The equation is inescapable: rising wages require adjustments somewhere. Average hospitality wages have risen from $16.84 to $22.70 between 2020 and early 2025—a 35% increase that has fundamentally reset compensation expectations in the industry.
The wage picture is complex. Competition for workers has driven pay higher across all positions. Many jurisdictions have implemented or increased minimum wages. And worker expectations around compensation have permanently shifted, making pre-pandemic pay scales obsolete in virtually every market.
Room pricing must balance multiple considerations. Guest sensitivity varies by segment—budget travelers notice small rate changes more than luxury guests. Competitor pricing creates natural constraints. And the overall value proposition must remain compelling in an increasingly competitive landscape.
Successful hotel operators are taking strategic approaches. Some implement dynamic pricing that captures maximum revenue during peak periods while remaining competitive during slower times. Others have invested in revenue management technology that optimizes rates in real-time based on demand signals.
Ancillary revenue streams offer another path forward. Spa services, food and beverage, parking, and resort fees can all contribute to profitability without raising base room rates. The key is ensuring these additional charges provide genuine value rather than feeling like hidden fees.
Efficiency gains offer yet another approach. Investing in technology that reduces labor hours per occupied room, streamlining operations, and optimizing scheduling can all reduce labor costs per revenue dollar without reducing worker pay.
The hotels navigating this challenge successfully share a common trait: they view pricing as a strategic decision requiring regular analysis, not a one-time adjustment. Regular rate reviews, competitor monitoring, and guest feedback all inform an evolving approach.