After a year of uncertainty, hotel revenue managers set strategies for 2026
The biggest challenge of the year for hotel operators was in line with the rest of the broader industry — uncertainty.
Whether it was in reference to sudden increases in the cost of goods or demand coming in lower than expected, one thing is clear: meeting hotel owners' expectations was difficult in 2025.
"The biggest challenges for us throughout the year were ... the inconsistencies and the roller coaster of unknowns," said Kerry Ranson, president of operations and partner at South Carolina-based hotel management and ownership company Raines.
It became hard for hoteliers to predict when success was going to come because the roller coaster veered off the usual path frequently during the year, Ranson said.
"The craziest part is, you'd have some months where traditionally on the books, we were great, pacing looked great, and then out of nowhere, strong months ended up being inconsistent," he said.
On the other hand, Raines said, some months that might have been slow in years past ended up surprising him with solid business.
Gabriel Perez, chief operating officer of lodging at South Carolina-based hotel operator The Indigo Road Hospitality Group, said in years past, the costs associated with opening a hotel or restaurant were fixed in a range that was up or down about 3% to 5%. That is no longer the case.
"Now, operators don't feel that we do have that command of category assurance to say this is what it will cost you if we are able to come up with a reasonable figure," he said.
So, what's changed?
Perez said untimely political decisions, such as the rollout of U.S. tariffs on goods from other nations , led to volatility as it relates to vendors and developers. This has presented challenges on the cost side, as prices are a moving target.
"It is very difficult for us to be within budgets, and it's not because of professional misguidance," he said. "It's because everything is changing in real time. Most of it is changing in real time out of leadership whims that have made things different.
"Although we still are able to get items and products and goods from everywhere, we really don't know the final price unless we write the final check at any given moment."
Richard Jones, executive vice president and chief operating officer at Atlanta-based Hospitality Ventures Management Group, said it's been difficult to drive profitability and create value for hotel owners under the current low-to-zero growth revenue environment. According to the most recent CoStar data, U.S. revenue per available room is projected to be down 0.4% year over year in 2025.
This has been a downward trend throughout the year, Jones said. It's forced operators to get creative when it comes to reducing costs while maintaining the guest experience.
"[It's] been quarter over quarter over quarter — it's just been a gradual decline," he said. "And all the stuff recently with the government shutdown and the effect that had on everything going into what was already a soft and challenging period, that just really put even more pressure on everything for a few weeks there."
Even though U.S. inflation has stayed at a generally normalized rate throughout the year, rising costs and flat RevPAR have put pressure on margins, said Gregg Forde, president and chief operating officer at Florida-based Island Hospitality Management.
Forde said his company has one of the lowest turnover rates in the hospitality industry and his teams are laser-focused on service, but that isn't enough to overcome the extenuating pressures.
"This is ultimately a conversation about operational challenges, but the challenge operationally comes from limiting top line," he said. "Ultimately, at the end of the day, if RevPAR as a whole is flat, no matter how good you are at all those things, the challenges operationally become an impact to the margin."
The other side of the coin
It wasn't all bad for hotel operations in 2025.
Last year, the most pressing concerns on the minds of hotel operators were labor and inflation. While inflation remained a challenge in 2025 and is something to watch in 2026, labor has improved greatly over the past 12 months.
"I think that we're definitely beyond the scarcity of labor, in general. It's better than it's been 12, 24 months ago," Jones said.
Forde said staffing is "one of the least talked about things for us in terms of a challenge" because of where Island Hospitality stands with its retention rate.
"It's talked about because you have to stay on top of it, you have to be proactive, you have to always be working at it, but it's certainly not discussed or treated as a challenge the way it was like three, four years ago from that perspective," he said.
One of the shifts Ranson saw around April and May this year where on-property teams started to move from a tactical approach to a strategic one. Coming out of the pandemic, hotel teams were focused on just getting through each day. Now there's been a shift back to planning for the future, he added.
"We started moving more into a strategic vision. They're back in the saddle," he said. "It was great to see our teams in the summer working on things — for instance, in the holidays for now, where they were working on promoting, 'OK, we're going to do a pop-up Christmas bar at a couple of our hotels.' I can tell you that wasn't happening from '21 to '24."
The field of hotel revenue management is a constantly evolving one, both through small steps and incredible leaps.
The practice itself is changing, with more and more hotel companies adopting commercial strategy as their way forward, combining the skill sets of revenue managers and sales and marketing leaders. At the same time, those in the field were adapting to a year in which hotel and travel demand didn’t play out exactly as expected.
Uncertainty was a significant challenge for hotel revenue managers in 2025. During a roundtable discussion at the 2025 Hotel Data Conference, revenue and commercial strategy leaders discussed the reality of changing expectations.
"Come out the gate in January, great January. Great February. Go to do the forecast for March, it was like, 'Oh, that's not good,'" Mark George, senior vice president of commercial strategy at Island Hospitality Management said during the roundtable. "It's just kind of continued since then. Every month, we open it up and prepare it and go to send it off to the owners, and there's a caveat every time."
It was acceptable to not be sure during the pandemic, but not knowing the answer received a much different response from owners this year, said Leah McFarland, senior vice president of revenue strategy at Crestline Hotels & Resorts.
"We're in a different place now. [For] owners — especially your publicly traded, your [real estate investment trusts] — 'I don't know' isn't acceptable," she said. "We're in a very different time than we were then, where we could say the world knew everything was uncertain, and now it's like, 'Well, no, you should have this figured out by now.'"
Many hoteliers see the potential in artificial intelligence to bring meaningful and beneficial changes to the industry overall and to revenue and commercial strategy specifically. In a panel discussion at HSMAI's 2025 Commercial Strategy Conference, hotel executives spoke about their hopes for AI.
"I think it's going to relieve us of the burden of all the drudgery and things that we really don't want to do every day that limit our ability to think and think deeply," said Kristie Goshow, chief commercial officer for Peregrine Hospitality. "That will just make for far more enjoyable hours at the desk."
At the 2025 Hotel Data Conference, revenue managers spoke about the evolving landscape and what it will take to keep up. Phill Burgess, senior vice president of sales and revenue at Athena Hospitality Group, said the path to purchase is no longer linear but algorithmic.
“It’s as if AI is the new frontier,” Burgess said. “We have to discover the rules of the terrain to just survive and thrive, so it’s like the wild, wild west of modern revenue management."
On another panel at the HSMAI conference, hotel executives spoke about best practices for attracting talented younger employees. One major factor at play is showing potential hires their careers can grow in a company.
"Scope of work is big, as well," said Taylor Baca, director of revenue management for Kona Village, a Rosewood resort. "I left a director of revenue position for another director of revenue position because my scope of work changed. I have a larger portfolio with more responsibilities. It's important to think long term."
The topic came up at the Hotel Data Conference as well. Erica Lipscomb, Crescent Hotels & Resorts' senior vice president of revenue strategy, said that mentorship is vital, and it has allowed her company to tap into eager young professionals.
"It's a reverse mentor program," she said. "And the reason I like those is because candidates show they are interested. They are the ones who are going to stay tapped in, stay connected. If you have a forced mentorship program, I find that you lose people quicker because they feel like it's more of a task than their own personal desire."
While there’s no Eras Tour on the horizon, U.S.-based revenue managers have one major event with multiple locations to look forward to next year. The 2026 World Cup will hold matches in 16 U.S. markets as well as in cities in Canada and Mexico. Harry Carr, senior vice president of revenue management at Pivot Hotels & Resorts — the lifestyle hotel operating vehicle of Davidson Hospitality Group — said the recent reveal of which teams are playing where has helped Pivot's hotels plan out their approach.
"It clarified our strategy that we need to build more base. It's not going to be the game days. It's going to be who can fill their hotel for the most days between June 15 and July 15," he said. "We need length of stay to be successful. We can't be full for two days around a match and then sitting at 30% occupancy because nothing's going on."
Three podcasts interviews from the Hotel Data Conference provided deeper insight into the revenue and commercial strategy practice.
Sage Hospitality Group Senior Vice President of Sales, Revenue and Distribution Strategy Priya Chandnani said that the hotel industry seemed to learn its lesson on pricing during the pandemic.
"I think my favorite takeaway from today — and I think we should all do this in hospitality, we've learned this a number of times before — is to continue to hold on that pricing," she said. "Continue to hold on rate. We've seen this movie before. We've read this book before. Dropping rate does not trigger demand."
Pyramid Global Hospitality's Senior Vice President of Revenue Management Lori Kiel spoke about the need for clear communication between operators and owners during the budgeting process.
"What we owe the owners is to make sure that we understand what the hotel's performance potential is," Kiel said. "When they were in a similar timeframe, what did that look like, and what did the year after look like? So while I'm also big on saying be careful about the trends you follow and looking too far back, I think that in this moment you have to understand that, especially relative to the economics and the politics, there is a lot at hand here that wouldn't necessarily be worthy of calling a trend."
First Hospitality’s Chief Commercial Officer Jenna Fishel highlighted the benefits her company has seen after moving to a commercial strategy approach and bringing its revenue management, sales and marketing teams together.
“If they’ve seen underperformance in a specific area, it doesn’t have to be a blame game,” she said. “They feel comfortable with each other that they know if something is being brought to their attention, it’s for a business purpose. There’s no ego in it.”
The U.S. hotel industry is facing another year of limited options for increasing the average daily rate, or ADR, with the current forecast calling for an average gain of just 1%, well below the expected level of cost increases for many expense line items.
In turn, the difference between anemic hotel revenue growth and rising costs is likely to result in narrowing operating margins. As a result, hotel property owners face the prospect of having less money to service their mortgage debts and pay partners a return on their investment.
Through October 2025, margins for gross operating profit, or GOP, declined from the same period last year. Over the first 10 months of 2024, hotel GOP margins stood at 36% but declined throughout the year to 34.8%.
Part of the decline in margins can be attributed to the continued increase in labor costs. Labor costs as a percentage of revenue have, on average, increased from 34% last year to 35% this year. One reason for the higher labor costs is the continued competition for hotel workers from other industries. To remain competitive and retain trained staff, hotel operators must offer wages and salaries that match those of other companies. Anecdotally, hotel operators say they are willing to pay higher rates to avoid costly turnover.
Hotel room revenues have been increasing at a slow pace for several reasons. High inflation is forcing consumers to allocate a smaller portion of their budget to discretionary items, such as travel. Tariffs have introduced uncertainty into the corporate planning process, prompting corporations to reassess budget line items they can control, such as travel in 2026. In addition, competition is growing, albeit slowly, which is putting further competitive pressure on room rate growth.
Looking ahead, the combination of an upward cost spiral and a lack of revenue growth means that margins for earnings before interest, taxes, depreciation, and amortization remain under continued pressure for hotel owners and operators. Through October 2025, EBITDA margins were 24.7%, 100 basis points lower than the 2024 results.
Operators and owners are watching some expected bright spots, such as the FIFA World Cup games scheduled to be held in 11 U.S. markets and the corresponding international tourist demand. In addition, the calendar shift of both July 4 and the December holidays to weekend dates could entice consumers to take longer vacations, providing a welcome boost to hotel demand and potentially to rates.
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