Opportunities and Challenges Facing the US Hotel Industry

In recent years, the hotel industry has experienced significant changes and developments driven by market consolidation and evolving customer preferences. Franchisees and franchisors are strategising to navigate these shifts, with larger hotel owners seizing opportunities to acquire and revitalise properties. Major hotel chains are also expanding their portfolios through acquisitions and brand development.

At the same time, the industry is responding to a new wave of traveller demands, creating unique and tailored experiences that cater to diverse customer profiles and interests. This guide explores the factors influencing hotel market consolidation and the innovative approaches franchisors have taken to redefine guest experiences and capitalise on emerging opportunities.

Hotel market consolidation

Factors influencing hotel market consolidation

On the franchisee side, the state of the hotel industry generally and of hotel financing loan markets specifically is creating conditions that are likely to lead to increased consolidation by large hotel owners. Following the end of the COVID-19 pandemic, franchisors gradually started to require franchisees to comply with standards more stringently, including requirements for capital expenditures necessary to modernise and improve hotel assets.

However, while the last 12 to 18 months have resulted in increasing revenue per available room (RevPAR) generally, this shift has also coincided with the maturity dates for a high level of US hotel securitised loans and rising interest rates. Elsewhere, increased property insurance costs and persistent inflation have created difficult refinancing conditions for many hotel properties.

These conditions have presented many smaller franchisees with difficult decisions depending on the state of their particular hotel and market. While some franchisees may have the option of refinancing (often at higher interest rates) or investing additional equity into the hotel asset, those that lack access to capital are often faced with difficult circumstances, such as an involuntary lender action or an untimely sale of the hotel to a party with the necessary capital to invest in the hotel.

Many larger franchisees (including those backed by private equity or other large family offices) are increasingly finding considerable buying opportunities at relatively reasonable multiples. These buyers’ ready access to capital is presenting significant opportunities to purchase and revitalise hotels, which is leading to even greater franchisee consolidation.

On the franchisor side, the last decade has witnessed significant consolidation of hotel franchisors via acquisition and brand development, such as through the acquisition or development of various lifestyle and other brands. For example, global brands, such as Hilton and Marriott (among other major hotel chains), have acquired and developed numerous additional brands in the last few years.

Franchisor companies have leveraged these acquisitions of niche and other brands to increase their offerings and continue to consolidate certain parts of the transient lodging market.

Redefining guest experience and creating brands (and experiences) to capitalise on opportunities

Many franchisors within the hotel industry are making significant efforts to address rapidly changing customer demographics and preferences, including an increasing consumer demand for more authentic and “unique” lodging experiences. A number of new traveller profiles have emerged in the last few years, with many of these travellers having significantly different preferences from established “business traveller” or “family vacation traveller” categories.

For example, travellers today have more varied preferences and demands, such as solo travellers, adventure travellers and health-oriented travellers. This market-driven change has caused hotel companies to respond and start to tailor their offerings to these customers’ unique interests.

While there are numerous examples of these new types of offerings, a few examples include:

• wellness and health-oriented travel experiences;
• curated, authentic local experiences (sometimes with a focus on unique history or heritage, etc); and
• event-driven experiences, such as travel bookings and packages centred around specific cultural events, such as major concert tours or even significant competitive events like the upcoming FIFA 2026 World Cup.

In an effort to capitalise on these customer-driven market preferences and changes, many hotel brands are making large investments in branding and other service offerings. One innovative way franchisors have captured these new markets is by developing and maintaining “soft brands” that allow an “independent” hotel owner/operator to have most of the advantages of a large hotel chain (access to a centralised reservation system, customers, support, brand loyalty, rewards programmes, etc) while maintaining the unique naming, design and positioning of the hotel. This arrangement has allowed many franchisors to increase their total number of rooms while allowing them to authentically cater to an increasingly diverse customer base with specific expectations.

Each of the largest hotel brands in the USA has developed one or more of these “soft brands”. This has resulted in many unique hotels joining a larger hotel brand’s distribution system while maintaining the impression of independence, leading to more “authentic” traveller experiences for customers.

In addition to “soft brands”, many large hotel companies are either developing or acquiring specialty/boutique hotel brands targeted at specific customer markets. There are numerous recent examples of this phenomenon, including Hilton’s acquisition of the luxury lifestyle “NoMad Hotels” brand as well as the college-themed “Graduate Hotels” brand and Marriott International’s acquisition of the outdoor-focused “Postcard Cabins” brand. These transactions continue to accelerate across the hotel industry, allowing hotel companies to be flexible and creative in their efforts to respond to customer desires for unique and authentic travel offerings.

Diversity, equity and inclusion and environmental, social and governance in the hotel industry: trends and impact

Diversity, equity and inclusion (DEI) and environmental, social and governance (ESG) policies have become central pillars in the modern hotel industry, shaping business strategies and workforce development.

Research conducted by Cornell SC Johnson College of Business found a significant gap in diverse hiring and promotion within the hospitality sector. In response, companies are implementing targeted DEI strategies, including unconscious bias training, pay equity audits and neutral CV reviews. Mentorship programmes and inclusive leadership training have become staples at major hotel chains, such as Hilton, Marriott and Wyndham. According to an article by Travel Noire, these companies recognise that embracing DEI not only fosters innovation but is essential to effectively serve a global customer base.

The 2024 DEI guide by Seramount (a DEI consulting firm) further reinforces that inclusive workplaces improve employee retention and align with anti-discrimination compliance requirements. Travel Noire cites that despite backlash against DEI programmes, the hospitality industry continues to maintain them, taking the position that diverse teams better reflect and cater to increasingly diverse travellers.

At the same time, ESG practices have gained a similar momentum. According to CBRE’s reports, hotel companies are accelerating sustainability initiatives by enhancing energy efficiency, reducing carbon emissions and embracing water conservation measures. Brands like Accor, Hilton and Marriott are aligning their sustainability goals with international benchmarks, including the Paris Climate Agreement.

ESG policies are not just ethical choices but are strategic, responding to both surging energy costs and the evolving preferences of eco-conscious travellers.

The Hotel Tech Report highlights that sustainability is no longer optional but a business imperative. In 2025, consumer demand for green practices is influencing booking decisions, making ESG adoption crucial for maintaining competitiveness.

While headwinds may challenge the direction of DEI and ESG advancement, some hotels are choosing to maintain their policies. Hospitality companies are likely to continue implementing and refining DEI and ESG strategies, not just for compliance or image, but as integral components they contend will be key to their long-term growth and success.

Impact of tariffs, immigration policies and geopolitical uncertainty on hospitality transactions in the USA

Companies looking to acquire or operate hotels in the USA can be significantly affected by geopolitical uncertainty and tariffs, which can contribute to higher construction or renovation costs and create uncertainty with respect to the availability of essential hotel supplies and labour. According to a recent article by Travel and Tour World, the related diplomatic tensions can also negatively impact hotel demand by discouraging cross-border tourism and business travel.

In the USA, at the time of writing, there is significant uncertainty with respect to the outlook for tariffs, as the current administration has used tariffs as leverage in its economic negotiations with other countries as well as in connection with its efforts to stem the tide of illegal immigration and drug trafficking. This could lead to delays in some hotel development projects and other hospitality-related transactions until these uncertainties are resolved or relations are normalised.

Many hotels heavily rely on imports of items ranging from steel, aluminium and lumber to furniture, linens and electronics. Tariffs on the importation of goods into the USA therefore directly impact the feasibility of hotel projects, both with respect to initial development costs and projections for the financial viability of ongoing operations.

The hospitality industry may need to adjust to the challenges presented by new tariffs by managing costs and diversifying sourcing. This will not be the first time that international trade developments have challenged the hospitality industry and prompted supply chain restructuring, as tariffs on imported Chinese goods have led to a shift in sourcing hotel furniture from Vietnam, which now supplies 95% of case goods for hotels in the USA.

However, the most recent round of sweeping tariffs could make increased costs unavoidable and result in higher prices at hotels across the USA, including price increases at hotel restaurants, given the significant amounts of seafood, dairy, produce and meats that the hospitality industry imports.

More restrictive immigration policies can also have an impact on the hospitality industry, which relies heavily on temporary work visas to staff hotels. While there has been some improvement in staffing levels over the last few years, as of January 2025, nearly two-thirds of hotels are reporting continued labour shortages (with 9% reporting that they are severely understaffed).

In addition to disrupting the supply chain and availability of labour, geopolitical factors can impact travel patterns even in times of relative peace. The number of foreign travellers passing through the ten busiest US airports fell by over 20% at the end of March 2025 when compared to the previous year. Some are attributing this decline to the current “trade wars”, a volatile economic and political climate and “fears of detainment or harassment”.

Recently issued travel warnings or advisories with regard to the USA by its traditional allies may also be contributing to decreased international travel.

While the complexities created by tariffs, more restrictive immigration policies and other geopolitical factors are certainly presenting challenges for hotel developers and operators in the USA, they also present opportunities for adaptation and growth in the evolving global hospitality market. These challenges and the current level of uncertainty will necessitate a continued focus on new technologies and alternative sourcing strategies so that the hospitality industry in the USA can continue thriving through uncertain times.

Streamlining and personalising customer experiences through the use of modern technologies

Role of modern technology in reducing friction for hotel guests and streamlining hotel operations

Many franchisors are employing technologies to remove or mitigate friction points in the guest experience and gain efficiencies in hotel operations. In a world where convenience and efficiency are paramount, the hotel industry is embracing a wealth of modern technologies to enhance guest experiences. One of the primary focuses of new technological advancements is to reduce friction for hotel guests, ensuring their stays are as seamless and enjoyable as possible.

For example, mobile check-in and keyless room entry systems allow guests to by-pass traditional front desk procedures, offering swift and hassle-free arrival. Digital gratuity platforms also remove practical barriers to tipping and obviate the need for guests to carry or withdraw cash. These innovations not only improve guest satisfaction but also streamline hotel operations by reducing the workload on staff and minimising human error.

Another significant impact of modern technology on hotel operations is the enhancement of behind-the-scenes efficiencies. Automation plays a crucial role in optimising various aspects of hotel management. For example, advanced inventory management systems help track supplies and predict future needs, ensuring that hotels can maintain optimal stock levels without over-ordering or facing shortages.

Similarly, energy management systems that use smart sensors can adjust heating, cooling and lighting based on occupancy, leading to substantial energy savings and reduced operational costs. These technologies enable hotel staff to focus on more critical tasks, improving overall productivity and operational effectiveness.

The integration of big data and analytics into hotel operations is revolutionising decision-making processes. By leveraging data collected from various sources, hotels can gain valuable insights into guest behaviours, preferences and trends. This information allows hotels to tailor their marketing strategies, optimise pricing models and develop personalised promotions that resonate with their target audience.

Additionally, predictive analytics can forecast demand and identify potential issues before they arise, enabling hotels to proactively address challenges and maintain high service standards. The synergy between modern technology and data analytics is empowering hotels to create more efficient, guest-centric operations that drive both profitability and customer loyalty.

Leveraging emerging technologies to personalise the customer experience

Similar to the hotel industry’s rapid expansion in the use of experiential and lifestyle brands, the industry is embracing a wealth of modern technologies to enhance guest experiences via personalisation. A prime example of personalisation in the hotel industry is the use of artificial intelligence or AI-powered concierge apps, which offer an array of services aimed at meeting the unique needs of each guest.

These concierge apps can learn from previous stays and interactions, allowing them to recommend activities, dining options and even room preferences based on individual tastes. For example, a guest who frequently orders vegetarian meals can be provided with a list of nearby vegetarian restaurants or can have vegan friendly snacks waiting in their room upon arrival. This level of attention to detail creates a feeling of being valued and recognised, significantly enhancing guest satisfaction.

Another important advancement is the implementation of smart room technologies. Hotels are now equipping rooms with devices that can adjust lighting, temperature and even curtains based on the guest’s preferences. By using a smartphone or voice commands, guests can personalise their room environment to suit their comfort levels, whether it involves setting the perfect ambience for a romantic evening or ensuring optimal lighting for a business meeting.

Hotels are employing data analytics to track guest feedback and preferences, allowing them to anticipate needs and proactively provide personalised services. For example, a hotel may notice a trend in guests preferring lower room temperatures at night and can adjust settings accordingly for future stays, ensuring a consistently comfortable experience.

While these emerging technologies can result in improved guest satisfaction, unlock new guest experiences and lead to more efficient operations, care must be taken to ensure that new applications are data secure, respect guest and employee privacy and comply with applicable laws and regulations.

Agreements with third-party providers to develop and maintain the software tools underpinning these new offerings should be reviewed to confirm that the hotel customer maintains the necessary oversight and rights to implement these applications effectively and safely.

Conclusion

Modern technology is transforming the hotel industry by reducing friction in guest experiences and streamlining operations. The integration of automation, big data and analytics is driving efficiency and enhancing personalised services, creating a more guest-centric approach. As hotels continue to embrace advancements, they will likely see increased profitability and customer loyalty. However, the industry also faces challenges such as the complexity of implementing new technologies, ensuring data security, geopolitical uncertainty and navigating DEI and ESG forces. Ultimately, the drive to enhance and personalise customer experiences suggests the continued adoption of technology, coupled with continued expansion of hotel brand options.