Why Labor Is the #1 Hotel Expense You Can Control

“Fifty cents of every dollar spent to operate a hotel goes to labor.” – Robert Mandelbaum, Research Director at CBRE Hotels

Labor Isn’t Just a Cost. It’s Your Strategic Lever.

Hotel profits are under pressure, and smart operators aren’t sitting back in reactive mode. They’re focusing on what they can control. Labor tops that list.

In a recent conversation on the Hospitality Daily podcast, Robert Mandelbaum, Research Director at CBRE Hotels, laid out the case for why labor management is a business-critical capability for every hotel leader today.

50% of Hotel Operating Costs Are Tied to Labor

According to Mandelbaum, labor typically accounts for 30 to 40 percent of hotel revenue, or about half of total operating expenses. That includes wages, benefits, training, and recruiting costs. It’s a consistent trend, even across decades of market cycles.

And yet, that consistency tells a story. Despite increases in pay, labor costs have held steady as a percentage of revenue. Why? Efficiency. Operators are adapting.

“There’s variability in staffing levels based on occupancy,” Mandelbaum explained. “And despite higher pay rates, the total number of hours worked has decreased. That’s what’s keeping labor in the 35 percent range.”

Efficiency is a Management Imperative

Labor efficiency accelerated during the pandemic, with changes like non-daily housekeeping and grab-and-go dining. But now, the pressure is even greater.

“Expense growth has been outpacing revenue growth,” Mandelbaum said. “In an environment like this, managing to the margin is critical.”

He’s seen this in the data: month after month, declining profit margins are driven not by a lack of effort but by rising costs in areas outside an operator’s control.

Labor isn’t one of those areas. It’s where leaders still have room to act.

Labor and the Hotel Guest Experience

Mandelbaum is clear: Labor is not just a cost. It’s often a key part of the product.

“The welcome at the front desk, greeting in the hallway, room cleanliness — that’s all labor,” he said. “When labor is well managed, you don’t just save money. You create better guest experiences.”

That’s why labor isn’t just a financial decision. It’s a brand and service model choice. High-touch or high-tech? Some guests want service through an app. Others want to interact with a host face-to-face. Hotel operators today need to be intentional about the labor experience they’re delivering.

If You Can Manage It, You Can Improve It

Labor is not fixed. It’s flexible. And it’s the single biggest lever operators can pull today to protect profitability.

“Managers have always done a good job controlling what they can,” Mandelbaum said. “Labor is still the biggest lever they have.”

Take Action

Labor is the largest expense you can actively optimize now in 2025. Not just to save money, but to improve performance and deliver consistently better service.

Learn how Hotel Effectiveness helps hotels schedule smarter, reduce overtime, and empower their teams–or fill out the form below to see it in action and discover how Hotel Effectiveness can make a difference at your properties.