The Secret To Success: How US Hotels Are Adapting Labor Models To Overcome Rising Costs

Published on December 14, 2025

Report by HotelData.com, powered by Actabl, discusses how U.S. hotels modified their labor models due to rising costs and below expected revenues. Operators addressed costs by improving labor productivity and optimizing labor costs to preserve profit margins while revenues remained well below targets. The report discusses how hotels achieved profitability despite all these factors by improving productivity and forecasting while optimizing their labor.

Increasing Costs and Decreasing Revenue

In 2025, U.S. hotels closed their doors for a few months due to higher wages and operating cost increases. While these constraints made profitability hard to achieve, hotels made further adjustments to their labor models to preserve profitability. The report showed an increase of 2%- 11.2% in labor cost per occupied room while wages increased 3.7%- 5.9%. A further increase in costs was documented from a 4%- 9% increase in headcount.

Nevertheless, as a result of this pressure, hotels discovered means to protect their margin through lowering hours spent per occupied room (HPOR) as well as enhancing overall labor efficiencies. From January to September 2025, hotels made efficiency gains and reduced hours per occupied room across guest services, housekeeping, and management. These changes were vital to counter shifting revenue performance due to hotels being overly optimistic with their room revenue budgets due to high targets set for the year.

Labor Efficiency Gains Against Cost Increases

By January to September of the following year, improvements made to labor efficiency as a result of these changes were visible in various operational areas of the hotels. The report indicated that hotels were able to achieve a high quality of service level with fewer labor hours remaining despite the wage pressures. HPOR across the core departments dropped 7 – 15% in the period, which shows a closer matching of staff and service levels to demand. For example, guest services, housekeeping, and management reduced their service levels by 13.5%, 7.1%, and 14.6% respectively.

During the same time frame, efficiencies improved for every job position. Room attendants improved efficiency by 5.5%, guest service agents improved efficiency by 12.7%, and AGMs and GMs improved efficiency by about 14%. In total, employees evaluated saw an overall reduction of 9% in minutes per occupied room (MPOR), which helped to lower the impact of increased wages and tightened operating margins.

Higher efficiency being achieved at the same time service standards were being maintained is a credit to the hotels. The report showed hotels maintained their service standards while reorganizing their staffing to provide more efficiency, which suggests improved forecasting, efficient cross-training, and better scheduling.

Increased Staffing and Overtime Strategy

In many cases, the headcount also increased, although the strategy was not aimed at reducing positions. In fact, hotels increased their staffing by as much as 9% over the summer and maintained staffing 4% above the levels at the start of the year, which was a change mainly due to the ongoing need for flexibility. Hotels used overtime as a regulated buffer to meet demand rather than a runaway cost.

With the rapid changes the economic landscape has brought upon the hospitality industry, organizations have had to make employee changes to satisfy the corporate demands set by the overarching industry leaders. Given that the industry was coming out of the pandemic, organizations expected -10.4% drop in the industry. However, by understanding the shortfalls of these revenue projections, organizations were able to set targets to at least break even. With the projections set by industry leaders, organizations were able to set employee targets to meet industry expectations.

• Workload balancing

With the improving economic landscape, the hospitality industry began to make employee changes to satisfy corporate predictions set by industry leaders. Given that the industry was just coming out of the pandemic, organizations were expecting a -10.4% drop. To understand the shortfalls of these revenue projections, organizations set targets at least to break even. With industry leaders’ projections, organizations set employee targets to meet industry expectations.

• Cost of Service

The hospitality and industry have been changing at a rapid pace, making the economic landscape even more difficult to navigate. Organizations have had to make employee changes to satisfy corporate demands set by industry leaders. Given the industry was just coming out of the pandemic drop of 10.4% was expected -10.4%. Organizations were able to break even by understanding the shortfalls of revenue projections. Organizations were able to create employee targets based on the industry leaders’ projections.

The Road Ahead: Labor Efficiency as a Key to Success

U.S. hotels will continue to rely on Labor Efficiency as a driving factor in determining profit margins. Sarah McCay Tams from Actabl believes that, for the first time, hotels have to consider labor as the single largest cost category in determining hotel performance. The forecast hotels for 2026 and beyond will be the ones that continue to refine their labor models, flexing employees to workloads on demand and staying ahead of costs with efficient forecasting, scheduling, and cross-training.

For the first time, hotels are focusing on aligning labor with actual business needs rather than just aligning labor with headcount or cutting costs. This means hotels are expected to still implement the strategies from 2025, such as clever labor deployments and forecasting for the current environment of increasing wages and uncertain economic conditions.

Conclusion

The 2025 Trends and Labor Costs show how hotels on the books have managed another difficult year in terms of cost and revenue. Balancing the different dimensions of labor costs and profitability managed to retain their margins through financial stress. This includes reducing hours per room and improving the productivity of hotel staff. On and off the books, hotel operations will continue to implement these techniques. Hotels will remain adaptable to changes and continue delivering great service to their guests.