always translate to bottom-line results.

What does an asset manager actually control?

Hotel asset managers sit between the ownership group and the on-property management team that runs daily operations. Their mandate typically covers:

• Annual business plan execution and capital expenditure approval
• Brand, management contract and franchise negotiations
• Performance benchmarking against competitive sets
• Disposition and refinancing strategy

When costs accelerate faster than revenue, the asset manager's toolkit narrows: pushing for labor efficiency, scrutinizing vendor contracts, deferring non-essential capex and negotiating management fees.

Why is profit under pressure if revenue is not?

Hotel operating expenses have escalated across multiple line items since 2022. Labor remains the largest single cost, with hourly wages, benefits and turnover costs compounding year over year. Utilities, insurance and property tax have all moved higher in many markets. The cost of capital for renovations and PIPs (property improvement plans) has reset to a materially higher baseline.

In that environment, a property can post RevPAR growth and still see GOP compress if expense growth runs ahead. Several large management companies have publicly flagged similar margin compression in recent earnings, with major operators including Marriott International, Hilton Worldwide Holdings and Hyatt Hotels Corporation noting that top-line gains have outpaced bottom-line improvement in select segments.

What is "revenue confidence" signaling?

CoStar's reporting suggests operators remain broadly optimistic about top-line demand. Group bookings have recovered in many markets, leisure travel patterns have stabilized and corporate demand has shown measurable year-over-year improvement in major urban centers. The revenue outlook supports continued investment, particularly in upscale and luxury segments where renovation ROI remains strongest.

The contradiction lies in sequencing: operators feel comfortable about the money coming in, but increasingly uncomfortable about the money going out.

What changes operationally?

Owners and asset managers are responding with sharper focus on controllable costs. That includes renegotiating property insurance at renewal, locking in energy contracts and tightening food and beverage operations at full-service properties where prime cost percentages have drifted above historical norms. Housekeeping and maintenance labor models are also under review as minimum wage and overtime rules evolve at the state and local level.

Lenders are watching closely. Profit pressure translates directly to debt service coverage ratios, which determine refinancing terms and covenant compliance. A property can show RevPAR growth on paper and still trigger lender scrutiny if NOI (net operating income) trajectories underperform underwriting models.

What should operators watch next?

Two near-term variables will determine whether the squeeze eases or intensifies through 2025 and 2026: the trajectory of wage growth in markets with scheduled minimum-wage escalators, and the pace at which insurance and utility costs normalize. CoStar analysts are likely to revisit GOP margin forecasts in upcoming hotel outlook revisions.

If revenue holds and expense growth moderates, the current gap between top-line confidence and bottom-line concern narrows, and asset managers return to a more familiar growth-investment playbook. If costs continue to outpace RevPAR, ownership groups face harder decisions about which assets to recapitalize, reposition or exit.