Last updated: 01:00 PM ET, Wed May 11 2016

US Hotel Industry Revenue, Profit Reach Record Levels

Hotel & Resort | Patrick Clarke | May 11, 2016

US Hotel Industry Revenue, Profit Reach Record Levels

Photo courtesy of Thinkstock.

The U.S. hotel industry's revenue and profit margin reached historic marks in 2015.

According to STR's 25th annual HOST Almanac, industrywide house profit reached $73 billion, surpassing its previous peak in 2007 and signalling a year-over-year increase of 9.4 percent on a per-available-room basis.

The figure is the industry's highest ever on an absolute nominal basis.

What's more, the industry's revenue exceeded $189 billion last year, representing an impressive $14 billion jump from 2014.

In terms of growth, revenue and profit both lagged behind previous years, with house profit increasing 11.2 percent in 2015 compared to 12.9 percent in 2014.

The U.S. hotel industry's profit margin in 2015 (38.5 percent) surpassed the previous peak of 2007 (38.1 percent), but still fell short of the peak achieved in 2000 (39 percent).

STR pinpoints climbing labor costs as a key factor, noting that they were much lower in 2000 compared to 2015. It analyzed and compared a same-store set of more than 1,100 hotels for both years and found that labor costs were up from 29.3 percent of total revenues in 2000 to 32.3 percent in 2015.

READ MORE: US to Add More Than 100,000 New Hotel Rooms in 2016

Breaking it down by category, STR found that the U.S. upper midscale segment saw the greatest profit increase at 8.4 percent, while the luxury segment recorded the smallest increase at just six percent.

Meanwhile, limited-service hotels' profit grew at a rate of 6.4 percent.

"Industry revenues and profits continue to reach record highs," STR's director of financial performance Joseph Rael said in a statement. "Additionally, we saw profit margin finally surpass the previous peak from 2007."

READ MORE: Which Hotels Have the Highest, Lowest Average Daily Room Rates?

Despite 2015's noteworthy figures, experts don't anticipate such dramatic rises moving forward.

"Of course, at this point in the cycle, we're seeing both revenue and profit growth starting to slow, and we expect growth to continue to taper over the next couple of years as well," added Rael.


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