Are Hotels Profitable this Year? 10 Most Profitable Hotels and How They Make It

Are Hotels Profitable in 2023? 10 Most Profitable Hotels and How They Make It

Most people have fantasies about visiting one of the most opulent hotel brands in the world, like Burj al Arab. 

Luxury hotels offer everything their visitors require to feel like royalty, including excellent room service and employees who are available to you around the clock.

Top-upmarket hotel businesses today go to even more unusual efforts to satisfy their visitors.

Staying in opulent hotels can be one of life’s most priceless and special experiences because of its gourmet cuisine, first-rate service, and cutting-edge technical innovations that enable it to elevate its user and guest experiences.

However, what would happen if you were a hotelier who had trouble securing a consistent stream of income?

Or is the hotel business you’re running not profitable enough?

Hence, knowing how to calculate your hotel profit is essential if you are a hotel owner in charge of a hospitality business because it will help you stay competitive and relevant in the congested business environment. 

Let’s look at how to maximize your hotel revenues and how the best hotel chains generate their income.

Furthermore, this article seeks to answer the following questions:

“Are hotels profitable?”, “is owning a hotel profitable”, “Are hotel business profitable”, and “Is the hotel business profitable?”

Key Takeaways


  • Short-term lodging and services associated with accommodations are offered by the hotel sector.
  • Hotels owned by C corporations and hotel REITs make up the majority of the sector.
  • C-corp hotels provide franchise licensing, branding and marketing, and hotel management.
  • The acquisition, ownership, and management of hotel buildings are the main priorities of hotel REITs.

Top 10 Most Profitable Hotels and How They Make It

The top 10 most profitable hotels and how successful these hotels are are outlined below;

  • Marriott International
  • Starwood Hotels & Resorts
  • Hyatt Hotels
  • Hilton
  • Taj
  • Wyndham Hotel Group
  • Best Western
  • AccorHotels
  • InterContinental Hotels Group
  • Choice Hotels

See also- TikTok Monetization: How Much Does TikTok Pay Per View

1. Marriott International 

are hotels profitable

Three hotel brands—Delta, Marriott, and Ritz-Carlton—make up the Marriott International hotel chain. 

Marriott is regarded as the most lucrative luxury hotel and produced more sales revenue in 2019 than any other hotel brand, according to Statista.

This hotel group doesn’t anticipate slowing down its rate of expansion anytime soon, with 250,000 rooms spread across 101 facilities globally. 

The goal for Marriott in terms of profitability is to raise earnings per share.

Along with repurchasing $174 million worth of stock, they also make money through signing, purchasing, and developing new properties for existing hotels. 

Marriott International is the clearest illustration of what will drive a profitable hotel in 2021 with an EPS of $0.87, EBITDA of $457 million, and a 5.4% RevPAR. 

Finally, $10.6 billion is thought to be the current revenue.

Visit hotel here

2. Starwood Hotels & Resorts

are hotels profitable

The hotel brands Sheraton, Westin, and 4 Points by Sheraton are all part of Starwood Hotels & Resorts Worldwide Inc. 

The major objective of HOT, another wildly popular and prosperous hotel brand, is to discover the most lucrative and effective strategies to raise EPS.

Repurchasing shares is their main method for turning a profit. 

Although HOT might not be as successful as Marriott, the company nonetheless managed to buy back 1.2 million shares in 2015, generating $228 million in total from only share repurchases.

HOT is still highly committed in its attempts to create 14,400 rooms, with a net income of $143 million, an EBITDA of $311 million, earnings per share of $0.84, and a dividend of $0.375.

Visit hotel here

3. Hyatt Hotels

are hotels profitable

Although Hyatt may not be the hotel on our list with the highest profit margin, it undoubtedly ranks among the most well-known hotel chains in the world. 

Hyatt Hotels Corp., which operates hotels such as the Hyatt Regency, Grand Hyatt, and Park Hyatt, is one of the world’s most durable hotel chains.

As one of the most elite luxury hotel chains, Hyatt heavily relies on stock purchases, share repurchases, and the acquisition of properties throughout the world to generate revenue. 

With 600 properties currently under management, the business spent about $187 million just on stock purchases in 2015. 

Furthermore, a $2.1 billion estimate for Hyatt’s current revenue is provided.

Visit hotel here

4. Hilton

are hotels profitable

In the world of hotels, Hilton is one of the top names.

Also, despite the brand’s worth declining by 30% as a result of the coronavirus pandemic, it has long held the title of most valuable hotel firm.

Hilton’s corporate expansion strategy, though, remains its strongest asset despite the brand’s value decreasing to $7.6 billion. 

Despite the pandemic, the hotel chain has stated that they intend to add 17,400 more rooms to their pipeline.

In total, there are going to be more than 400,000 new rooms. 

With such a remarkable hotel portfolio under its belt, Hilton and its other seven hotel brands are likely to surpass $13,8 billion in total brand value.

Visit hotel here

5. Taj

Taj is a recent addition to the hotel industry, yet the business has already been given a AAA strength rating. 

This hotel brand has a strong corporate reputation, high employee satisfaction, incredible client familiarity, and an excellent sense of the most profitable marketing initiatives.

These motivating elements make Taj, with a total brand worth of $296 million, one of the strongest hotel brands in the world. 

Additionally, with a score of 89.3 out of 100, the hotel has a very strong Brand Strength Index.

Taj’s incredibly successful five-year plan, which had as its main objectives the sale of non-core assets and overcoming the major difficulties presented by the coronavirus outbreak, is the reason for the company’s tremendous profitability.

Visit hotel here

6. Wyndham Hotel Group

are hotels profitable

The Wyndham Hotel Group is ranked first among the top hotel firms based only on the number of properties it has, with close to 9300 units spread across 75 different countries, according to the company’s global portfolio.

The hotel’s two main competitive advantages are its upmarket lodging and sound business strategy, which enable the company to prosper and expand. 

More importantly, the Wyndham Hotel Group earns $4 billion in sales each year from its over 830,000 rooms.

Visit hotel here

7. Best Western

are hotels profitable

Best Western is a privately held hotel operator that operates three cutting-edge hospitality brands: Best Western Premier, Best Western Plus, and Best Western. 

One of the most prosperous hotel chains in North America, they own more than 2,000 hotel units in the United States.

The company, which has more than 58 million members in both Canada and the US, has won numerous honors for its outstanding services. 

Six billion dollars is thought to be the brand’s overall market value. 

The Best Western Rewards loyalty program, which has over 35 million members and has won the company high positions on the World Report’s Best Hotel Rewards Programs, is their greatest strength.

Visit hotel here

8. AccorHotels

are hotels profitable

AccorHotels is one of the biggest hotel brands outside of the US, with 25 hotel brands in their portfolio. 

With FRHI Hotels & Resorts, which welcomes more than 500,000 guests daily, AccorHotels achieved great success.

The hotel’s well-known reward program, Club AccorHotels, brings together over 27 million visitors from all over the world and offers access to 4,530 properties. 

The brand’s greatest advantage is that it can accommodate all kinds of customers, regardless of their financial situation. 

For this reason, AccorHotels offers a mix of opulent luxury brands and quality comfort brands that are reasonably priced. 

Lastly, the projected $2.24 billion market worth of the brand.

Visit hotel here

9. InterContinental Hotels Group

are hotels profitable

As a well-known brand in the hospitality sector with a reputation for creating elite hotel brands, this hotel chain has already established itself. 

The company earned a total of $1.784 billion in revenue in 2017 alone and currently owns more than 5,400 hotel units globally.

However, investing in Regent Hotels and acquiring a 51% interest was crucial to their success. 

Also, the business now has 974 properties and caters to travelers from more than 100 nations, expanding into a varied clientele.

Visit hotel here

10. Choice Hotels

are hotels profitable

With a primary concentration on franchising lodging services, Choice Hotels is one of the most successful and well-known hotel chains in the world. 

Comfort Suites, Comfort Inn, Econo Lodge, and Clarion are just a few of the recognizable names in the hospitality industry that make up the chain. 

Both leisure and business clients are served by Choice Hotels.

With over 6,300 properties and 6,800 rooms available, the company offers properties of all price points, from the most luxurious to the most affordable. 

As of right now, their brand is worth $1 billion.

Visit hotel here

How to Evaluate the Profitability of a Hotel Business

One of the key components to your success as a hotel manager is your capacity to be profitable. 

It deals with how well your hotel will be able to make money off of the services it offers over a specific time frame.

Utilizing profitability ratios is the most effective approach for calculating profitability. 

By examining financial accounts, you can utilize these ratios as essential tools to calculate your earnings with accuracy. 

They provide comprehensive insights into how your hotel brand functions.

Three key profitability ratios exist:

1. Return On Investment 

This determines how profitable the capital investment for your hotel can be. 

For hotel operators, this capital—which includes fixed assets and net working capital—is a crucial financial indicator. 

It aids in calculating your returns on borrowed and owned capital investments. 

You may quickly determine your return on investment (ROI) by dividing your operational income by the amount of capital invested, multiplying the result by 100, and then dividing the result by your total investment.

2. Return on equity (ROE)

You can estimate your entire profit by investing assets in the form of equity or risk capital using the return on equity (ROE) formula. 

The return on government bonds should always be better than this ratio, or at least equal to it.

3. Return on sales (ROS)

This ratio makes it easy to determine how much money your hotel makes from its sales and is a great way to gauge how you’re doing about your primary rivals. 

Before financial costs and taxes, ROS displays the typical profit margin for your hotel.

These ratios are used to calculate the profit a hotel will make, with the two most crucial ROS components being profit and sales maximization. 

Furthermore, to determine the revenue from your hotel, you can also use extra KPIs.

See also- Is Airbnb Profitable In 2023? Where to Invest

Is Owning A Hotel Profitable?

Are Hotels Profitable in 2024? Before you think of owning a hotel, you must first consider its profitability.

The response is that it depends. Location, room count, and staff size are just a few of the variables that have an immediate impact on your hotel’s earnings.

If owning a hotel is profitable, let’s look at an example.

An all-inclusive price for developing a five-star hotel with 500 rooms would be $300,000 per key or room.

Your capital cost decreases to $ 150,000,000 as a result. 

We are also aware that the cost is high; hence, most individuals use a mix of loans and investment capital to construct hotels.

Assume that you handled managing half of the capital from investments and half from a financier. 

Now, the typical financing period for a sum this large is 20 to 30 years.

As a result, $2,500,000 would be paid in capital repayments each year if your loan was spread out over 30 years. 

Furthermore, assuming a 5% interest rate, the capital’s interest will cost $3,750,000, or $125,000 a year. 

As a result, $2,650,000 would be the final amount repaid for the year.

To pay the debt and construction costs, assuming a 70% occupancy rate throughout the year, you must produce $7,572 annually, or roughly $20 each night.

Five-star hotels frequently charge $220 or even more each night, and this is also extremely common. 

Accordingly, you can pay for taxes, operational costs, and more by slightly raising the price of your hotel.

Now that this is done, whatever is left over goes to investors as dividends, and a sizable percentage goes into a savings account for future upkeep, improvements, etc.

In the end, you typically get to keep 10% of the profits, which is still not terrible despite being less.

How Much Money Do Hotel Owners Make Annually?

Are hotels profitable in 2024? This remains a major question on the lips of people. The pay for a hotel owner varies widely based on factors like the type of hotel, daily occupancy, operational costs, employee size, etc.

On the other hand, Shmoop claims that the average annual salary of hotel owners in the US is between $40,000 and $60,000.

Sincerely, the sky’s the limit for you in this profession if you master the abilities and knowledge necessary to manage a hotel.

One of the wealthiest businessmen in the hospitality sector is Bill Marriott, owner of Marriott Hotels, who has a net worth of $2.2 billion. 

You too may succeed to this level.

Pros and Cons of Owning A Hotel

The pros and cons of owning a profitable hotel are;

Pros

  • an enjoyable job
  • prospect for high profits
  • A range of prices
  • Possibilities for growth
  • Buy-back options with flexibility

Cons

  • entails significant maintenance costs.
  • exerting on the body
  • a small margin of profit
  • cost-effectiveness issues
  • Minimum standards for intensive management
  • Costly maintenance and repairs

Are Hotels Profitable in Nigeria?

Are Hotels profitable in 2024?

The hotel industry is successful in Nigeria for obvious reasons, such as hotels developed and positioned near tourist attractions, hotels near universities, or hotels built and located near airports, whether they are 3-star or 5-star. 

Tourists and travelers will always require a place to sleep or relax as long as there are trips across state lines or the nation.

Therefore, hotels are very profitable in Nigeria and are a very lucrative business for people to venture into.

A minor downside is that it requires a lot of capital to begin the acquisition and building of the proposed building.

Most Profitable Hotel in the World

The Burj Al Arab in Dubai is the most profitable hotel in the entire world. An artificial island in the Arabian Gulf is home to the seven-star luxury hotel The Burj Al Arab. The 202 suites of the hotel are all beautifully decorated with modern conveniences. The Burj Al Arab is famous for its top-notch service, luxurious lodgings, and incredible views of Dubai.

Because it is capable of charging such high prices for its rooms, The Burj Al Arab can generate such enormous revenue. The Burj Al Arab’s average nightly accommodation charge is above $1,000, while some suites can go for as much as $10,000. The restaurants, bars, and spa at The Burj Al Arab all contribute significantly to its overall revenue.

With this, you can easily get the answer to the question, “Are hotels profitable in 2024”

Frequently Asked Questions

Are hotels profitable in 2024?

Yes, hotels remain profitable in 2024, but a lot will depend on location, brand, amenities, and service. Although there is still recovery from the COVID-19 pandemic in the hotel sector, there is a growing desire for tourism, and hotel owners are reporting higher profitability.

How do these hotels make so much money?

1. Offer affordable rates: Hotels with affordable rates are more likely to draw travelers.
2. Focus on customer service: Hotels that put a priority on providing excellent customer service are more likely to have happy customers who will visit again.
3. Increasing revenue from other sources: will help hotels become more profitable. These options include bars, restaurants, spas, and event venues.
4. Reduce expenses: By lowering expenses like labor and energy costs, hotels can boost their profitability.

What are the challenges facing hotels in 2024?

1. The cost of living is increasing: which is putting strain on household budgets and may cause trip spending to decline.
2. Current COVID-19 epidemic: The ongoing COVID-19 epidemic still poses a threat to the hotel sector since it may result in travel restrictions and canceled reservations.
3. The conflict in Ukraine: Travel demand may be impacted by the economic uncertainty and disruption brought on by the conflict in Ukraine.

Conclusion 

Although entering the field of hotel revenue management may seem tiresome and difficult work, it isn’t that difficult to become proficient in it. 

It’s crucial to keep up with the most recent key performance indicators and ratios to understand what drives your hotel, market, clients, and industry at any given moment.

Revenue in the hotel and accommodation sector has recovered from the COVID-19 pandemic and was predicted to reach $188 billion at year’s end in 2022, up 11% from 2019. 

Revenue per available room is not anticipated to rise above pre-pandemic levels until 2025, inflation-adjusted. 

In 2024, hospitality businesses that offer alcohol and live entertainment may need to set aside 5% to 20% more money for insurance, and businesses that offer amenities like spa services will also suffer rate rises. 

Due to supply chain issues, inflation, and profit margin pressure from increased wages, the hospitality industry will experience declining profit margins in 2024.

CBRE increased its projection for hotel performance in 2022 and beyond in light of the first quarter of 2022’s strength, ongoing development freezes, higher inflation, and encouraging job data. 

Lastly, the average daily rate is expected to fully recover in 2022, while demand and income per available room are expected to increase in 2023, according to CBRE. This shows good signs that answer the question, are hotels profitable in 2024?

References

5 Comments
  1. I was lucky enough to find this phenomenal website recently, a jewel providing value to subscribers. The clever owner really understands how to crank out relevant content. I’m pumped about this find and hopeful the excellent content keeps coming!

  2. We just wanted to take a moment to acknowledge all the hard work and effort you’ve been putting in lately. Keep up the amazing job, you’re doing great!

Leave a Reply

Your email address will not be published. Required fields are marked *

© 2024 Moniepedia