The North American hospitality industry stands at an inflection point. While global RevPAR climbed 4% in 2024/2025 and the industry celebrated 4.8 billion room nights, the celebration feels muted among hotel owners, investors, and executives who did not materialize any
substantial RevPAR growth in the US as US RevPAR growth was modest in 2024/2025, around 2% on average. They understand the profound shifts reshaping their world. This isn’t just another cyclical downturn or recovery story. It’s a fundamental reimagining of what it means to operate successfully in hospitality.
Walk through any major hotel conference today, and you’ll hear the same underlying tension: optimism about demand recovery coupled with anxiety about operational realities that would have been unimaginable just five years ago. The old playbook isn’t working anymore, and the new one is still being written. To summarize it: The weather is partly cloudy!
When Labor Becomes Your Largest Challenge and at the same time – Greatest Opportunity!
The staffing shortage that began as a pandemic-era disruption has evolved into something far more structural. Despite improvements from the depths of 2022, 65% of surveyed hotels still report staffing shortages as we move through 2025. But the numbers only tell part of the story.
Consider the luxury hotel general manager who shared with me recently that her property is paying housekeeping staff 40% more than three years ago, and still struggling to maintain full staffing levels. Or the independent boutique owner who’s discovered that offering flexible scheduling has become more important to potential employees than traditional benefits packages. These aren’t temporary adjustments; they represent a permanent shift in the employer-employee relationship within hospitality.
What’s fascinating is how different property types are adapting. Extended-stay properties are finding creative solutions by cross-training unionized maintenance staff for light housekeeping duties, while chain hotels leverage their scale to offer career advancement opportunities that independent properties simply cannot match. Meanwhile, boutique properties are doubling down on their intimate culture and community feel to attract staff who value meaningful work relationships over corporate advancement tracks.
The financial reality is sobering: labor costs now represent approximately 50% of operational expenses for lots of properties, with the industry paying a record $123 billion in wages and compensation in 2024 alone. Yet forward-thinking operators are beginning to view this not as an insurmountable cost burden but as an investment in operational transformation.
Technology is playing an unexpected role here, not as a replacement for human workers, but as a force multiplier. Smart scheduling systems that predict optimal staffing levels based on historical data, weather patterns, and local events are reducing overstaffing costs by up to 15%. AI-powered housekeeping applications optimize cleaning routes and task prioritization, enabling existing staff to increase productivity by 20-30%. Guest service chatbots handle routine inquiries, allowing human staff to focus on the high-value interactions that truly drive satisfaction and loyalty
The Capital Reality Check That’s Reshaping Investment Strategies
The era of cheap money is over, and the hospitality industry is still learning how to operate in this new financial landscape. Years of low interest rates left many operators with what PwC describes as “atrophied financial reflexes,” and the adjustment has been painful.
Canada’s hotel transaction volume is forecast to reach $1.75 to $2.25 billion in 2024, yet the fundamental economics of these deals have changed dramatically. Independent properties find themselves particularly vulnerable, often lacking the financial resources of major chains to weather extended periods of higher borrowing costs. Luxury hotels requiring significant capital improvements face an especially challenging environment, where every renovation decision now carries heightened scrutiny and longer payback periods.
The ripple effects extend far beyond simple borrowing costs. Asset values are under pressure as cap rates adjust to new realities. Lenders are applying stricter criteria and demanding more detailed operational projections. Investors who once focused primarily on location and brand affiliation now scrutinize everything from energy efficiency to technology infrastructure to staff productivity metrics.
This financial pressure is forcing a level of operational sophistication that many properties have never required. Revenue management has evolved from simple seasonal adjustments to forecasting models and then to complex, data-driven strategies that optimize pricing decisions in real-time. Properties using advanced revenue management systems are seeing average rate increases of at least 3-7% without sacrificing occupancy, while predictive analytics help optimize capital expenditure planning and reduce unexpected expenses by up to 25%.
The most successful operators are learning to view financial constraints as creative catalysts rather than limiting factors. They’re diversifying revenue streams beyond traditional room sales, implementing partnerships with local businesses, and discovering that operational intelligence can often substitute for capital investment.
Guest Expectations That No One Saw Coming: Fast is not fast enough
Perhaps the most surprising development in hospitality isn’t technological. It’s psychological. Today’s travelers arrive with fundamentally different expectations than guests just five years ago, and these changes cut across all demographic lines. Research indicates that 65% of
travelers want hotel technology to be more advanced than what they have at home, while 58% believe AI improves their booking and stay experiences.
This shift transcends generational differences. The 65-year-old business traveler checking in via mobile app with the same comfort level as a 25-year-old leisure guest represents a profound change in baseline expectations. Guests don’t want technology for its own sake, they want seamless, intuitive experiences that anticipate their needs without creating friction.
Luxury properties face a particularly complex challenge: maintaining their premium positioning while meeting heightened technology expectations. The traditional luxury model of high-touch, personalized service must now coexist with guests who expect digital convenience. Chain hotels struggle to balance standardization with personalization, while boutique properties work to compete with major brands’ technology investments without losing their unique character.
Extended-stay guests present their own puzzle, expecting residential-level convenience combined with hotel-level service. They want the independence of an apartment with the support systems of a hotel, a combination that requires sophisticated operational approaches and often significant technology integration.
The most successful properties are discovering that personalization at scale requires intelligent systems working behind the scenes. Machine learning algorithms analyze guest preferences, booking patterns, and behavioral data to anticipate needs before guests even arrive. This might mean automatically adjusting room temperature, pre-selecting amenities, or customizing in-room entertainment options. Properties implementing comprehensive personalization strategies are seeing guest satisfaction scores increase by 15-20% and direct booking rates improve by 10-15%.
Navigating Uncertainty That Feels Different This Time
Market volatility has become the new constant, but the current environment feels qualitatively different from previous cycles. U.S. RevPAR growth expectations have been revised downward from 2.0% to 0.5-1.2% for 2025, while the imposition of tariffs in Q1 2025 has immediately impacted the Canadian economic outlook. Canadian RevPAR levels are projected to reach 128% of their 2019 benchmark, but this growth comes with increased uncertainty about sustainability.
The volatility affects different property types in distinct ways. Business hotels continue struggling with corporate travel patterns that remain fundamentally altered by remote work adoption. Resort properties must navigate seasonal demand fluctuations intensified by changing vacation behaviors. Urban hotels deal with the ongoing impact of distributed work on traditional business demand, while airport hotels benefit from recovered international travel but face capacity constraints that limit growth potential.
What’s particularly challenging is the speed at which market conditions can shift. Economic indicators, travel trends, and local events now interact in ways that can dramatically impact demand with little warning. Properties that once could rely on seasonal patterns and historical data for planning now require more sophisticated forecasting approaches.
Successful operators are implementing dual strategies: defensive measures to protect margins during downturns and offensive tactics to capture market share when conditions improve. This includes flexible pricing models that can respond rapidly to changing conditions, diversified revenue streams that provide stability during volatile periods, and strategic partnerships that offer mutual support during challenging times.
Advanced analytics platforms are becoming essential tools for navigating this complexity. These systems process economic indicators, travel trends, and local event data to forecast demand patterns with remarkable accuracy, enabling properties to adjust strategies weeks or months in advance rather than reacting to changes after they occur. Dynamic pricing algorithms help properties optimize revenue during both peak and off-peak periods by identifying micro-opportunities that traditional approaches might miss.
The Technology Integration That Actually Works
The conversation around technology in hospitality has matured significantly. The early enthusiasm for automation and digital solutions has given way to a more nuanced understanding of where technology adds genuine value versus where it creates unnecessary complexity.
91% of travel companies are planning moderate to aggressive growth in technology spending, with planned investments rising 14% in 2024. However, successful implementation isn’t about spending more, it’s about spending strategically on solutions that deliver measurable results while enhancing rather than replacing human hospitality.
The most impactful technology implementations are often the least visible to guests. Revenue management systems that continuously optimize pricing based on thousands of data points. Predictive maintenance platforms that prevent equipment failures before they impact guest experiences. Integrated CRM and property management systems that enable hyper-personalized guest communications and tailored offers throughout the booking and stay journey. AI-powered recommendation engines that suggest relevant services and experiences based on guest preferences and behavior patterns.
These behind-the-scenes improvements create the foundation for exceptional guest experiences while improving operational efficiency. Personalized experiences—powered by AI and integrated systems—are becoming the standard rather than the exception, as guests now
expect tailored offers, seamless booking processes, and mobile-first service delivery.
Properties that have successfully integrated technology share common characteristics: they start with clear operational objectives rather than technology features, they implement systems that integrate with existing platforms, and they provide comprehensive staff training that emphasizes technology as a tool for better hospitality rather than a replacement for human judgment.
Building Toward 2026: The Strategic Imperative
As we look toward 2026, the properties positioned for exceptional performance are those viewing current challenges as catalysts for transformation rather than obstacles to endure. They’re asking different questions: How can operational constraints drive innovation? What opportunities emerge from changing guest expectations? How can financial pressures force better resource allocation?
The most successful operators are discovering that sustainable competitive advantage now comes from operational sophistication rather than location or brand alone. This includes everything from advanced revenue optimization and predictive maintenance to personalized
guest experiences and strategic workforce development.
The implementation approach matters as much as the solutions themselves. Properties beginning with revenue management and operational efficiency tools that deliver immediate ROI are building foundation capabilities that support more sophisticated applications later. Guest experience enhancements follow naturally once operational basics are optimized. Advanced predictive analytics for strategic planning become possible only after data collection and analysis capabilities are established.
The Human Element That Technology Amplifies
Perhaps the most important insight emerging from this transformation is that technology’s greatest value in hospitality comes not from replacing human interaction but from amplifying it. The properties thriving in this new environment are those that combine traditional hospitality excellence with intelligent operational support.
Artificial intelligence handles routine inquiries so staff can focus on meaningful guest connections. Predictive analytics identify opportunities for personalized service that human staff can deliver. Operational automation manages background tasks so teams can concentrate on creating memorable experiences.
The fundamental truth of hospitality remains unchanged: guests seek authentic human connection and exceptional experiences. What’s evolving is how properties create the operational foundation that enables their teams to deliver these experiences consistently and
profitably.
The Path Forward
The challenges facing North American hoteliers are significant and multifaceted, but they’re creating opportunities for properties willing to embrace change. The key is recognizing that success in 2026 won’t look like success in 2019, and that’s not necessarily a limitation.
The properties that emerge stronger will be those that view current market conditions as a forcing function for operational excellence. They’ll invest in their people, leverage technology strategically, maintain financial discipline while pursuing growth opportunities, and never lose sight of the human experiences that define hospitality.
The transformation happening across our industry isn’t just about surviving current challenges, it’s about building capabilities that will drive success for years to come. The question isn’t whether the hospitality landscape will continue evolving; it’s whether your property will help shape that evolution or be shaped by it.
2026 success starts with the strategic decisions being made today. The future belongs to operators who understand that in an industry built on human connection, the best technology makes those connections more meaningful, more efficient, and more profitable.