Hotel: average revenue, profit and margins

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The Dojo Business Team

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What is the current average daily revenue per available room and how does it compare across weekdays, weekends, and peak seasons?

The average RevPAR in the U.S. hotel market currently stands at $103-$106 per day, representing a key performance indicator that combines occupancy rates with room pricing strategies.

Weekday performance typically maintains steady baseline rates, while weekends generate 10-20% higher RevPAR due to leisure travel demand. Peak seasons, particularly during holidays and major events, can drive RevPAR increases of 15-25% above annual averages.

Seasonal variations are most pronounced during the third quarter (July-September) when international travel peaks and domestic vacation patterns align. Urban markets experience different peak patterns compared to resort destinations, with business hotels seeing stronger weekday performance while leisure properties excel during weekends and holiday periods.

Geographic location significantly impacts RevPAR performance, with major metropolitan markets like New York and San Francisco achieving premium rates while secondary markets maintain more modest but stable revenue levels.

What is the occupancy rate over the past 12 months, and how does it fluctuate by season or market segment?

U.S. hotels averaged 63-65% occupancy over the past 12 months, with significant variations based on location, property type, and market conditions.

Major urban markets demonstrate the highest occupancy rates, reaching 88% or higher during peak periods, while lower-demand markets typically achieve 60-62% occupancy. Seasonal fluctuations are most evident in leisure destinations, where summer months can see occupancy spikes of 20-30% above winter levels.

Business hotels experience occupancy patterns aligned with corporate travel cycles, showing strength during weekdays and softer performance during weekends and holiday periods. Resort properties follow opposite patterns, with peak occupancy during weekends, holidays, and vacation seasons.

Market segmentation reveals that extended-stay properties maintain more consistent occupancy rates throughout the year, while luxury hotels experience more dramatic seasonal swings but achieve higher average daily rates during peak periods.

You'll find detailed market insights in our hotel business plan, updated every quarter.

What is the average room rate achieved, and how does it differ between standard rooms, suites, and special packages?

What percentage of total revenue comes from non-room operations such as food and beverage, events, and spa services?

Non-room revenue typically accounts for 30-40% of total hotel revenue, with food and beverage services representing the largest component at 20-30% of total income.

Food and beverage operations include restaurants, bars, room service, and catering for events, providing essential services that enhance guest satisfaction while generating additional profit streams. Meeting and event spaces contribute 5-10% of total revenue, particularly important for business hotels and conference centers.

Spa and wellness services generate 2-5% of total revenue in properties that offer these amenities, with luxury and resort hotels achieving higher percentages. Other ancillary services such as parking, laundry, gift shops, and business centers typically contribute less than 5% combined.

Full-service hotels depend more heavily on non-room revenue compared to limited-service properties, with some resort destinations achieving up to 50% of total revenue from non-accommodation sources during peak seasons.

What are the fixed operating costs per month, including staffing, utilities, and maintenance, and how do they impact profitability?

Fixed monthly operating costs for hotels typically range from $100,000 to $500,000, depending on property size, location, service level, and local market conditions.

Staff salaries represent the largest fixed cost component, including front desk operations, housekeeping management, maintenance personnel, and administrative roles. These costs remain relatively constant regardless of occupancy fluctuations and typically account for 35-45% of total operating expenses.

Property-related fixed costs include mortgage or rent payments, property taxes, insurance premiums, and basic utilities that maintain essential building operations. These expenses can represent 20-30% of total monthly costs and directly impact the break-even occupancy rate required for profitability.

Technology subscriptions, marketing contracts, and equipment leases add additional fixed costs that support daily operations but don't fluctuate with guest volume. Effective management of these fixed expenses is crucial since they must be covered regardless of revenue performance.

This is one of the strategies explained in our hotel business plan.

What are the variable costs per occupied room, such as cleaning, amenities, and guest services?

Variable costs per occupied room typically range from $20 to $45, varying significantly based on service level, property type, and guest expectations.

Housekeeping represents the largest variable cost component, including cleaning labor, laundry services, and room supplies such as toiletries, linens, and consumables. These costs scale directly with occupancy and can account for $15-25 per occupied room in mid-scale properties.

Energy usage varies with occupancy levels, as occupied rooms require heating, cooling, lighting, and hot water that wouldn't be necessary for vacant rooms. Additional variable costs include guest services, concierge expenses, and amenities that are provided based on actual guest presence.

Food and beverage variable costs apply when properties include complimentary breakfast or other included services, with costs ranging from $8-15 per guest depending on the offering quality and local food costs.

What is the average gross operating profit margin, and how does it benchmark against comparable hotels in the same market?

The average gross operating profit (GOP) margin for U.S. hotels ranges from 35-40%, with high-performing properties achieving margins above 45% through optimized operations and cost management.

Mid-scale and full-service hotels typically achieve GOP margins in the 35-40% range, while luxury properties can exceed 50% during peak periods due to premium pricing power. Limited-service hotels often achieve margins of 40-45% due to lower staffing requirements and reduced operational complexity.

Market positioning significantly impacts achievable margins, with hotels in prime locations and strong brand affiliations commanding higher rates while maintaining competitive cost structures. Properties that effectively manage both revenue optimization and cost control consistently outperform market averages.

Benchmarking against comparable properties in the same market segment reveals that top-quartile performers typically achieve GOP margins 8-12 percentage points higher than bottom-quartile properties, primarily through superior revenue management and operational efficiency.

What is the net profit margin after accounting for taxes, interest, depreciation, and amortization?

Net profit margins for hotels typically range from 8-15% after accounting for all expenses, taxes, interest payments, depreciation, and amortization.

Properties with significant debt loads or recent capital investments may see lower net margins due to interest payments and accelerated depreciation schedules. Newly renovated or heavily leveraged properties often experience margins in the lower range until debt service decreases or revenue grows.

EBITDA margins provide a clearer view of operational performance before non-cash charges, typically running 15-25% for well-managed properties. This metric better reflects the core hotel business performance without the impact of financing decisions and accounting treatments.

Established properties with minimal debt and completed renovations can achieve net margins at the higher end of the range, particularly during strong market conditions and effective cost management periods.

What is the contribution margin by revenue stream (rooms, F&B, events, other services)?

What are the primary drivers of profitability, and how sensitive are they to changes in occupancy, pricing, or costs?

Hotel profitability is most sensitive to occupancy rate changes, where each 5% occupancy increase typically improves gross operating profit by 8-12% due to the high contribution margin of room sales.

Average daily rate (ADR) improvements have an even more dramatic impact on profitability, as rate increases flow directly to the bottom line with minimal additional variable costs. A $10 increase in ADR can improve annual profit by $50,000-100,000 for a 100-room property depending on occupancy levels.

Cost control in labor and utilities provides significant leverage, as these represent the largest controllable expense categories. Reducing labor costs by 2-3% of revenue can improve GOP margins by 2-3 percentage points, while energy efficiency improvements can reduce operating costs by $2,000-5,000 monthly.

Revenue mix optimization toward higher-margin services creates compounding benefits, as properties that successfully drive non-room revenue achieve more stable cash flows and improved overall profitability during low occupancy periods.

We cover this exact topic in the hotel business plan.

What is the break-even occupancy rate required to cover total operating costs?

Most hotels require 55-60% occupancy to reach break-even, though this varies significantly based on cost structure, average daily rate, and non-room revenue contribution.

Properties with higher fixed costs relative to revenue require higher break-even occupancy rates, while hotels with strong pricing power and efficient operations can achieve profitability at lower occupancy levels. Limited-service hotels typically break even at 50-55% occupancy due to reduced staffing and operational requirements.

Full-service hotels with extensive food and beverage operations may require 60-65% occupancy to break even, as their higher fixed costs must be offset by increased revenue per occupied room. Resort properties often have lower break-even points during peak seasons due to premium pricing and ancillary revenue streams.

Hotels that effectively manage both fixed and variable costs while maximizing revenue per available room can achieve break-even at occupancy levels 5-10 percentage points below market averages, providing crucial competitive advantages during economic downturns.

What recent industry benchmarks or competitive set data are available to evaluate whether revenue, profit, and margin levels are in line with market performance?

Current industry benchmarks show U.S. hotels achieving RevPAR growth of 2-4% annually, with top-performing properties consistently exceeding market averages through superior revenue management and operational efficiency.

STR (Smith Travel Research) and CBRE provide the most comprehensive competitive set data, tracking performance metrics across property types, geographic markets, and brand segments. These benchmarks reveal that top-quartile performers achieve RevPAR levels 15-25% above their competitive set averages.

Gross operating profit margins show less variation than revenue metrics, with successful properties maintaining 35-40% GOP margins regardless of market segment through disciplined cost management. Properties consistently achieving margins above 45% typically demonstrate exceptional operational excellence and market positioning.

International benchmarks from Western Europe and APAC markets provide additional context, showing that U.S. hotels generally achieve higher profit margins but face more volatile demand patterns compared to established European markets with stronger leisure travel foundations.

It's a key part of what we outline in the hotel business plan.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.

Sources

1. STR - US Hotel Performance May 2025
2. Oyster Link - US Hotel Industry Statistics
3. AHLA - State of the Industry 2025
4. RevFine - Food and Beverage Analytics
5. CBRE - Operating Costs in 2025
6. SiteMinder - Hotel Profit Margin
7. Statista - Hotel Operating Profit Margin Worldwide
8. Smartness - How to Calculate Hotel Costs
9. Catala Consulting - Hotel Variable Costs
10. Mews - Hotel Operating Costs