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Rising hotel labor costs and profits reflect the surging group demand being seen in major markets around the U.S., according to profit-and-loss data from real-estate analytics company CoStar and its lodging-data subsidiary, STR.
September's total revenue per available room surged by 8.6 percent over last year, according to CoStar, while labor costs skyrocketed 13.1 percent.
"September labor costs were higher than the summer months, even though overall demand was lower," said Raquel Ortiz, STR’s director of financial performance. "That is consistent with leisure travel subsiding and corporate travel in peak season."
The fall conference season has been a big driver for this. Since Labor Day, group demand among luxury and upper upscale hotels has increased 3.1 percent year-over-year, on average, according to STR. Group demand was up 4.3 percent year-over-year for the week ending Oct. 28, and group average daily rate increased 4.5 percent. Compared with the same post-Labor Day period in 2019, group demand is down just 1.5 percent.
In September, F&B labor costs shot up 9.8 percent on a per-room basis, the most of any department, according to CoStar. Catering and banquet revenues were up an impressive 20 percent year-over-year, reflecting the group business that necessitated the additional labor.
Thirteen of the top 25 major markets posted double-digit growth in gross operating profit per available room through September, led by New York City and Oahu. About 60 percent of the growth over the past six weeks has come from weekdays, with the major markets accounting for the majority of that, said CoStar.