• Hoteliers are budgeting for 2026 based on “realism,” with labor, renovations, and food and beverage costs being the highest expected expenses.
• Labor costs are stabilizing but remain high due to competition and inflation, with companies treating retention as an investment in service consistency.
• Renovation and maintenance costs are elevated due to high construction wages and tariffs, leading owners to closely scrutinize capital spending.
• To manage F&B costs and overall instability, operators are engineering and simplifying menus and focusing on contribution margin growth.

U.S. hoteliers are bracing for a road filled with cost increases as they finalize budgets for 2026, adopting a strategy based on “realism and not on hope.” The industry is adapting to a significantly more expensive operating environment where cost reduction and efficiency are prioritized over relying solely on revenue growth.

The three primary areas driving expense growth are labor, renovations, and food and beverage (F&B). Labor costs remain the largest expense, fueled by inflation and competition, though rapid wage increases have stabilized. Management companies are emphasizing staff retention as an investment in service consistency, rather than viewing labor purely as a cost to be minimized.

Renovation and maintenance costs remain elevated due to high construction labor wages and the lingering impact of tariffs. Owners are scrutinizing capital projects and proactively increasing their repair assumptions, recognizing that deferring necessary maintenance will negatively impact guest scores. In the F&B sector, costs are rising due to material instability; operators are responding by actively engineering and simplifying menus to improve contribution margins. To manage the overall financial environment, management companies are implementing comprehensive readiness plans that focus on daily financial forecasting and early communication with vendors to control expense growth.

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