Rising costs are key concern for accommodation businesses
A new report has been launched by Expert Market looking at the state of the accommodation industry – showing that rising costs around labour, maintenance, and interest rates are primary concerns for franchise and independent businesses over the next year.
The Accommodation Industry Report surveyed more than 400 accommodation businesses on the state of the industry, their biggest upcoming challenges, and how they aim to address them.
It found that ‘rising labour costs’ was a primary risk facing their operations for just over a third (34%) of accommodation businesses. 48% said ‘Staffing Issues’ was their main risk, adding to cost pressures as ‘increasing staff salaries’ was stated as the primary way to address this, according to 34%.
‘Rising maintenance costs’ (27%) were also cited as one of the top concerns, alongside rising interest rates (19%), and rent increases (12%).
With US inflation rates reaching 3% at the start of the year, there is a complex economic environment for accommodation businesses in 2025. At a time when the accommodation industry is experiencing the highest industry quit rate since 2022, staffing is at the core of their cost concerns.
When broken down by franchise and independent businesses, franchises are feeling a lot of strain from their staffing costs, while independents are seeing more financial impact related to their premises as well as customer churn.
As economic hardships rise, the report highlights that staffing is one of the most affected areas creating a perfect storm for the industry – especially for franchise businesses.
When asked which areas rising business costs had affected most, cutting back on ‘hiring and & staffings levels’ was the main area for almost half of franchise (49%) businesses, and over a third of independents (34%). A further impact on staff is that a quarter of both franchises and independents are reducing investment into employee benefits & welfare.
Renovations and innovations were another two key areas where businesses were making cutbacks. 42% of franchises and 33% of independents cited reducing investment in interior/exterior building renovations as well as in customer experience enhancements, at 27% and 14 respectively. Technological upgrades were reduced by just over a quarter (26%) of independents, and just under a quarter (22%) of franchises.
Relying on new technology is another way accommodation businesses are aiming to keep costs down and customers as well as staff happy.
When asked about the changes expected to be made in the next 5 years, ‘Relying more on mobile apps to communicate with guests’ and ‘Increasing the use of automated room amenities’ came out on top from 14% of those surveyed. Automating guest communication is a key theme – 5% said they’d ‘rely more on AI chatbots for guest communication’, particularly as 12% said they’d like ‘less reliance on front desk for customer support’.
Expert Market’s editor, Chris Maillard, comments: “It’s an economically tough time for many businesses, and with the balancing of keeping staff and facility needs, the accommodation industry has a huge set of challenges ahead.
The report shows that people are the key element to a successful accommodation business. However, as they have the highest quitting rates of any industry, this will not be easy to manage. It has to be a mix of hiring people who love this type of work, and retaining them with good salaries and incentives.
Implementing new technology such as mobile apps and chatbots should help shoulder the increased burden on staff. These solutions are still fairly limited, but if they manage the workload, will be well worth the investment.”