Hotels are complicated assets to run, but there is one easy concept: If revenues exceed expenses, the result is profit. Unfortunately, the broader hotel industry is looking down the barrel of a cost-filled gun that isn’ t shooting blanks. According to data from asset manager and hotel appraisal firm LW Hospitality Advisors, cost creep is not uniform across segments, but hotel operators deluged with higher expenses are being tasked to tame costs
Patrick O’ Connor, president, O’ Connor Tax Reduction Experts
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against a backdrop of enervated revenue.
“ There’ s only so much you can do, especially as costs are rising,” said Dominic Finn, SVP of asset management at LWHA.“ For the most part, operators are doing their part to manage against limited RevPAR growth.”
As 2025 played out, expenses across departments rose, dealing a blow to operators having to deal with lower revenue generation. It was not a recipe for success. In 2025, annual U. S. hotel occupancy and revenue per available room fell year over year for the first time since 2020, according to data from CoStar. RevPAR was down 0.3 % in 2025 versus 2024.
“ RevPAR growth can often mask underlying expense creep,” added Ben Ketcham, AVP of asset management at LWHA.“ In the current operating environment,
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disciplined expense management is one of the most important levers for improving flow-through, protecting margins and maximizing overall hotel performance.”
PAYING UP GOP margins were relatively flat YOY 2025 versus 2024, but NOI margins fell by 0.6 %, with property tax increases of 5.9 % YOY on a per-availableroom basis impacting all segments and chain scales, with limited-service and extended-stay hotels seeing their property takes go up more than 10 % YOY. They served as the primary driver of margin erosion between GOP and NOI, LWHA noted.
It turns out, though property taxes, unlike utilities or supplies, are a fixed cost, according to Patrick O’ Connor, president of O’ Connor Tax Reduction Experts, in many
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cases they are inflated, due, he said, to“ systemic overvaluation by assessors.” When a hotel is sold, the sales price includes three components: the real estate, inclusive of the building and land, Business Enterprise Value( BEV), which includes the value of the operating business, and Business Personal Property( BPP), inclusive of FF & E. The problem, argues O’ Connor, is that assessors are including both BEV and BPP in their tax assessment when only the real
Dominic Finn, SVP of asset management, LWHA
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54 hotelsmag. com July / August 2026 |