How Hotels Are Protecting Profit in 2025 (Despite a 15% Revenue Miss) - Lindsey Goedeker & Sarah McCay Tams, Actabl [Sponsor Bonus]

Josiah: Today in this special bonus episode, I'm excited to share with you a recording of a webinar that we ran this week at Actabl. It's an expanded version of what our Senior Vice President Lindsey Goedeker presented at the lodging conference. That was such a hit. It was standing room only. Thousands of people listened to it, and I can't tell you how many people came up afterwards to talk about the data that was shared there. Lindsey and Sarah, our head of editorial at Actabl, were talking afterwards about how we can open this up to those who weren't able to attend the event. So in this episode, you're going to hear Lindsey and Sarah talk about the data and what it means for you.

Last thing before we get into this, this is obviously an audio recording, so if you want to get access to the slides and the data they were discussing, click the link in the show notes because you'll not only find that, but you'll also be able to get access to our webinar that we're going to be hosting next week on Thursday, November 13th. We'll release our Q3 data update. Really excited about that, but without further ado, let's get into it.

[intro]

Sarah: Welcome to today's Speed Stats Webinar, Why H1 Performance Rewrote the 2025 Playbook. I'm Sarah McCay Tams, head of editorial at Actabl. Joined by Lindsey Goedeker, we'll be discussing hotel performance data for the first half of 2025. Unpacking the gap between budget and reality, exploring labor efficiency trends, and looking ahead to smarter 2026 planning. We'll also share an early preview from the upcoming Q3 profitability performance report launching on November 13 on hoteldata.com.

Lindsey: This presentation was designed to show the gap between what operators budgeted for 2025 and what actually happened. What we're going to show throughout the presentation is that operators were able to protect their profitability, which is really remarkable given revenue performance, and they were able to do this through agile labor management. Thanks to our data in both ProfitSword and hotel effectiveness, we can analyze budget, forecast, and actuals so we can see the moment in real time where they pivoted. We'll use that lens to understand how hotels adapted in the first half of the year and what that means as we look forward to 2026. Using data from thousands of hotels across the US, we've analyzed not just what happened, but how it compared to what operators expected to happen or their initial budget for the year. This disconnect is the real story that we're leaning into as we plan for 2026.

Sarah: The first half of 2025 didn't play out as expected. What drove that gap between that budgeted optimism and the actual outcomes?

Lindsey: I think budgeted optimism is a perfect recap. There was strong momentum in 2024 and operators really predicted to continue to grow that projection throughout 2025. Operators at large projected double digit revenue growth. While we didn't see that, they also underestimated the persistent cost inflation across almost all categories. So budgets were also largely static, relying too heavily on 2024 performance. And again, if you take a good year, you're optimistic about it. It may not set you up for adjustments in year to hold on as things unfold.

The first major disconnect that we saw was with the top line operators across the US. They budgeted for RevPAR of over $123, but the market delivered just $105, so we saw a 15% miss driven by softer than expected demand. Our data from the first half of last year in 2024 shows that RevPAR was at $126. So hotels were already budgeting a slight decline for 2025. The sharper drop reflects a slower than expected demand recovery and ADR plateauing earlier in the year than we could have expected.

Sarah: So that 15% miss on RevPAR, that's a significant deviation. What do you think were the main drivers of that shortfall?

Lindsey: A lot of this is nuanced. Obviously, the market that you have is going to be a huge driver in your individual performance. We saw that occupancy most notably underperformed to budget in urban and resort markets. We also saw that with occupancy at risk, ADR started really plateauing earlier in the year where we expected to drive it forward because we weren't seeing the occupancy we were expecting. So it also made operators nervous to continue to push ADR when we're already not capturing the market in the way we thought we were.

Sarah: Perfect. But how do you think those operators can maybe identify those early signs that their assumptions are drifting off course before midyear hits?

Lindsey: I think the most important way to understand it is just have as close to real time insights as possible. One of our operators once told me, I would love to always deliver positive news, but if it's bad news, I want to tell you as fast as possible. And so I think that's the key is regardless of whether it's going as expected, better or behind plan, being able to see it in real time so that you're pivoting in the moment and not looking back, wishing you would've seen the inflection point. So having real time information to know when you have a deviation from plan is always going to be the first step.

Sarah: Absolutely.

Lindsey: Well, when we look at top line and we see a 15% miss to budget, I would've had an expectation that there's at least the same miss on bottom line, especially because there are so many flat costs. How much can you really move on your expenses? But that's not what we saw. What we saw in the first half of the year is that operators were able to hold onto profit. So if you think to the former slide where it's a 15% miss on the top line, the bottom line, our GOP margin changed by two tenths of 1%. So operators were able to pivot in real time protecting their bottom line.

Sarah: So despite that revenue drop, profitability held steady. What do you think made that possible? Because that's huge.

Lindsey: In hotel operations, there are hundreds and thousands of dials that you can turn a little bit. The largest expense driver is your labor. So if you're able to turn the dial on labor management, that's your biggest expense category that you can manage. And what we saw is that properties that held on to the bottom line, we saw a pivot point throughout the year where they changed their labor strategy and that allowed them to hold on to their profit. So I think that's the number one thing. The other thing is echoing back to having on demand data, it's the ability to forecast and reforecast, not just look at your budget and then look in the rear view and say how you performed to your budget. But to call a number mid month and say, I'm not projected to hit that budget, but here's what I'm going to do to change and then recover next month. So I think it's having an agile plan in place and changing your strategy when the market changes, being prepared for that inflection point, and also having a rolling forecast so that you're already in the rhythm of looking for deviations and responding to them on the fly.

Sarah: So would you say that this was planned agility or reactive adjustment once results started slipping, or was it a combination of both?

Lindsey: I think it has to be a combination of both, but I think the operators that win know it's never going to go to plan, and so they understand their budget is the ideal plan, the path they want to walk forward. But if things start straying, they understand the levers to pull. So although they may not have planned all of the moves they made, I do think that you have to be in agreement with your operating teams early on in the year that when you stray from budget, it's not lost. The commitment is to keep it back on track. So I think it's a combination of both.

I mentioned we were able to see that the real hero of the story on protecting the bottom line was agile labor management. Operators weren't sticking with the same rigid plan that they started with at the start of the year. They adjusted staffing dynamically. This flexibility prevented deeper margin erosion throughout the first half of the year. It continued to emphasize that you can't afford to have static performance numbers. You can't set it and forget it. It would be great if you could, but that's just not the reality. Hoteliers have to be able to adapt in real time and iterate on strategy as market conditions evolve.

Sarah: You're calling agile labor management the hero of 2025. What do you think made it so effective?

Lindsey: I think it's the teams. I think it's not just labor. It's the people, the actual teams that are reviewing it and the expertise of how they're looking at their labor schedules. Looking at dynamic inputs, understanding that not all labor is an easy schedule based on the number of occupied rooms, but what is the demand mix that you have? What dials can you pull to pull in a different type of customer where then you may be able to reduce your expenses across the board in your operation? Mature management companies understand how to pull levers in market to get the ideal customer in the doors of their hotel. And that means a customer that is going to have high ancillary spend throughout the property and is going to be a lower cost to maintain. And maybe they don't need daily housekeeping or they don't take use of all of the amenities on site. So having the ability to be agile in real time, not just on staffing, but also how do you bring in the right guest to staff accordingly to their needs?

Sarah: Perfect. So that's looking at the guest, but within the actual organization itself, what sort of cultural or operational changes can help make these teams more agile or make that a part of their routine?

Lindsey: Typically, we're scheduling our team members out in two week sprints. They're going to know for the next two weeks, but your booking window and demand is changing days out, same day even. And so having agile tools in place where you can see even in that two week window, did you have a large cancellation and now we need to reduce the staffing levels, not having those extra team members on site, or did something move to the next week and now we need to shift their time? So having labor tools that allow you in real time to see fluctuations that would change the way that you're staffing, and giving those tools to your team as well, allowing people to swap shifts with each other so your managers don't have to worry about it and you stay within your labor standards. But it's that ability to, on the fly in real time, continue to protect your profit.

Our data reveals something I think that we all know at large, which is the cost of labor across different chain scales is very variable. You would have to benchmark your specific chain scales against these data points to understand how you fall in line. But I think one of the most interesting things is where we think about these average wages per occupied room, specific to housekeeping on this screen compared to last year. So resorts are of course the most expensive to maintain. There's so many outlets, and the guest expectations are different. In resort housekeeping, labor right now is $110 per occupied room. Last year it was almost $14 higher, which is remarkable. You would think if anything, labor expenses year over year at minimum are going to go up by that three to 5% cost of living adjustment everyone's going to get, but it went down significantly. That savings, if we think about a 100 room resort property that's occupied at 60% throughout the entire year, that labor savings for them is going to translate to $300,000 throughout the year. And so that's a fantastic example of specifically how resort properties have been pivoting in real time to significantly reduce their labor burden from last year.

Sarah: I mean, $300,000 a year, that's a huge potential saving. How do you think operators think about labor efficiency differently across the segments? What levers can they be pulling?

Lindsey: Of course, I think resorts, just the nature of the properties and how complex they are, there probably are a lot more levers that you can pull. One common story that I hear among our customers is about maintenance of their properties. And resort properties, there is so much to maintain. And for a long time in the post pandemic years, we weren't maintaining our properties at the level we were used to. And so what that meant is that things weren't working to plan or the guests weren't as satisfied, so we had to have higher staffing levels to compensate for that because the quality of the asset had eroded a little bit. But we've seen companies continue to invest in maintaining their properties, which alleviates that additional burden from your staff. I don't need more housekeeping teams because they're compensating for the rooms not being in the state they should be. I'm giving them a better baseline product to work from, and that makes them more efficient. Other things that we've seen specifically with housekeeping is how can you automate what your housekeeping team is doing? How can we take a process like breaking the boards, which could take hours of management time every day, and automate that? How can we automate progress from your housekeepers back to your front desk so that you're getting guests in rooms as soon as possible? So I think that automation is a key piece of it as well.

Sarah: These figures where we can see wages per occupied room broken out by chain scale, how does that help hotels benchmark effectively without them falling into that trap of unfair or inaccurate comparisons? Because if you know what your market is doing, then you know what good looks like, right?

Lindsey: Of course, generic benchmarks can really be misleading. There is so much to your chain scale and your specific geography that you're in. So property level productivity standards are much more accurate as a guiding light for how you should be performing. So in addition to having granular data on your own hotel's performance, having as specific of data as possible on your competitive set across the labor standards and average wages will be incredibly helpful to make sure that you're not competitive at large, but in your specific market where you need to win.

We think about what happened in 2025. Right now, it's the time of the year that we look ahead to our 2026 budget. So the three things that we are really feeling strongly as we look forward to 2026 is number one, you have to be able to challenge your labor model. Build productivity standards for every role from bottom up based on reality, and embrace agility. Plan to pivot. Plan to be implementing forecast throughout the month as often as you are able to, to understand when you reach those inflection points and need to change your strategy. And also ground your projections in reality. Anchor your targets to this year's actual performance, not the optimism that we held onto from last year into this year and then really had to overcome.

Sarah: That's amazing. Could you give us an example of a company that's using this approach to good effect?

Lindsey: Sure. I think there's so many ways to chart a path out of an underperforming budget. One that we've seen is companies that are really invested in reducing overtime labor. There's one partner of ours, they have 30 hotels, and their commitment in the first year was, we want to reduce overtime by 1% across our properties. And they were able to do that. And because overtime was such a large category of expense for them, that reflected just an incredible incremental savings to the full portfolio. Reducing overtime isn't your only option, though. There's other companies that I've spoken to where for certain departments they were largely dependent on contract labor. And we all know that contract labor is incredibly expensive, but not just that, but it means you're not necessarily investing in the team members that want to grow and stay in your portfolio or even in this line of work. So I know of one company that specifically stepped into overtime labor, because overtime labor was still less expensive than contract labor, and it allowed them to invest in their in-house team. So the people that wanted cross training opportunities, that wanted learning opportunities, they were able to sign up for overtime shifts and increase their standard of living while learning more about hotel operations. Yes, on your P&L it will reflect an overtime labor amount, but that's where you need to understand the trade out. If you're stepping into that, but reducing contract labor, so your labor is still going down and you're investing in the future leaders of your business, then that might be the trade out for you to consider.

Sarah: Yeah, it's understanding what works best for your specific business, doesn't it? So we've got new data coming soon from the Q3 profitability performance report, launching November 13 on hoteldata.com. This is going to dive deeper into those budget versus forecast versus actuals across RevPAR, ADR, and GOP. And here's a sneaky peek at what the figures are showing us. Sadly, all metrics are down. Rooms revenue for Q3 is 12% down on budget, ADR 4% below budget. But those GOP margins, they're only 1.2 points off budget. So as we've seen today, the revenue gap continues, but operators are becoming more efficient at protecting that profit. If you want to click the QR code or visit hoteldata.com, you can subscribe for those data updates and it will ping straight into your email when the report lands. And that wraps up today's webinar. Lindsey, thank you so much for sharing such valuable insights.

Lindsey: Thank you so much for having me, Sarah. The big lesson from 2025 is adaptability. The hotels that stay closest to their data will be the ones who can continue to protect their profit and grow profitably in 2026.

Sarah: Thanks, Lindsey, and thank you to everyone who joined us. Be sure to follow Actabl on LinkedIn to stay informed on our upcoming webinars and subscribe to hoteldata.com for that Q3 profitability report. Thanks, goodbye.