U.S. Hotel GOP Margins Slid to 34.8% as Expenses Outran Revenue

U.S. hotel GOP margins (gross operating profit as a share of revenue) fell from 35.1% to 34.8% in 2025, because expenses grew 3.1% while revenue grew only 2.6%, according to CBRE. EBITDA margins slipped from 23.3% to 22.8%. The problem is not revenue. It is how little of it survives the P&L.

The squeeze shows no sign of easing. AHLA's "2026 State of the Industry" report puts GOPPAR (gross operating profit per available room) at roughly 90% of 2019 levels, with rising operating expenses as the primary cause. Labor costs, the industry's largest expense line, are projected to approach $131 billion in 2026. Actabl/HotelData first-quarter 2026 figures show labor cost per occupied room up 1.8% year-over-year, from $45.96 to $46.79, while hours per occupied room fell 2.3% — evidence, the data suggests, that productivity gains are absorbing part of the wage pressure.

Can the revenue side bail operators out?

Possibly. CoStar raised its 2026 U.S. forecast in August: occupancy of 63.1% for the year, up eight percentage points from 2025; ADR (average daily rate) growth of 3.1%; RevPAR growth of 4.4%. STR president Amanda Hite said: "The hotel industry sold a record number of room nights in the first half of the year, an increase of 11.4 million compared with 2025, while room revenue climbed by more than $5.4 billion." She added that "the industry outperformed our expectations." STR's P&L forecast shows GOP up 4% year-over-year after a contraction in 2025.

Ben Perelmuter, CEO of Remington Hospitality, sees a window: "The biggest opportunity over the next 12 to 24 months is the potential for ADR growth to outpace expense growth again." Hotels sell what amount to nightly leases, which lets operators recalibrate rates daily. "That's the environment where discipline pays off," he said.

How are management companies responding?

Mostly by redefining which revenue counts. Paul Sacco, chief growth and development officer at PM Hotel Group, said "the cumulative impact of insurance, utilities, property taxes, technology, distribution costs and other operating expenses has fundamentally changed the profitability equation." His fix: look past RevPAR toward net RevPAR, which nets out the cost of customer acquisition, and ultimately toward EBITDA per available room — "a much clearer indication of how effectively we're converting demand into value for hotel owners."

Pyramid Global Hospitality's Benchmark Resorts & Hotels Collection built a suite of AI-powered labor intelligence tools to staff smarter, with EVP of operations Peter Karpinski reporting "the most measurable impact across housekeeping and F&B." EOS Hospitality, which owns and manages mostly independent hotels, leans on total guest spend — F&B, spa, meetings, golf. "RevPAR and market share matter, but ultimately owners want to know how revenue converts to NOI," said chief commercial officer Ernest Lee. Brittain Resorts & Hotels, COO Kris Kuball said, focuses on pre-arrival upselling, room upgrades, ancillary fees and targeted F&B — initiatives with "a healthy flow-through to the bottom line."

Owner pressure is reshaping contracts. Incentive compensation is increasingly tied to GOP, NOI and budgeted targets rather than gross revenue. Many expect future management agreements to carry lower base fees and higher incentive fees once performance hurdles are met, which Perelmuter said "should help align interests and clearly reset performance expectations."

What about Europe?

Same headwinds, different accents. David Hart, CEO of the UK's RBH Hospitality Management, cited payroll pressure since Covid, plus high utilities, inflation-driven procurement costs and rising fixed costs tied to global conflicts. United Hospitality Management, operating from Lisbon and Dubai, clusters functions across properties, centralizes services and builds purchasing partnerships; Executive Chairman Carlos Leal insisted efficiency "must be aligned with the guest service promise."

The UK faces a labor-relations shift too. In July, housekeepers outsourced to WGC Ltd at Radisson Blu Canary Wharf and Radisson Blu Euston Square secured statutory trade union recognition via the UVW union. General Secretary Nelly Ospino called it "a historic victory for hospitality workers across the U.K." Hart flagged the UK's Employment Rights Act 2025, including zero-hours contract changes, as a significant cost-basis impact: "The introduction of unionized labor is a big threat."

On technology, operators are aligned but cautious. RBH's Hart asked whether AI "can be harnessed appropriately to drive clear savings"; Brittain uses it to forecast occupancy and build variable staffing models; Pyramid applies it where it "removes administrative burden without touching the guest-facing experience," per Karpinski, who still bets on people: the experiential economy, he said, keeps growing.