Managing Economic Uncertainty in the Hospitality Industry
In my article on Hotel Operating Costs: Everything is More Expensive, published on Feb. 8, 2026, in HotelExecutive I discussed the specific challenges resulting from inflation costs that are up 25% since 2021, with wages up 22% since then. In this article, I want to discuss the other factors which the industry needs to address due to challenges around domestic and international travel, and the economy.
As I write this article, gas prices continue to increase according to the US Energy Information Administration.
Much of this increase is tied to the increasing price of a barrel of oil, the result of the current war in the Middle East and Iran's blocking of the Strait of Hormuz. While it is eminently possible that the Strait may have reopened by the time this article gets published, the industry consensus is that it will take several months for capacity and production to ramp back up and that high gas prices will continue into late 2026 or early 2027. As I write this no one knows specifically when the Strait will open again or how long it will take for countries such as Qatar to move all the oil they're stockpiling.
The following chart shows the trend for International travelers from 2020 – 2025. It starts with the pandemic collapse to 19.2M in 2020, a slow 2021 rebound, then strong a recovery through a 2024 peak of 72.4M. 2024 is followed by a notable 2025 drop to 68.3M, the steepest single-year decline since 2020, widely attributed to geopolitical friction and reduced travel confidence in the US market.
Other factors that will impact international travel include:
Visa and entry friction - processing delays and heightened scrutiny under tightened immigration policy may deter visitors, particularly from key long-haul markets like India, China, and Brazil.
Dollar strength - a persistently strong USD made US travel expensive for international visitors.
Geopolitical perception - travel advisories and negative sentiment in European and Canadian markets (the US's largest source markets) began to suppress demand.
Just as gas prices have increased at the pump, jet fuel prices have also increased. And while there is limited data available to compare plane tickets in 2026 to 2025, the increase in fuel prices (approx. 98% in 2026 vs. 2025) is anticipated to lead to an increase in ticket costs. Additionally, it appears that airlines are also looking to increase ancillary fees (luggage, seat upgrades, etc.) as a means of managing the costs. Air travelers may be paying more for tickets and for luggage.
Thus the 3 major drivers of hotel occupancy: people driving, international visitors, and domestic air travelers are all experiencing notable price increases while the factors precipitating these increases have no clear end point.
All of this creates ever greater uncertainty and suggests several key changes or evolutions in how hotels operate.
Sell more creatively.
Plan more narrowly.
Operate more flexibly.
Sell More Creatively
I was recently looking for a hotel for a European vacation. As is often the case, I could choose a room that included breakfast throughout my stay or not. A traveler looking to book a room in the US can choose among select service properties that offer free breakfast (Hampton Inns, Fairfield Inns, etc.) or full-service properties that do not.
Most full-service properties allow you to add breakfast to your stay, but it is rare to see a room option with breakfast and a room option without after entering the dates of a trip. And while it is interesting that numerous full-service hotels offer packages with breakfast for special occasions, especially Valentine's Day, this is rarely an easily accessible offering.
Resorts offer packages. Golf resorts offer packages which include golf play to make it easier for guests to organize their vacations. Many resorts allow you to purchase additional services such as massages and other spa treatments. But it's generally not easy. I recently looked at 4 different Hawaiian resorts to consider their options.
One resort apparently offered no packages (at least I didn't find any) although there was then an option to get more points in their loyalty program and pre-pay parking. One resort offered a golf and breakfast package which was to be found after choosing a room type. A third offered a room with breakfast for occupants on the first screen I saw and a fourth offered an F&B credit along with a breakfast discount. All of the properties offered multiple room types, and, in one case, there were over 15 room types from which to choose before getting to see potential packages.
In short, rather than putting the packages up front and then allowing the customer to choose a room type, they all started with room type and if one didn't choose a room it would be possible to miss the opportunity to see available packages. With the exception of the one property that specifically offered a breakfast package before choosing a room type, all the other offerings required digging to get to packages.
While the term Staycation goes back over 75 years, the rising cost of air travel makes local trips more appealing. Hotels can take advantage of this with more easily accessible packages and. I would suggest, collaborating with local museums and cultural sites to build packages that are purchased more easily. The OTA's, along with the airlines, offer vacation packages that include air and hotel. Why not take a more micro approach and offer a prospective guest a trip to your city / community that includes entry to museums or other cultural sites of interest.
Hotels just need to make it easier. Packages should be more easily accessible when a prospective guest goes to the website, regardless of whether it's the brand's site or the individual hotel's.
Plan More Narrowly
When I started in the hotel business (which was before the widespread use of Excel and other spreadsheet programs), annual budgets generally involved a draft, a second or third iteration, and a final budget. Once computers came into use, the process ended up taking longer and longer. Budget processes that start in August and September may still be ongoing into December, even January.
But in today's environment, projecting revenues and activities (occupancy, etc.) seems as much of a dartboard game played by really good players as it does a logical process of predicting the future. Even as I write this, the eleven cities hosting World Cup games are concerned about the originally anticipated surge in business.
You have to wonder why we do 12-month budgets that then sit undisturbed. If less time was spent on the next 12 months for developing a budget and more time spent on the next 90 days, planning would improve. A 90-day window requires less work to analyze year over year than 12 months. Because the next 90 days are closer than Oct – Dec. of the following year more is known about anticipated transient and group demand. The property is then better equipped to plan staffing and supply needs for the near term.
I am not suggesting that the annual budget be eliminated. I recognize that owners and investors need a longer-term perspective. But I've sat in too many P&L reviews in which the problems are too often attributed to a poorly constructed budget which ultimately reduces accountability. Thus, the annual budget should consume less time and the re-forecasting of the next 90 days (essentially, a 30-60-90-day projection) needs more attention rather than, as is often the case, a quick revision to the original budget.
This can be accomplished by setting up a template that allows the team to put in a new top line forecast which will then roll through the expense and labor forecasts. A key to making this approach effective is to have agreement on the drivers or KPI's, agreement on which costs are fixed, variable or semi-variable (e.g., cable fees are fixed, room amenities are variable, lobby flowers are semi-variable). Labor should be viewed from the same perspective, and properties should be careful not to treat too much labor as fixed.
By refocusing on the shorter term and acknowledging the current instability, a P&L review focusing on Actual vs. Reforecast will yield a more effective and meaningful assessment of performance.
Operate More Flexibly
As most readers will acknowledge, it has become increasingly common to have a department focused on responding to guest requests. Typically, this department has, at minimum, combined previous phone oriented activities (restaurant reservations, In-Room Dining Orders, phone calls, etc.) or even integrated deliveries to guest rooms such as towels, amenities, In-Room Dining deliveries, etc. This trend has been underway since Westin created Service Express in the last century. And most brands and management companies have some variation on this approach today.
Many years ago, I did some work at an old resort in the Catskill mountains of New York. Unlike the many hotels I have been to in the last 40 years, there was not a separation between Rooms and F&B. The separation there was between Front of the House staff and Back of the House staff.
As much as hoteliers talk about the importance of cross-utilization, there sometimes seems to be an invisible line between Rooms employees and F&B employees. At best, that line is crossed when an individual employee is qualified to work in an F&B department and a Rooms department, although the ease with which this cross-utilization occurs is highly dependent on the scheduling technology available.
Nonetheless, the general approach to staffing in the industry is that there are people in the Rooms division (Housepeople and Public Space people) who clean things and people in the F&B division who clean things (stewards, utility cleaners and dishwashers). Banquet Housepeople clean inside Banquet rooms and Public Space cleaners clean outside banquet rooms. Why does the job change at the doorway?
I recognize that organization charts, P&L's and labor management processes would all have to be reconsidered if we looked at the context of the actual work rather than the historic division to which it has been assigned. What if a hotel had a cleaning department that was responsible for cleaning front of house public space and back of the house (kitchens)? What if the people cleaning banquet rooms on banquet floors also cleaned banquet area bathrooms (especially when the banquet rooms are on a separate floor and public space cleaners have to devote travel time to going up or down to those floors)? What if the person who handles the late afternoon check-ins transitions to working as the Host/ess in the restaurant after the check-in runs was over?
There are a variety of ways to think of operations without assuming the classic organization structure dictated by Rooms and F&B. And while I recognize that hotels operating under CBA's in various municipalities may have more restrictions on how they can approach looking at work in the operation, hotels without unions could learn to do more with less by cross-utilizing people based on the requisite skills and knowledge they possess rather than the division which employs them.
Conclusion
In the past, certain crises that have impacted our industry have challenged hoteliers over the long term (the Covid Years, the crash of 2008). Others have been shocks to the system (9/11) that, once complete, allowed the industry to work towards recovery. But if we look back at the challenges of the last 25 years one can assume that more will come and, just as likely, from unknown sources.
Making it easier for customers to buy, planning in a narrower time frame and breaking out of some of the old operational perspectives will continue to help the industry navigate this and future times of challenge.
Originally Published in Hotel Business Review - Hotel Executive
