With expectations of limited revenue growth in 2025, U.S. hoteliers are focusing on all expense categories within their hotels. Early indications are that property operators are doing a commendable job managing the more controllable expenses within their operated departments; however, containing the undistributed department expenses is proving to be more of a challenge.
Information and telecommunications systems (IT) is an example of an undistributed department that exhibited above-average growth in 2024. From 2023 to 2024, IT department expenditures at the properties that participated in CBRE’s annual Trends in the Hotel Industry survey increased by 4.6 percent, which is greater than the 4 percent increase in total hotel expenses during that period. IT department expense growth in excess of total hotel expense increases occurred at full service, limited service, extended stay, and resort hotels, while all-suite and convention hotels did a relatively better job of controlling IT department costs.
The outsized increase in IT costs is attributable to a variety of factors. Not only is the cost of a property’s software and hardware on the rise, but we are seeing a continued rise in the use of technology throughout the hotel.
To gain a better understanding of recent property-level technology-related expenditures within U.S. hotels, CBRE analyzed the IT department costs of 4,834 properties that participated in our annual Trends in the Hotel Industry each of the past two years. In 2024, these hotels averaged 205 rooms in size and achieved an occupancy of 70.2 percent along with a $208.74 ADR.
What Increased?
The day-to-day operating costs associated with technology are captured in the IT department of the Uniform System of Account for the Lodging Industry. Expenses within the IT department are separated into four major categories*:
Labor Costs and Related Expenses
The salaries, wages, and employee benefits for telephone operators, directors of information systems, and systems analysts and programmers.
Cost of Services
The cost of phone, Internet, cell, and fax services for administrative purposes, or when offered to guests on a complimentary basis.
System Expenses
Software licenses, maintenance, service, storage, and software fees associated with IT systems used in both the operated and undistributed departments.
Other Expenses
All other IT department expenses, such as operating supplies, training, system storage and optimization, uniforms, and travel.
From 2023 to 2024, the greatest increases in IT department expenditures were related to operated-department systems, such as systems that handle traditional services like reservations, property management, key-coding, and point-of-sale. Other systems included in this category, and most likely contributing to the rise in cost, are new guest-facing technologies for concierge services, in-room entertainment, golf/spa/restaurant reservations, and guest service requests.
The back-office technology found in the undistributed departments did not post as strong an increase in 2024. From 2023 to 2024, the cost of systems that cover accounting, payroll, security, sales and marketing, maintenance, and utilities increased by just 1.3 percent.
Dedicated IT department personnel are typically found only at full-service, convention, and resort hotels. On average, just 16.3 percent of IT department expenditures at the hotels in the sample were spent on salaries, wages, and employee benefits. In 2024, IT labor costs increased by 3.8 percent.
As the use of IT by both hotel guests and employees becomes more prevalent, the need to provide training and assistance is on the rise. To handle this increased need for IT assistance, more hotels are relying on in-house technicians or outsourcing functions such as help desk, cybersecurity, and the overall management of onsite hotel and guest networks. These factors will put upward pressure on IT department expenditures in the future.
What Declined?
Hoteliers benefited from a decline in the cost of service delivered by phone (-1.7 percent) and Internet (-1 percent) providers in 2024. The decline in the cost of phone service is a continuation of the decline in the use of voice calls and unlimited pricing packages. The decline in the cost of Internet service, however, may be a trend that will be reversed in the future, as an increasing number of administrative and guest functions are dependent on strong and reliable Internet connectivity. These include guest use of mobile devices, staff use of hand-held devices, room keys, and EV charging.
An indirect benefit of the use of technology is the ability to curb increases in labor costs outside the IT department. With salary and wage rates for hospitality employees increasing more than 5 percent, hoteliers are constantly looking for ways technology can improve employee productivity. Historically, the greatest impact on labor efficiency has occurred in the back-of-house functions; however, guest-enabled front desk and point-of-sale systems have made their mark in front-of-house areas as well.
Capital Expenditures
As noted earlier, the costs recorded in the IT department do not account for capital expenses. Like all hotel FF&E items, the price for major hardware and software purchases is expected to increase by as much as 10 percent to 20 percent in 2025. Compounding the rise in technology expenditures is the need to replace technology that is approaching the end of its useful life after deferred upgrades the past few years.
Controlling Costs
IT costs can be a challenge for hotel owners, operators, and the major chains, especially as billing, technology, and services for IT services and systems are constantly changing. Hotels can control technology costs through annual audits of their digital infrastructure services. Our firm has taken this approach with hotels by identifying services that are billed but not in use, or services that are billed but not compliant with the original contract.
Vendor consolidation is another method for controlling costs. For example, CBRE Network Advisory Services has identified situations where hotels or hotel chains are utilizing over 10 Internet service providers for their portfolio. When consolidating vendors, there is an opportunity to leverage price per megabit, terms, and conditions, and increase bandwidth speeds. Using this strategy, we were able to identify $1 million in annual savings for a 120-hotel management organization.
While controlling IT department costs can be challenging, hoteliers can be effective in reducing these costs by frequently reviewing their systems, processes, and expenditures.
