Editor’s Note: Connecting the Dots is a series of monthly conversations with Michael Dominguez, President and CEO of Associated Luxury Hotels International. The series examines issues in the global economy that will “connect the dots” to be helpful not only in business but in life as well.
Michael Dominguez: So, over the next 18 months, when we're looking at the hotel environment, there are a couple of things that are consistent and there's some real positives that we're finally starting to see in the industry. As I like to say, I think we're finally stabilizing and normalizing from the pandemic. It has taken that long to get into some normal growth lines and normal trend lines.
First and foremost, I think it is critical for everyone to understand we have a split between luxury and economy and midscale hotels in this industry. We have the same in an overall economy. We have a luxury buyer and we have a bargain shopper, and those are two different worlds right now and those are two different discussions.
So, when you're hearing about the economy, you're hearing about our industry, I think it's very important to never look at the aggregate. If you look at the aggregate numbers, it's not going to make any sense to your stakeholder where you're going to see an average rate that's increasing by 1.8% over the United States, and that is the prediction for 2025. And you're going to be getting a quote from a hotel that's 5-to-6% higher. Well, that is because all our meeting space, remember, is in the luxury and upper upscale space, and the luxury and upper upscale is growing at that 5-to-8% clip depending on where they are.
I've said this in the past, I think it's interesting: We now have 500 hotels globally that average $1,000 as an average rate a night for the year…500. Pre-pandemic, that was 179. Most importantly, in the United States, that's 80 hotels when it used to be 22. We almost have four times as many hotels averaging $1,000 a night. If you look at every major hotel brand, and if you look at what's being grown and built in the industry, it's all around the luxury segment because we continue to see the luxury growth.
Here's some real positives. For 12 months, I continue to show this community, when we are presenting that hotels, as far as gross operating profit percentage, those margins were decreasing, not increasing on a year-over-year basis. That was consistent in 2024; for out of 12 months, there were only three months that had positive GOP growth. That was a challenge; that puts a lot of pressure on the hotels and the margins are razor thin.
Here's the positive: Since October 2024, we've now had consecutive months every month that shows a positive GOP percentage growth. That's important. The hotels being able to run the buildings and run them in a profitable way, that improves service, that improves investment, that improves everything that matters to you when you are bringing your meetings and bringing your attendee to those type of facilities. So that's a real positive.
Now, why is that happening? Here's the other positive: We have finally normalized wage growth in our industry. The hotel industry, in the hospitality and leisure industry, had outpaced all private industries as far as wage growth and what that looked like throughout the pandemic, and we had grown 30% in a four-year window. What we are seeing now is a 3.5-to-4% wage growth average, and that's the average increase year over year. That's really important because that is normal. That was a normal number pre-pandemic, and we have finally settled there. That goes back to my original comment: We are finally settling and normalizing from the pandemic.
Here's the other thing. I am sometimes a little concerned when I see the narratives, and we talk about a labor crisis in our industry, specifically in the hotel side of it—if you look at reporting from CBRE, we have 15 jobs open for every hotel in the United States; in 2019, we had 15 jobs open for every hotel in the United States. We're exactly where we've always been. Where I'm really encouraged, we've had positive job growth in the United States for literally the last six consecutive months. You continue to see job growth that keeps exceeding expectations and where I am feeling very optimistic, No. 2 consistently over the last three months, has been hospitality and leisure job growth right behind health and medical. That is a real positive for us.
If I look at investment into our industry, the pipeline for hotels—not in construction; in construction right now is down year over year—but in planning, final planning and literally under contract are all up and under contract being up double digits. That tells us people want to invest in our industry. If they want to invest in our industry, they're very bullish on what the future of our industry holds, and so am I.