As hotel companies announced their third quarter results, leading hospitality companies executives gathered in Denver at The Hospitality Show 2025 to look back on a turbulent year and discussed ways of improving profits moving forward. The panel, the Profit Engine: Aligning Ownership, Brand and Operator moderated by Jeanelle Johnson, managing partner at PwC, examined the connection between profitability and the coordinated efforts of hotel owners, brand developers and operational leaders.
In an engaging dialogue, the panelists, who represented brands and owners, talked about challenges to profitability, the changing dynamics in the industry, permanent changes that need to be made, and how the industry can more proactively influence external factors.
Challenges to Profitability
The top line can have an outsized impact on the bottom line, said Navin Dimond, founder and CEO of Stonebridge Companies, a hospitality management company headquartered in Denver. “When we see a one, two, or three percent drop on the top line, it’s not the same drop on the bottom line,” he said. Rather, the bottom line could drop between six to eight percent. Because owners feel these differences more keenly than the brands, Dimond said that owners and operators should plan ahead to mitigate a soft market, as profitability can be fragile.
Greg Lattin, regional vice president at Marriott International, added that the industry overall is layered, with a variety of factors that can affect the bottom line, including a mix of big picture factors and local challenges.
“You’ve got a lot of stuff happening very fast. You've got macro very much a local scenario that affects profitability. Combined with the fact that we've got a lot of competition for customer preference, we still have tremendous demand issues in certain segments,” he said. He suggested that improving profitability rests on rethinking how work gets done collectively, with greater cooperation between owners, operators and brands.
Although everyone would like to think the pandemic is well behind us, the reality is that its economic consequences to hospitality are indeed lingering, said Pete Sams, president of Highgate. “The fundamentals have changed; the dynamics have changed in our industry, and it’s a real struggle,” he said. Factors such as higher labor costs, elevated insurance costs, and higher debt have eroded profit margins for owners.
“We spend more time now thinking about and trying to support our owners through the lens of debt coverage,” continued Sams, noting that the pandemic erased several years of income, and despite “revenge travel and the champagne effect creating even more aggressive underwriting,” that spike is now gone, but the higher costs remain. The only segments that have seen consistent top line growth are luxury and upper-tier. Like the other speakers, Sams advised that all parties need to align their goals and objectives.
Jeff Wagoner, president and CEO of Outrigger Hospitality Group, based in Hawaii, said that insiders know to expect a disruption every ten years or so, but the cycle happened sooner than expected because of the pandemic. For this reason, it can be difficult to make budget cuts amid rising costs elsewhere, which affects profits. “I think we're in a very unique time in that we haven't gone through the traditional growth that we see in the industry over multiple years; we're now in a softening mode again, without the ability to find those places to create our profitability,” said Wagoner.
Aligning Incentives across the Ecosystem
The panelists next tackled the question of aligning incentives, and who drives decisions. With so many stakeholders, it is imperative that they all work in harmony to ensure that everyone is profitable, particularly as all parties have skin in the game.
Lattin explained that Marriott, while a brand, also operates hotels, so it understands both perspectives. “We think about teaching our folks and our leaders at all parts of the organization to think like an owner, to understand what is happening with each owner's economics, and know how to bring to bear everything they possibly can to help is critical,” he said. “Likewise, whether it's performance evaluations or incentive compensation, needs to be weighted and is weighted very heavily towards the profit equation.”
Lattin added that Marriott utilizes advisory councils in its decision-making; he sees this collaborative ‘feedback loop’ as the key to profitability.
Sams added that there was a shift in the paradigm in the hospitality ecosystem toward owners, calling them the ‘backbone,’ though without sacrificing the bottom line for brands, and that they can work together by collaborating, listening to each other, and learning from each other.
Institutionalized Changes Needed to Weather Future Crises
Because the industry is dynamic, the panelists addressed the subject of how it can make permanent improvements versus temporary responses should another crisis occur, and particularly how these responses can be aligned within brands, owners and operators. Dimond suggested that brands can drive institutionalization of any solutions. One example he mentioned was developing two-tiered pricing for housekeeping flexibility. He also noted that the hospitality industry is highly correlated to the GDP, but for the first time, revenue is decreasing while the GDP increases, which is indicative of the complicated situations that the industry is facing.
Another suggestion from Dimond was hotels getting on board with FedNow, an instant payment system, and possibly applying that to credit card transactions.
Lattin chimed in about the importance of not just having innovation and technology but making sure that hospitality leaders know how to use technology effectively. “Spending a lot of time making sure that we're keeping up with the new innovations, to me, is critical,” he said.
External Factors: Labor, Technology, Political Advocacy
The last topic the panel covered was how to influence external factors that can shape the industry, such as labor and technology, for example. Wagoner acknowledged that while the hospitality industry will always be a people industry, and that labor and staffing is a big expense, there is room for technology. The example he cited was robotics, such as vacuuming robots that he witnessed at a hotel in Singapore, noting that it was something that the industry needs to keep an eye on, as “…the world is changing, and it’s changing really fast.”
Sams concluded that brands should be at the table with the owners, “…leveraging that weight and that influence and that ability to help us move the needle on the big topics that we’re trying to tackle as an industry that are forward-looking and thinking about our future.”
“I would tell people be agile. Your mind, your team members, they need to be agile. The thing that's constant in today's world is change, and the rate of change is increasing. Things change faster, so the quicker you can adopt it, whatever it may be. Learn to be agile. If you're not, it's going to be a struggle,” said Dimond.