In this six-part series on the hospitality industry, we’ll explore how hotels and resorts make guests feel at home and where they find their most profitable opportunities, starting with hotel accommodations.
The hotel accommodations sector is a fundamental pillar of the hospitality and tourism industry, playing a crucial role in shaping travelers’ experiences. Hotels cater to a diverse range of guests—from budget-conscious tourists to luxury-seeking travelers—offering various services and amenities designed to elevate their overall journey.
The hospitality and tourism industry is a multi-trillion-dollar business. In 2023, global revenue increased by 7.0%, rising from $4.39 trillion in 2022 to $4.70 trillion in 2023. This growth demonstrates the industry’s resilience as it recovers from the disruptions caused by COVID-19. With safety protocols firmly in place, travelers once again feel confident to embark on their adventures.
Globally, the hotel industry generated $570 billion in revenue, with the U.S. contributing $208 billion. Whether for business, leisure, or relaxation, accommodations are a key element of the travel experience. With so many options available, from boutique hotels to expansive resorts, travelers can tailor their stays to fit their preferences and budgets.
Planning a Trip: Where to Stay?
Planning a trip is exciting when choosing the destination, activities, and duration of the stay. However, selecting accommodations can sometimes be the most challenging part. The internet has made this easier with the rise of online travel platforms. According to recent studies, 88% of Americans now prefer to book their stays online. With countless deals and options at your fingertips, finding the perfect fit can be time-consuming, but once you do, your adventure awaits.
The Profit Engine: Accommodations
Accommodations remain one of the largest revenue streams for hotels and resorts. Room rates fluctuate depending on various factors, particularly the time of year, location, and demand. But how do hotels determine their pricing at different times?
The three key metrics that drive hotel profitability are:
- Occupancy Rate: The percentage of rooms filled during a specific period.
- RevPAR (Revenue per Available Room): The total revenue generated per available room, whether occupied or not.
- ADR (Average Daily Rate): The average rate paid per occupied room.
The factors that influence occupancy rates, RevPAR, and ADR will be:
- Location or region
- Brand recognition (major brand vs. independent hotel)
- Star ratings
- Advertising and marketing efforts
These metrics are critical to measuring a hotel’s success. Let’s look at how rates have increased from 2018 to 2025.
For example, in the U.S. in 2018:
- Occupancy rates were 66.2%.
- RevPAR reached $85.96.
- The ADR climbed to $129.83, the highest in 17 years.
Although the 2018 historical figures provided insight into the industry, including occupancy rates that surpassed those of 2023, contemporary data from 2023-2025 illustrates the continued recovery and shifting market dynamics, evident in substantial increases in RevPAR and ADR.
- Occupancy rates in the U.S. reached approximately 63.0% for full-year 2023 and are projected to be around 63.0% for full-year 2024. Projections for 2025 place occupancy slightly higher at about 63.4%.
- RevPAR (Revenue per Available Room) reached approximately $97.97 for full-year 2023 and is projected to be around $100.19 for full-year 2024. For 2025, RevPAR is expected to climb to a new nominal high of about $102.78.
- The ADR (Average Daily Rate) climbed to approximately $155.62 for full-year 2023 and is projected to be around $159.00 for full-year 2024. ADR is anticipated to rise again in 2025 to a new high of about $162.16.
It’s clear that while we’re seeing a significant upward trend in hotel accommodations and overall hospitality industry growth from 2018 through 2025—a testament to its buoyancy even after the challenges of COVID-19—the fundamental allure of travel, both within the U.S. and abroad, remains undiminished for many.
In-Room Revenue Streams
Once guests check in, hotels tap into other revenue streams to enhance their in-room experience. These include pay-per-view movies, mini-bars, and room service, all of which add to the hotel’s bottom line.
While these metrics reflect the financial side, let’s not forget the people behind the scenes—front desk staff, housekeeping, reservations, valet services—who ensure the guest experience is seamless.
Variety in Hotel Rooms
Hotel rooms come in a wide range of sizes and price points, from modest accommodations to lavish suites spanning over 17,000 square feet. Whether staying in an affordable hotel or indulging in a luxury resort, travelers can find options that suit their needs and desires.
Wherever your travels may lead, there’s always a hotel or resort ready to welcome you. Enjoy your journey, immerse yourself in your destination, and remember to appreciate the hardworking teams that create the atmosphere for your enjoyment.