Leisure Hotels Best Positioned to Offset High Inflation
Apr 26, 2022, 13:42 PM
Periods of high inflation—especially the 1970s and early 1980s—have had a significant impact on hotel gross operating profit (GOP) margins.
Rising wages are a key factor; leisure and hospitality wages were up 15% over the past year, more than double the increase for all private sector workers. Consequently, GOP margins have fallen significantly since the summer of 2021. In addition to higher wages, the resumption of lower margin services (e.g., restaurants, spas) has contributed to margin pressure.
Leisure-oriented resorts and properties along interstate highways typically can increase average daily room rates (ADR) in response to higher costs. Luxury resort hotels appear to be particularly well positioned to boost ADR given the excess savings among wealthier households.
FIGURE 1: Hotel Gross Operating Profit Margin Range