Hotel operators are contending with softening demand, rising expenses and persistent labor pressures that are squeezing margins and forcing more disciplined decision-making across their portfolios. Hotel Business spoke with Sara Masterson, president, Olympia Hospitality; Patrick Short, president/COO, TPG Hotels & Resorts; and Heidi Wilcox, president/CEO, First Call Hospitality, to see how these issues are affecting their companies.
—Gregg Wallis
What are the biggest challenges hotels face today?
Masterson: Uncertainty is our greatest challenge. Macroeconomic instability is creating a lot of traveler concern across segments, which manifests in hotels as unpredictable demand patterns, short-term decision-making and shifting guest priorities. These conditions, compounded by rising operating expenses, from labor to goods, create an environment where flexibility is critical—both in meeting guest needs and in operating priorities. The ability to adapt quickly and in an integrated way across all disciplines—sales, marketing, revenue, operations, finance, strategy—is what separates the strongest performers.
Short: The biggest challenge hotels are facing today is that revenue growth isn’t keeping pace with rising costs. Margins are tightening again, and after years of working on and finding efficiencies, there’s only so much left that can be trimmed. Although the 2026 outlook indicates slight growth, hotels must be prepared for little to no growth—or even a decline. Labor, benefits, utilities and the cost of goods are all increasing faster than revenue, and that imbalance is really at the core of the challenge our industry is facing as we move into 2026 and beyond.
Wilcox: The biggest challenge today is maintaining margins. Whether it is demand changes or labor/operating expenses—discussions with teams on how to maintain the overall NOI in a just-in-time environment are occurring. Even with the capital expenditures planned, equipment is not lasting as long nor are there trades available to make repairs.
How are rising costs and labor pressures impacting operations?
Masterson: Rising costs, compounded by soft and unstable top-line performance, are putting significant pressure on operating margins. While labor availability has improved some over the past year, it remains, along with wage growth, a major challenge across markets. We’re responding by being both flexible and creative—rethinking staffing models, investing in cross-training and focusing on efficiencies that don’t compromise the guest experience. We are also using technology to help ensure that we are purchasing goods and scheduling labor to maximize efficiency.
Short: When it comes to labor, it’s not only about the raw wages being higher; it’s also about not having enough qualified candidates to choose from. Hospitality is a people business at its core, and when, as an industry, everyone is short-staffed, it puts extra pressure on the team members we do have, resulting in burnout rates that are at an all-time high. TPG is focused on developing our own talent internally, but even that’s challenging because the competition for good people is intense when everyone’s trying to recruit from the same pool.
Wilcox: These increases are reducing margins, affecting overall cash flow and the opportunity to accomplish lower cost expenditures within operations that were accomplished prior. We are continuously trying to find ways to reduce costs and finding ways of engagement with teams to reduce turnover.
Which strategies are most effective for boosting revenue and guest satisfaction?
Masterson: I think that personalization is the key. The more we tailor each stay to guest preferences—whether through curated experiences, packages or room selection—the greater the impact on both satisfaction and loyalty. Today’s traveler expects hotels to “know them” and anticipate needs. And by understanding and acting on those preferences, including amenity choices, upgrades, early arrival details or communication tone—we can create meaningful upsell and cross-sell opportunities at very low cost.
Short: On the revenue side, I always say we have to be scrappy. When the market is strong, everyone benefits, but when things slow down, we must be creative, disciplined and proactive in finding every possible opportunity.
When it comes to guest satisfaction, it all comes back to people. Investing in teams, especially local leaders, makes a huge difference. The more time they can spend out with guests instead of buried in reports or meetings, the better the guest experience. One additional reality that will help increase guest satisfaction is that more hotels are beginning to undergo renovations and refreshes. Product across the industry is getting tired, and the completed PIPs will help drive satisfaction.
Wilcox: Employ an experienced revenue management and sales team that understands the clients, market, brand and technology available. Another is to hire hospitable-minded staff as this is a skill not easily trained. This then gives the operations team the opportunity to focus on the hotel and guest expectations based upon the hotel training, SOPs and manager support. By accomplishing these strategies, we have seen increases year after year in markets that we thought were already at their peak.
How is technology changing how you manage properties and teams?
Masterson: At our core, hospitality is a people business and that remains unchanged—but technology enhances our ability to connect, not replaces it. From data-driven revenue tools to more intuitive communication platforms, we’re using technology to streamline decision-making, handle back-office functions, improve productivity and spend more time where it matters most: engaging with guests and supporting our teams.
Short: TPG views technology from two angles. 1) Does it deliver a real ROI? 2) Does it make operations more efficient in real time? From a corporate leadership perspective, it involves using technology to intimately know our properties and the business/guests/team members at those properties. Waiting for data is not the answer; it needs to be real-time. Most systems have the capabilities to do much more than hotels are currently utilizing them for, so proper training and optimization are essential.
Wilcox: We have had great partners with technology over the last few years that have given us the opportunity to maintain costs. This has been refined to the point we now can look at other new technologies, like AI. We are looking into ways AI can assist with sales prospecting, guest communications and review responses. The value to the hotels would have an immediate ROI.
Where do you see the most opportunity for growth?
Masterson: We believe there continues to be opportunity for management companies that can move fluidly between branded and independent hotels. Franchise hotels benefit from structured systems, brand standards and powerful distribution channels; we take those disciplines and apply them to our independent properties to drive consistency, profitability and reach. Conversely, we bring the entrepreneurial mindset and local authenticity of our independent hotels into our branded portfolio—creating a more distinctive guest experience. That cross-pollination is where real value is created. Owners increasingly want partners who can deliver both brand compliance and individuality—who understand how to leverage a flag when it adds value, but also how to operate successfully outside of one.
Short: I believe the biggest opportunities still come from partnerships. The markets that thrive are those where hotels, local businesses and city organizations work together to attract visitors and events. Collaboration creates success for everyone. Let’s not ignore the potential in making travel exciting again—promoting experiences, connecting with guests emotionally and reminding people why they love to travel in the first place. There are a lot of pressures in corporate travel to minimize costs, but ultimately getting people together, having great experiences and providing the results that they wouldn’t experience over Zoom or Teams will help drive repeat additional business.
Wilcox: Qualified hotel management will make a hotel profitable with high guest satisfaction while maintaining a quality hotel. This is any management/ownership partnership’s ultimate goal. Lately though, I see the opportunity for growth in this space when the management can provide consistent communications, property oversight, sales generation and accurate financials. If this is not happening, trust between the ownership and the hotel team wanes. Hotel management and ownership must be partners in order to truly keep on track.
