Business

Hotels Are Paying $131 Billion on Labor and Still Cannot Keep Their Staff

AHLA projects U.S. hotels will spend $131 billion on labor in 2026 while 76 percent report staffing shortages. Harry Hayman on what the data means.

By Harry Hayman 7 min read
Hotels Are Paying $131 Billion on Labor and Still Cannot Keep Their Staff

The two numbers appeared in the same report, and I have been thinking about them since. The American Hotel and Lodging Association’s 2026 State of the Industry report projects that U.S. hotels will pay approximately $131 billion in wages and benefits this year. That is a 15.3 percent increase above what the industry paid in 2019, while total hotel operating revenue over the same period has grown only 12.8 percent. At the same time, the same report projects that 76 percent of hotel properties will still operate understaffed, with the worst gaps in housekeeping, front desk, culinary, and maintenance. I read both figures and saw a picture that has nothing to do with the labor market being broken. I saw an operating model that has not yet been asked the right questions.

Why Harry Hayman Is Watching This Number

I track labor data in this industry because I consult directly with hotel and food service operators through Gemini Strategic Consultants, and what operators believe about their staffing situations is often shaped by how they frame the question. Most hotel executives look at $131 billion in labor spend and assume they are doing everything they can. The AHLA 2026 State of the Industry resource is worth reading closely, because the data it presents is not only a projection about costs. It is a portrait of an industry spending more on the same architecture.

The 76 percent figure has its own history. The AHLA’s Front Desk Feedback survey from May 2024, which drew responses from 456 hoteliers across the country between May 16 and May 24 of that year, found that 76 percent of respondents were already reporting staffing shortages. Thirteen percent described themselves as severely understaffed. When a 2026 projection lands on the same number that operators reported two years earlier, the reasonable conclusion is not that the situation is holding steady. It is that the structural causes of the shortage have not been addressed.

That is the figure I keep returning to. Not $131 billion in spend, though that number is significant on its own. The figure that tells the real story is the two year match between the survey finding and the projection. Two years passed, wages went up, and the percentage of properties understaffed did not move.

The Quit Rate Is the Number the Budget Does Not Explain

The Bureau of Labor Statistics Job Openings and Labor Turnover Survey, commonly called JOLTS, released March 2026 data that an OysterLink analysis of hospitality workforce trends pulled into focus. The quit rate for accommodation and food services in March 2026 was 4.3 percent. The private sector average that same month was 2.2 percent. You can verify the underlying JOLTS series for accommodation and food services through the Federal Reserve’s own data repository, where the trend over time makes clear this is not a one month anomaly.

What a 4.3 percent quit rate means in practice is that people are voluntarily leaving these jobs at nearly twice the national rate. They are not being laid off. They are not failing to find work. They are finding work, starting it, and leaving it. The BLS also reported a job openings rate of 5.5 percent for accommodation and food services in March 2026, the highest of any industry sector tracked in that release. So the industry is not short of openings. It is short of conditions that make people stay in those openings.

That distinction is where the design failure lives. You cannot hire your way out of a retention problem. The openings keep reappearing precisely because the conditions producing departures have not changed.

What Turnover Adds to the Labor Budget

The $131 billion in projected wages and benefits is the number that appears in the AHLA report. What does not appear in that figure is the cost of replacing the workers who leave. Analysis from Netchex on the real cost of hospitality turnover in 2026 places the average replacement cost for a hospitality worker at roughly $18,000 per hire, accounting for recruiting, onboarding, the productivity gap during the learning curve, and the additional burden placed on colleagues covering a vacant position. Netchex’s broader benchmark report on hospitality turnover notes that full service hotels are running 40 to 60 percent annual front line turnover in departments like housekeeping and front desk.

Run the arithmetic on a property with 100 front line employees at a 50 percent annual turnover rate and an $18,000 replacement cost per departure, and you add $900,000 to the labor budget that never appears on the wages line. It shows up instead as training costs, overtime for the people covering gaps, staffing agency fees, and management hours that could have been spent improving the operation rather than backfilling it. The budget looks like $131 billion. The real cost of the model, with churn folded in across the industry, is materially higher. And the operators who have not run that calculation for their own properties are making decisions without the full picture in front of them.

What Operators Focused on Retention Do Differently

In my work with hotel operators at Gemini Strategic, the properties that have stabilized their front line workforce share three things that rarely appear prominently in industry reporting on this problem.

The first is scheduling that actually respects people’s lives. The Pennsylvania Restaurant and Lodging Association and other state level industry bodies have noted what turns up consistently in retention data: unpredictable scheduling ranks as high as or higher than pay competitiveness among the reasons people leave hospitality jobs. Giving a housekeeper or a front desk agent two weeks of advance schedule, honoring that schedule when it is set, and building a rotation that gives people their days off when they expect them costs nothing additional in wages. It costs discipline and planning at the management level. The properties willing to invest both are consistently outperforming their peers on voluntary turnover.

The second is visible career structure. Hourly workers who can identify a specific next step in their role, a lead attendant title, an inspector position, a supervisor track with defined criteria, report higher intent to stay than workers doing identical work with no articulated path forward. This is not about having a policy document stating that promotions are possible. It is about a direct supervisor saying clearly, here is what earning the next role looks like, and then following through when someone earns it.

The third is management culture at the front line level. The relationship a housekeeper has with her direct supervisor determines more about whether she comes back next week than any program that human resources puts in place. How problems get addressed on the floor, whether she feels heard when she raises an issue, whether her work is acknowledged rather than only tracked: these are not soft factors. They are the operational difference between a 40 percent and a 20 percent annual turnover rate in that department, which, given the replacement costs above, is also the difference between a budget that is working and one that is quietly bleeding.

What the Numbers Are Asking the Industry to Do

The $131 billion labor projection and the 76 percent understaffed figure together are not an argument for spending less on workers. They are an argument for spending differently, and on different things. Wages matter. But a wage increase delivered inside a chaotic schedule, a dead end role, and a management culture that treats the front line as interchangeable goes only so far before the quit rate tells you where its limit is.

The data in the AHLA report and the BLS JOLTS series are pointing toward the same conclusion from two different directions. The industry has invested heavily in the cost side of the labor equation without investing equivalently in the design of the work itself. Retention is not a compensation problem in isolation. It is a scheduling problem, a career visibility problem, and a supervisory culture problem, and the operators who are addressing all three at once are the ones who are not spending their summers replacing the same positions they filled last winter.

That is the conversation I try to move clients toward at Gemini Strategic: not what the labor budget needs to be, but what the operating model producing that spend needs to become so that the people inside it actually want to stay.

Sources and references

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