Hotels gain despite expense strains
Published: December 1, 2006
Labor unrest, high energy costs and inflated operating expenses did not curb hotel profit margins much. According to PKF Hospitality Research (PKF-HR), gross U.S. hotel operating profits are up 13.1 percent from the first half of 2005 to the first half of 2006.
“Hotel management has very little control over a sharp rise in utility costs, or increases in royalty payments based on the terms of their franchise contract,” stated R. Mark Woodworth, president of Atlanta-based PKF-HR. “On the other hand, operators do have the ability to adjust the staffing of room attendants or bartenders to control labor costs.” Still, hotel expenses grew an average of 7.8 percent during the first half of 2006 — more than twice the U.S. inflation rate during that period.
PKF-HR expects 2006 will be the third year in a row the hotel industry displays two-digit profit gains, and predictions for 2007 are rosy as well.
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