SAN ANTONIO — There has been a fundamental shift in the way hoteliers talk about profitability, and the hospitality industry can no longer call it a post-pandemic blip or temporary change.
Inquiries about cash flow, profitability and flow-through are increasingly part of the conversation, alongside average daily rate and revenue per available room.
Not having the right focus and flow through to the bottom line can result in revenue growing and the hotel's ownership not seeing that increase translate to profit, warned Jennifer Hill, senior vice president of commercial at Kalibri Labs.
"This is resulted in the structural change in hotel economics — it's not just that we're post-pandemic or post-recovery," Hill said at the recent Hospitality Sales and Marketing Association International Commercial Strategy Conference. "This has just been a really major shift in the way our industry operates."
Tracking the hotel economics shift
Part of what's contributing to this imbalance is the hotel industry's pre-pandemic years of low interest rates, as well as a rise in taxes, labor, insurance and other expenses.
"I actually have a lot of conversations that pop up talking about spend, because we've all been there. Owners always want you to spend flat year over year, despite wanting increased revenues year over year, too," said Dury Kim, senior vice president of commercial at InnVentures. "It's a nearly impossible feat."
In 2025, U.S. hotel guests paid $211.4 billion while the hotels collected only $205.1 billion of that, Hill said. That's $6 billion that guests paid to stay in hotels that ownership didn't collect.
"Guests are paying more than ever, and we're keeping less, and what that means for our owners — and sometimes why they get a little grumpy — is we're capturing less of that revenue," she said. "In 2025, imagine a $100 bill — we kept $79.22 of it. The year prior, we kept $80.33. That's pretty significant."
The cost of acquiring hotel guests has evolved in a few ways, and its important to see the full picture, which includes fees associated with online travel agencies, channel costs and transaction fees. There's also discretionary costs the hotel controls — digital media spend, data and tech investment, sales team incentives, etc. And, of course, there's also the fees associated with franchising with hotel brands.
The way to navigate this shift is to put profit as the center of your hotel's goals, not revenue, Hill said. This includes finding the most profitable mix for guest acquisition and setting a spending cap.
She added OTAs are a great example because those companies look great on the revenue side since those bookings bring a high ADR.
"I know that everybody knows that OTAs have a higher cost, but I don't think we stop to think about what that actually is," she said, adding that hotels can reevaluate their business mix.
"OTA, whether we like it or not, [it's] part of the business mix, but we can shrink it," Hill said, speaking of her time working in commercial strategy within hotels. "We right-sized the discretionary spend, so instead of putting all of our pennies in the OTA ad spend bank, we moved some over to our sales team. ... This is really the power of fixing the mix."
What owners want
Hotel ownership goals haven't changed much despite some of these shifts in hotel economics, Kim said.
"Every owner at the end of the day really cares about is how much they're receiving at the end," she said. "They don't care about where your RevPAR is, they don't care about how much gross revenue you're bring in. They care about how much is lying in their pockets at the end of the day — no matter what owner type they are."
However, there are some differences in ownership types, Kim said. Most private equity owners have an exit strategy top of mind and they want to flip a profit quickly. Additionally, they have their own commercial strategy teams driving forward thinking.
Meanwhile, real estate investment trusts are more like a partner because they usually hold onto their assets a little longer and care about the operational value of the hotel. Their revenue and commercial teams are a little easier to work with.
Then there are family offices, which vary as hotel owners. They aren't asset managers, so they're aren't usually someone who's got a background in real estate. They also might have more of a sentimental tie to the property, Kim said.
"They care about their assets a lot of the time," Kim said. "If you think about it from that perspective, they're a lot more emotional about their asset, kind of protecting their asset. Usually, they're a lot more scared when revenue drops, despite profitability going upwards, because then they think that it's not going to sustain."
Hotel owners and managers alike need to evolve from the "heads in beds" strategy, Hill said. The fact is that hoteliers can't always be focused on driving only occupancy or driving just ADR. It has to be a strategic mix that works for the hotel in particular.
"The profitability conversation comes in handy when you have optimized most of your segmentation strategy and find the tweaks here and there," Kim said. "In channel strategies, I think that if you're not making your piece of the pie, it's really hard to have that conversation, too."
As hotel economics continue to shift, Kim said its important to remember that hospitality takes teamwork.
"What our owners care about matters to us, too," she said. "Know your owner and know what they care about, because what they prioritize is going to be the key metric that we prioritize, and not everybody will have the same prioritization."