Recruitment gaps, wage pressures and rising operating expenses are complicating hotel budget planning. Evidence from the US, Europe and Asia-Pacific shows why stronger room revenue may not translate into higher profits.
Hotel owners and operators preparing their 2027 budgets face a difficult question: how much of any additional revenue will reach the bottom line?
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Higher wages can help attract employees, but they do not guarantee that vacancies will be filled. Meanwhile, rising payroll, utility bills and supplier prices can erode gains in room revenue, leaving less money for property improvements and future investment.
Research from major hotel markets highlights the challenge. In the US, hoteliers report understaffing despite widespread wage increases. In Europe, labour costs are outpacing revenue growth in several markets. Across Asia-Pacific, competition for better-paid jobs continues to make employee retention difficult.
The findings cover different markets and reporting periods, rather than providing a single global picture. Their message for hotel operators is clear: 2027 budgets must account for local employment conditions and the cost of maintaining service, alongside forecasts for occupancy and room rates.
Higher wages leave staffing gaps unresolved
More than half of respondents to the American Hotel & Lodging Association’s (AHLA) Front Desk Feedback survey described their properties as somewhat or severely understaffed. Yet 70% said they offered higher wages to recruit and retain employees.
The survey covered 246 US hoteliers in late February 2026 and was published in March. It also found that 54% offered flexible scheduling and 31% enhanced benefits. Labour costs were among the leading financial pressures, cited by 65% of respondents.
These figures reflect the experiences of surveyed US operators, rather than global measures of staffing shortages or wage inflation. They nevertheless demonstrate that higher employment spending can coexist with unfilled positions.
Vacancies can create costs beyond the missing employee’s salary. Hotels may need overtime, temporary workers or agency staff to cover shifts. Inadequate housekeeping coverage can delay room readiness and reduce the number of rooms available to sell.
Front desk and food and beverage teams can also struggle to maintain service when staffing falls short of demand.
Budget reviews should therefore connect payroll spending with operational results. The key questions are whether higher spending helps fill vacancies, reduces turnover and provides enough capacity to serve guests.
Regional pressures require local responses
In Europe, CBRE’s midyear 2026 hotel outlook identifies labour costs rising faster than revenue across several major markets, particularly the UK. Higher utility expenses and brand and operator fees add to pressure on gross operating profit margins.
The report anticipates more moderate trading momentum extending into early 2027, following stronger-than-expected performance in the first half of 2026. This leaves operators less scope to rely on room-rate increases to offset rising expenditure.
In Asia-Pacific, research highlights the difficulty of retaining employees. JLL’s APAC Hotel Operators’ Sentiment Survey 2025/2026 found that employees at one in two hotels continued to leave for better salaries. Salary increases, however, ranked fifth among the retention measures implemented by operators.
Based on more than 830 hotel responses across 22 countries in the third quarter of 2025, the survey captured expectations for 2026. It provides context for subsequent planning, rather than a forecast for 2027, and raises a practical question: are retention measures addressing why employees leave?
The answer will vary by property. A luxury resort and a select-service city hotel have different staffing needs, service commitments and opportunities to improve productivity. Regional trends provide useful context, but budgets need to reflect conditions at individual properties.
Expenses beyond payroll squeeze returns
Labour is only part of the cost equation. In the AHLA survey, goods and supplies were the most frequently cited financial pressure, identified by 71% of respondents. Half cited utility and energy costs, while 43% pointed to insurance premiums.
AHLA’s 2026 State of the Industry assessment also identified rising operating expenses as a major reason US gross operating profit per available room remained at roughly 90% of its 2019 level.
Property reviews should extend to distribution commissions, payment processing, software subscriptions, maintenance contracts and procurement. Technology expenditure can include system integration, staff training and ongoing support, as well as licence fees.
Some costs can rise independently of occupancy. Insurance renewals, maintenance requirements and supplier contracts may increase expenditure even when demand weakens.
Owners must also distinguish operating performance from cash generation. Financing costs, property taxes and capital expenditure do not all fall within the same profit measure, but they affect the funds available for debt service, refurbishment and investment.
Track the profit behind each booking
Revenue per available room (RevPAR) combines occupancy and average daily room rate, making it a useful measure of room-revenue performance. It does not show the cost of generating that income.
Each additional occupied room brings cleaning, laundry, amenities and other service requirements. A booking’s contribution also depends on the rate achieved, the cost of acquiring the reservation and any associated guest spending.
RevPAR can therefore increase even as profit margins weaken if operating expenses grow faster than revenue.
Gross operating profit per available room (GOPPAR), departmental profit margins and labour cost per occupied room can provide a fuller picture. Comparisons require consistent accounting definitions and allowances for differences in facilities and service standards.
Productivity figures need similar scrutiny. Fewer housekeeping hours may appear to indicate greater efficiency, but the benefit is questionable if rooms become available late or complaints increase.
Reviewing labour hours alongside overtime, room readiness, staff turnover and guest feedback helps managers identify these trade-offs.
Target retention and technology spending
Retention measures are most effective when they address the reasons employees leave. More predictable schedules may help those struggling with irregular hours. Where pay is the main concern, training and career development alone may have limited impact.
Exit interviews, employee feedback and department-level turnover data can help managers identify where intervention is needed.
Staffing schedules should reflect expected arrivals and departures, restaurant bookings, group business and local events, while allowing for sickness and unexpected demand. A schedule that leaves no room for disruption can turn planned savings into overtime, service delays or lost sales.
Technology requires equally clear objectives. Workforce-management and housekeeping systems can improve forecasting, shift allocation and task coordination. Their business cases should include implementation, integration, training and support costs.
The test is whether these systems deliver measurable benefits, such as fewer scheduling errors, reduced overtime, faster room readiness or more time for employees to assist guests. Time saved on one task is valuable only if it improves the wider operation.
Build flexibility into 2027 budgets
A single forecast for occupancy, room rates and payroll can leave hotels exposed when trading conditions change. Scenario planning allows managers to assess how slower rate growth, weaker demand or higher employment and energy costs could affect profitability.
It can also distinguish expenses that management can adjust quickly from commitments tied to contracts, property requirements or minimum staffing needs.
Proposed savings should be assessed against their operational consequences. Procurement changes must preserve supply reliability and quality. Staffing plans need to provide enough capacity to meet demand. Technology investments require realistic cost estimates and measurable returns.
For 2027, protecting margins will depend on understanding what each property needs to deliver its service promise and whether the revenue from each stay covers the cost.
Budgets that connect workforce decisions, operating expenses and guest outcomes will give owners a stronger basis for deciding where to save and where to invest.
