Why Are Hotel Operating Costs Rising So Quickly?

As vaccine proliferation leads to more travelers returning to the market and the relaxation of international borders, hotels are starting to finally realize the long-awaited full reopening. As such, many hoteliers will hope revenues approach the record-breaking 2019 peak.

Those plans may have to go on hold, as the world still reckons with the political and economic fallout of the pandemic. Hotel operating costs have recently skyrocketed in response to rising commodity costs and a global shortage of workers.

b3lineicon|b3icon-computer-graph||Computer Graph

Increasing Demand

While on the surface, hoteliers should rejoice over the opportunities an unprecedented return to travel would have on revenues, the types of consumers have changed since 2019.

Having lifted lockdown restrictions much sooner than Northern counterparts, states in the American South are generally recovering at a faster rate. Of all U.S. markets, Myrtle Beach, S.C. has seen the greatest demand growth since 2020 lows, while the state of Florida is collectively up to 78 percent occupancy.

In America’s tourist capital, Vegas casinos last week were cleared to operate at 100 percent capacity. The announcements of trade shows and conferences portend a return to normalcy, and recent reports show some resorts have reached 90 percent occupancy, while flights into McCarran International Airport have already climbed to 70 percent of 2019 levels.

Were hotel operating costs the same as 2019, this would be purely welcome news for operators across the world. However, with global supply chains strained under increased demand and various complex political policies resulting in crippling workforce shortages, hoteliers are seeing the return of traveling revenues met with rising expenses.

Consumers are not the same as they were two years ago. As an example, the rise of work from home has shaped the “digital nomad” as a rising market segment. These extended-stay travelers, while contributing additional revenue, require added services, such as faster internet and bolstered network security.


Strained Supply Chain

To make a long story short: global supply chains for most industries dropped to the bare bones in response to demand declines in 2020, and gradual expansions back to 2019 levels are not fast enough to prevent delays and inflated prices.

That means expenses for common commodities, especially food and beverages, are rising at an alarming rate. With kitchens and front desk staff already operating on minimal budgets throughout the pandemic, operators need to know how to further cut hotel operating costs to keep a profit.

b3lineicon|b3icon-users-group||Users Group

Workforce Shortage

Meanwhile, varying forces have caused a shortage of domestic hospitality workers across the globe, and with many international borders still constraining visa access, most hotels cannot rely on foreign workers as much as they used to.

This workforce shortage has already impacted operations, as short-staffed hotels have been forced to reduce offerings and guests have had to endure longer wait times. With a smaller talent pool to choose from, employers have had to sweeten the pot to fill open positions, often through higher pay, benefits, or signing bonuses, all of which affect the short-term bottom line.

Partial Solution: Insights Through Analytics

One route operators can take to limit the impact of these disrupting forces is to evaluate the performances of properties, suppliers, inventory, and more through insightful analytics that show the whole picture.


Fourth experts will go into further detail Thursday, June 17, with a timely discussion on how operators can use hotel analytics to fully take advantage of the global reopening while avoiding these new pitfalls.

Related Posts