Anatomy of a Hotel Audit
By Steven Klein Partner, Gerson, Preston, Klien, Lips, Eisenberg & Gelber | January 06, 2019
These are challenging times for the hotel industry. Due to skyrocketing operating costs, most U.S. hotel groups have still been unable to reach operating margins commensurate with the industry peak in 2007. Consumer preferences demand upgrades in technology and room renovations, cutting into the bottom line even as rising salaries, wages, benefits and staffing levels add to labor costs.
Historically, hotel management raised room rates in order the balance the books. But new challenges on several fronts are making that approach impractical.
Airbnb, the home-sharing platform going head-to-head with hotels, continues its phenomenal growth. Through 2014, hoteliers in cities such as New York, Los Angeles and San Francisco that offer significant inventories of Airbnb options saw variable profits shrink up to 3.7 percent, according to a recent report from the National Bureau of Economic Research. The greatest losses came during peak seasons in tight markets –– think Manhattan on New Year's Eve or Cambridge, Massachusetts at graduation –– when room rates soar and hotels traditionally post their highest margins.
According to the study, as of November 2016 Airbnb reported an inventory of just over 3 million listings worldwide –– nearly three times that of industry frontrunner Marriott International. Most recently, Airbnb announced a 2,500 percent growth in bookings in 2017.