North American hotels are experiencing record revenue as the economy continues to grow, but there is a downside to all this economic growth. Wages in the hotel business are rising faster than rates, which can cut into a hotel’s margins.
The Bureau of Labor Statistics estimates that total compensation for U.S. hospitality employees has increased more than 3 percent a year between 2013 and 2016. And according to CBRE, labor-related costs are the largest operating expense for hotels, making up nearly 43 percent of operating costs. If hotel operators can’t avoid the higher cost of labor, they will have to find other ways to maintain existing profit margins, such as lowering operating costs. Here are two major ways hotels can do that.