Consumer (6 of 6)

Hotels and travel

About 9 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Hotels rent rooms by the night, and travel companies such as online travel agencies earn a cut for bringing them guests.

The big idea: A room left empty tonight can never be sold again, and most of a hotel's costs are the same whether it is full or not. So profit depends on filling rooms at a good price, which RevPAR (occupancy times average rate) measures in one number. One building often involves three companies: the owner who paid for it, the operator who runs it, and the brand that lends its name, and each earns money in a different way.

One unit, in numbers: One sold room night at a franchised mid-priced hotel in the US: USD 160 comes in, and USD 40 (25%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: About 15 to 20 percent operating margin for listed hotel groups; asset-light brands earn more, owners lessRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: HighA lot of money must be tied up before the business earns anything, so the return on that money matters as much as the margin. More on capital intensity
The number to watch: OccupancyRooms sold divided by rooms available in a period.

Ask this first in a case

Who is our client: the owner of the building, the operator, the brand, or a travel platform? Each earns money differently.

Words used above (3)

Occupancy:: The share of available rooms that were sold.
RevPAR:: Revenue per available room: occupancy times ADR.
Asset-light:: A business model that earns fees without owning the buildings.

The industry's other words are explained in Words to know (11).

On this page (17 sections)

How money is made

Hotels sell room nights, their largest income, plus food and drink, meetings and events, spa and parking.
Brands earn franchise fees on rooms revenue, and operators earn a base fee on revenue plus an incentive fee on profit.
Online travel agencies earn a commission per booking (the agency model) or collect the guest's payment and keep a margin (the merchant model), plus advertising.
Hotel groups also earn from co-branded credit cards, selling loyalty points to partners, and branded homes.
Owners earn the hotel's profit after fees, and a gain if the property rises in value.
Tour operators sell packages (flight plus hotel) and keep the gap between the package price and their bulk costs.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One sold room night at a franchised mid-priced hotel in the US, with the hotel's costs shared out per night. Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
Room rate paid (average daily rate, close to the US average of about USD 160 in 2025)	USD 160	100%
Minus Labour: housekeeping, front desk, maintenance and managers (about 35 percent)	USD 56	35%
Minus Sales, marketing, administration and loyalty programme costs (about 12 percent)	USD 19	12%
Minus Energy and maintenance (about 8 percent)	USD 13	8.1%
Minus Distribution: OTA commissions on some bookings, booking systems and card fees (about 6 percent)	USD 10	6.3%
Minus Laundry, amenities and room supplies	USD 8	5%
Minus Franchise and brand programme fees (about 5 percent of rooms revenue)	USD 8	5%
Minus Reserve for furniture, fittings and equipment, FF&E (about 4 percent)	USD 6	3.8%
What is left (contribution)	USD 40	25%

Check: USD 160 minus USD 120 of costs leaves USD 40.

So what: The owner keeps about USD 40 of USD 160, before property tax, insurance and paying for the building. Only the laundry, supplies, some cleaning and commissions rise with each extra guest, so an extra night sold adds far more than USD 40: occupancy and rate together (RevPAR) are the lever that moves profit most.

Key measures(8)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Occupancy
Rooms sold divided by rooms available in a period. Glossary: Occupancy
Typical: About 62 percent across US hotels in 2025; big city and resort hotels can run above 80 percent[1]
Average daily rate (ADR)
Rooms revenue divided by rooms sold: the average price of a sold room night. Glossary: Average daily rate (ADR)
Typical: About USD 160 across US hotels in 2025[1]
RevPAR (revenue per available room)
Rooms revenue divided by rooms available; equal to occupancy times ADR, so it joins volume and price in one number. Glossary: RevPAR (revenue per available room)
Typical: About USD 100 across US hotels in 2025[1]
RevPAR index against the competitive set
The hotel's RevPAR divided by the RevPAR of similar nearby hotels, times 100. Above 100 means it wins more than its fair share.
GOP margin and GOPPAR
Gross operating profit (profit before fees, property costs and financing) as a share of revenue, and per available room.
Typical: About 37 percent for European hotels in 2025 (January to November); HotStats also reported about 44 percent in the Middle East and 47 percent in India in 2025[2]
TRevPAR (total revenue per available room)
All hotel revenue, including food, drink and events, divided by rooms available.
Channel mix
The share of bookings that come direct, through OTAs, from groups, and from corporate contracts. Each channel costs a different amount.
Typical: At Marriott about 68 percent of global room nights in 2025 were booked by loyalty members[4]
Pipeline
Hotels signed but not yet open. For a brand, it is the fee income of the next few years.
Typical: Marriott reported nearly 610,000 rooms in its pipeline at the end of 2025[4]

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Who is our client: the owner of the building, the operator, the brand, or a travel platform? Each earns money differently.
What is happening to demand for the destination: flights, visas, events, safety and the economy?
How does RevPAR compare with similar nearby hotels, and is any gap in occupancy or in rate?
What is the mix of guests and channels: leisure, corporate and groups; direct and OTA?
Is the pattern seasonal, and is the hotel new and still ramping up?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Search and inspiration
Margin varies
Search engines, social media, review sites, travel apps and AI assistants
Search engines earn from advertising that hotels and travel agencies pay for.
Step 2: Booking and distribution
Fat margin
Online travel agencies (OTAs) such as Booking.com, Expedia, Trip.com, MakeMyTrip and Agoda; hotel websites; travel agents and tour operators
OTAs charge hotels a commission, commonly about 15 to 25 percent of the room price, and need few assets.
Step 3: Getting there
Thin margin
Airlines, rail, car rental (see the Airlines brief)
Step 4: Brand, loyalty programme and booking system
Fat margin
Hotel groups acting as franchisors, such as Marriott, Hilton, IHG, Accor and Wyndham
Fees of roughly 4 to 6 percent of rooms revenue plus programme fees, with almost no buildings of their own.
Step 5: Running the hotel
Medium margin
Operators under a management contract, often the same hotel groups, or independent management companies
A base fee of roughly 2 to 4 percent of revenue (3 percent is most common) plus an incentive fee tied to profit.
Step 6: Owning the building
Margin varies
Families, real estate funds, REITs (listed property companies), and in the Gulf often government-linked developers
The owner pays for the building and refurbishments and keeps what is left after fees, so it carries most of the risk.
Step 7: The stay and experiences
Margin varies
Hotel restaurants, spas and events; tours, attractions and short-term rentals such as Airbnb

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

The fattest margins sit with those who own the guest relationship without owning buildings: brands earning franchise fees and OTAs earning commissions. Owners carry the building, the refurbishments and the downturn risk, and keep what is left after everyone else is paid, so their return swings with occupancy and rate.

Cost structure(6)

The main costs, each as a share of revenue (the money from sales).

Labour, all departments (percent of total revenue, full-service hotel): 30 to 40 percent
Sales, marketing, administration and loyalty costs: 10 to 15 percent
Food and drink cost of sales (only hotels with restaurants and events): 8 to 12 percent
Energy and maintenance: 7 to 10 percent
Distribution: OTA commissions, booking systems, card fees: 4 to 8 percent
Management and franchise fees, paid by the owner below gross operating profit: About 3 to 8 percent, depending on the contract

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

US hotel occupancy, ADR and RevPAR, 2025: About 62.3 percent, USD 160.54 and USD 100.02[1]The first full-year fall in US occupancy and RevPAR since 2020.
GOP margin, European hotels, 2025 to November: About 37 percent; about 42 percent in Southern Europe and 33 percent in Western Europe[2]
GOP margin by region, 2025 (reported August 2025): About 44 percent in the Middle East, 47 percent in India, 30 percent in China[3]The lessons give 30 to 40 percent for a typical full-service hotel; India and the Middle East ran higher in 2025. The report does not say which months it covers.
Operating margin, US-listed hotel and gaming companies: About 19 percent[6]Mixes asset-light brands, hotel owners and casinos, so a single hotel can differ a lot.
Share of Marriott rooms franchised or licensed, end of 2025: About two thirds; less than 1 percent owned or leased[4]
Booking Holdings revenue as a share of gross bookings, 2025: About 14.5 percent (USD 26.9 billion of revenue on USD 186.1 billion of bookings)[5]Our calculation from the reported totals; it blends commissions, merchant margins and advertising.

Typical cases(7)

Case prompts you might hear in this industry.

Our client owns a 300-room hotel in Bangkok. Profits have fallen for two years. What is going on, and what should they do?
A developer wants to build a 400-room resort on the Red Sea coast. Should they go ahead?
A hotel group pays too much in commissions to online travel agencies. How can it reduce that dependence?
Should our hotel raise its room rates by 10 percent?
How many hotel rooms will a Gulf city need to meet its visitor target for 2030?
A global hotel group is thinking of buying a regional hotel brand in India. Is it a good deal?
A Dubai hotel's bookings collapsed after the airspace closures of 2026. What should the owner do in the next six months?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Looking only at occupancy or only at price. Use RevPAR, and then check profit, because a lower rate that fills rooms can still lose money.
Forgetting who pays for what: the operator and brand take fees, while the owner pays for the building and the refurbishments.
Treating OTA commission as pure waste. An OTA booking that fills a room that would stay empty is still profitable.
Ignoring seasonality: a beach resort can be almost full in its high season and half empty in the low season.
Using 2025 Gulf travel data in 2026 without checking the effect of the conflict on flights and bookings.

What changed, 2024 to 2026(7)

Recent changes a case could turn on.

Travel reached new highs. UN Tourism estimates about 1.52 billion international tourist arrivals in 2025, up about 4 percent, while Asia and the Pacific were still about 9 percent below 2019 levels.[7]
Saudi Arabia is building a tourism economy: about 122 million visits in 2025 (domestic and inbound), up about 5 percent, against a target of 150 million by 2030, with many new hotels and resorts under way.[8]
The 2026 Gulf conflict hit hotels hard. After airspace closed from 28 February 2026, Dubai hotel occupancy fell as low as about 21 percent in late March, against more than 70 percent a year earlier (STR data).[11]
The Gulf recovery was slow. Dubai hotel occupancy averaged about 56 percent in the first half of 2026, about 30 percent lower than a year earlier, and in August the big full-service Gulf airlines were still flying about 20 to 25 percent less capacity than in 2025. Check current data before any Gulf hotel case.[10]
US hotel demand softened: 2025 was the first year since 2020 in which US occupancy and RevPAR fell, as rates rose less than 1 percent.[1]
OTAs moved toward taking the payment themselves. Booking Holdings' merchant revenues rose about 25 percent in 2025 while agency revenues fell about 7 percent, and room nights reached about 1.24 billion.[5]
Regulators turned to travel platforms. The European Commission designated Booking as a gatekeeper under the Digital Markets Act in May 2024, which limits practices such as requiring hotels to give the platform their best prices.[13]

Players by region(6)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: Marriott
Hilton
IHG
Accor
Hyatt
Wyndham
Booking Holdings (Booking.com, Agoda)
Expedia
Airbnb
Trip.com
Europe: Accor (France)
Meliá (Spain)
Whitbread, owner of Premier Inn (UK)
Booking.com (Netherlands)
TUI, tour operator and hotels (Germany)
Middle East: Jumeirah (Dubai)
Rotana (Abu Dhabi)
Emaar Hospitality (Dubai)
Red Sea Global, resort developer (Saudi Arabia)
Almosafer, travel agency (Saudi Arabia)
India: Indian Hotels Company, owner of Taj
ITC Hotels
Lemon Tree Hotels
OYO, budget hotel platform
MakeMyTrip, online travel agency
Southeast Asia: Minor Hotels (Thailand)
Banyan Group (Singapore)
The Ascott, serviced apartments (Singapore)
Agoda, online travel agency
Traveloka, online travel agency (Indonesia)
United States: Marriott
Hilton
Hyatt
Choice Hotels
Expedia
Airbnb
Host Hotels and Resorts, a hotel REIT

Words to know(11)

Linked words have a fuller entry in the glossary.

Occupancy (glossary entry): The share of available rooms that were sold.
ADR (average daily rate) (glossary entry): The average price paid per sold room night.
RevPAR (glossary entry): Revenue per available room: occupancy times ADR.
GOP (gross operating profit) (glossary entry): Hotel profit before management and franchise fees, property costs and financing.
OTA (online travel agency) (glossary entry): A website or app such as Booking.com or Expedia that sells hotel rooms and flights for a commission.
Management contract (glossary entry): An agreement in which an operator runs a hotel for its owner in return for fees.
Franchise: An agreement in which a brand lets an owner use its name and systems in return for fees; the owner runs the hotel.
Asset-light (glossary entry): A business model that earns fees without owning the buildings.
FF&E reserve: Money set aside each year to replace furniture, fittings and equipment.
Competitive set: The group of similar nearby hotels a hotel compares itself with.
REIT (real estate investment trust) (glossary entry): A listed company that owns property, such as hotels, and pays out most of its income to shareholders.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(13)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

Practise it

Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.