Is the hotel industry a house of cards?

From the outside, everything in hotels looks fine

From the outside, the brand-managed hotel market looks healthy. Room rates are at record highs. New hotels keep opening. To me, it looks like a house of cards.

I’ve been General Manager of three hotels in England, Regional F&B Director for Morgans Hotel Group in London, and Corporate Director of F&B at Hyatt for Europe, the CIS, Russia and India. In recent time I’ve completed more than 30 hotel reviews around the world, and mentor and coach hotel GMs and F&B leaders, and here is what I see behind the numbers and conversations that worry me.

Take budgets. In my experience, most hotels are working from a reforecast, not the budget, within two months of the new financial year. Some budgets are set far too high. Some aren’t phased properly. Some are kept soft on purpose. Brand proformas are no better. The projections often don’t materialise as planned, and some owners are still waiting, many years later, for the ADR and occupancy they were promised. Yes, there are performance clauses. But too often, they’re never triggered.

I’ve made an 11-minute video on this. If you prefer to watch, it’s here: the full video on YouTube

Record rates, smaller profit

If room rates are at a record high, why are so many owners making less money?

Start with costs. Between April 2019 and April 2026, the UK’s headline National Living Wage rose about 55%. Energy, cost of sales and most other lines on the P&L climbed too.

Now the top line. In the US, ADR rose 22% from 2019 to 2025, according to CoStar. Over the same period, the US Bureau of Labor Statistics puts inflation at 26%. In real terms, rates went backwards. Add lower occupancy, and RevPAR is about 8% below 2019 after inflation (my calculation from CoStar and BLS data). The American Hotel & Lodging Association estimates that, once inflation is taken out, hotel profitability in 2025 was still around 10% below 2019.

It isn’t only America. HotStats, which tracks hotel P&Ls, reports that UK hotels are doing more business than last year, but keeping less of it. Across Europe the averages still look healthy, but in London, Paris and Rome, revenue grew while margins fell. Its warning for 2027 budgets in those cities: a budget built on RevPAR will overstate next year’s profit.

Lesson one: measure your room rate and profit against inflation. Beating last year’s figures can still mean earning less in real terms.

Where the guests went

Costs are only half the story. Where did the corporate traveller go?

A 2026 poll by the Global Business Travel Association (GBTA) found that a quarter of corporate travel buyers had moved some meetings online. Business travel spending hit a record in 2025. But on GBTA’s own figures, 2024 spending was still 14% below 2019 after inflation. Companies are paying more, not travelling more.

AI is now removing office roles too. Fewer office roles mean fewer meetings, less conference business and fewer business dinners.

Demand isn’t collapsing. But growth is slowing while costs keep climbing, and that is when debt starts to matter.

How fast a hotel breaks

Trepp tracks US commercial property loans. At the end of 2019, just 1.34% of US hotel loans in commercial mortgage-backed securities were 30 days or more behind on payments. By July 2020, it was 23.4%: nearly one in four, in about seven months. In September 2026, it was 6.18%.

That is how fast a hotel breaks. When revenue stops, the debt payments don’t.

In 2025, two of the biggest listed hotel groups took on more debt and handed around twice that amount back to their shareholders. But most of our industry’s debt doesn’t sit with them. It sits with owners, developers and private lenders, where nobody publishes the numbers. I’ve seen debt issued on proformas built on ADR and occupancy the market has never delivered.

There’s something else you won’t find in any annual report. In my experience, many hotels now grade their suppliers by how critical they are, and pay them in that order. The rest wait, because owners need the cash flow to stay afloat.

I believe a downturn is coming, and for hotels carrying too much debt, it could feel like 2008 and 2009. I can’t tell you when. But I can show you where it hits first.

When the company above you fails

Sometimes it doesn’t hit the hotel first. It hits the company above it.

In June 2024, FTI, Europe’s third-largest tour operator, collapsed with about a billion euros of debt. While a takeover waited to complete, suppliers demanded payment upfront and the cash ran out. The group was put into insolvency in Germany and split up, and its hotel company was pulled in with it.

And it’s still happening. In November 2025, Sonder, which started that year with more than 9,000 apartments and hotel rooms in 41 cities, shut down almost overnight. Guests were told to check out immediately. Owners who had leased their buildings to it were left with empty buildings and unpaid rent. Two New York landlords are each seeking at least US$10 million.

Lesson two: know whose business your hotel depends on, and what happens to your cash flow if theirs fails.

Why nobody says it, and who pays

Why does nobody inside the industry say this out loud? Because the system rewards the optimistic number and punishes the honest one.

Look at LinkedIn. In my experience, hardly anyone in this industry leaves a negative comment about hotel groups by name because it could cost them their job. Once they’ve lost that job, they’re happy to tell the truth.

When the numbers miss, the blame usually lands on the hotel’s operating team, who often never had the final say on what the market could deliver. I’ve seen GMs and their department heads removed for missing numbers that were never realistic. Many GMs don’t feel safe telling an owner, or a brand, that a budget can’t be hit. So they accept it. In 2023, a report by Actabl with the American Hotel & Lodging Association put manager turnover in US hotels 25% to 35% above 2019.

Then the cuts start, and the guest notices first. When operators cut staff and services during the pandemic, J.D. Power found guest satisfaction fell at hotels run by North America’s largest third-party management companies, driven by food and beverage and staff service.

The building waits too. Since the pandemic, many brands have let hotels postpone renovations. Owners were short of cash, and it helped them get through. But a brand standard is there to protect the owner’s asset. In 2025, a hotel project manager told Hotel Management that many hotels hadn’t been renovated in 10 to 12 years. JLL says hotels used to be renovated every seven to ten years, and that outdated rooms are now hurting guest satisfaction.

That costs money. In a 2024 survey for Accor, 97% of European hotel guests said they had checked reviews at some point when booking. Across 22 studies, when a hotel’s online rating goes up 1%, its room rate typically goes up by about 0.85%. Let the service or the rooms slip, and you cut the rate you can charge. And the renovation bill doesn’t go away. It comes back later, bigger, at today’s interest rates.

Fees and loyalty: who really benefits

Then there’s the hotel management agreement. The base fee is usually a percentage of total revenue. The incentive fee depends on profit, but the base fee is paid either way. So the operator still earns its base fee while the owner’s GOP falls.

To be fair to the brands, loyalty programmes fill rooms. In 2024, CBRE found loyalty members made up more than half of occupancy (52.8%) across five of the biggest hotel groups.

But loyalty is also a business. In 2025, Hilton’s licensing fees rose US$104 million, mainly from partnerships led by its co-branded credit card. Wyndham’s partnership fees went from US$69 million in 2024 to US$96 million in 2025. Part of the card money does flow back to pay hotels for free nights, but the brand keeps its licence share.

When a guest books a free night, the hotel is usually paid a set amount, which can be far below its cash rate. Only when the hotel is almost full do most programmes pay close to its average rate. Industry experts also say points tend to be earned at city business hotels and spent at resorts, so the hotel that paid to issue them is often not the one hosting the free stay. Meanwhile, CBRE says US hotel owners’ loyalty fees have grown faster than rooms revenue since 2007, and still did in 2024.

Five questions every owner should ask

I’m not saying every hotel is in trouble. I’m saying too many are standing on numbers that won’t survive a downturn, and it’s the owners who carry that risk.

If you own a hotel, ask these five questions:

• Is the phasing realistic, month by month, for how your hotel really trades? Phasing decides your cash flow, not just your year-end number.
• Was the plan challenged before you accepted it? By someone who doesn’t benefit from it looking good.
• Are your rooms still at the standard your rate depends on? And when did someone last walk every one of them?
• If your biggest partner failed tomorrow, how long would your cash last?
• Does your GM feel safe telling you the truth?

What happens next

None of this is complicated. It takes honesty, and leaders willing to make a stand.

I believe a correction is coming. The hotels that come through it won’t be the ones with the best-looking budget. They’ll be the ones whose owners saw the real numbers early, and acted on them.

A house of cards falls when nobody checks what it’s standing on. Check yours now, while there’s still time to fix it.

Watch the full 11-minute video, with every source on screen. It’s made with my AI clone: me as I look now, my voice at 99%, and my own research and words. Is the hotel industry a house of cards?

At Captivate, we carry out operational reviews for hotel owners and operators, and we coach and mentor F&B leaders and General Managers at hotel level.

What’s the most unrealistic budget you’ve ever seen? No names. Just the number. And which of the five questions would be hardest to answer in your hotel today?