The biggest mistake I see operators make when they are told to reduce hotel operating costs is to cut staff.
Labor is the largest line item on the P&L, and it is the easiest one to touch. But the easiest cut is rarely the smartest one. In my experience, the real money is hiding somewhere else: energy waste, stale vendor contracts, and scheduling inefficiencies nobody has reviewed in years. I like to cut those first. Service rarely feels it.
Where the Real Money is Hiding
I like to start with energy costs: closing off unused floors during low occupancy, deploying technology that eliminates waste, and shopping alternative vendors instead of auto-renewing the incumbent.
Purchasing contracts and vendor agreements are the next stop. Most hotels have not rebid a major contract in years. Scheduling inefficiencies are right behind them. In my experience, overtime alone can run close to 10 percent of total labor cost, and most GMs do not realize it until someone shows them the number. AHLA’s 2026 State of the Industry report tells a similar story industry-wide: rising operating expenses have kept gross operating profit per available room at roughly 90 percent of 2019 levels, even with demand holding steady.
None of this touches the guest. That is the point.
Cutting Labor Costs Without Cutting Service
My first move is cross-training. A front desk agent who can also run breakfast service during a rush is worth more than two specialists standing idle at different times of day.
From there, smarter scheduling tools, productivity benchmarks by department, and showing GMs exactly what the impact will be. Numbers tend to move GMs faster than directives do.
What actually helps is technology that removes repetitive tasks entirely:
- Mobile check-in and check-out
- Digital housekeeping boards
- Automated night audit
- Chatbots for simple guest requests
Add inventory and ordering automation, robotic vacuums for hallways and public areas, and a stayover opt-out program, and the savings can add up to more than 15 percent of rooms department costs. That tends to be real margin.
The 90-Day Cost Audit: A Practical Framework
I built this for operators who want results, not theory. Three phases, 30 days each. No guesswork.
Phase 1 (Days 1-30): Find the Leaks
- Financial baseline. Review the trailing 12-month P&L by department. Benchmark against STR’s operating expense data, brand standards, and the hotel’s own historical peak performance.
- Labor audit. Analyze schedule-to-forecast alignment, overtime drivers, and productivity metrics: minutes per room, covers per labor hour, check-ins per hour. Review contract labor usage.
- Procurement review. Pull every vendor contract. Flag expired agreements, auto-renew clauses, CPI escalators, duplicate vendors, and pricing gaps versus group purchasing organizations.
- Utilities and energy. Evaluate kWh per occupied room, water usage, HVAC setpoints, preventive maintenance compliance, and laundry and irrigation efficiency.
- Revenue integrity. Audit OTA commissions, wholesaler mapping, comp room controls, group billing accuracy, and fee compliance. This is where a disciplined revenue management strategy starts to pay for itself.
Phase 2 (Days 31–60): Fix What You Found
- Labor optimization. Zero-based scheduling, flex shifts, cross-training, and daily productivity huddles to cut overtime and lift efficiency.
- Vendor renegotiation. Rebid the top spend categories. Consolidate vendors. Lock fixed pricing for 12 to 24 months. Add performance SLAs that actually have teeth.
- Inventory and waste controls. Tighten amenity usage, linen pars, chemical dilution, portion control, waste logs, and menu engineering.
- Energy quick wins. LED retrofits, EMS and smart thermostats, laundry ozone systems, low-flow fixtures, and HVAC recalibration.
- Revenue integrity fixes. Correct rate mapping, enforce rate fences, and tighten comp and fee workflows.
Phase 3 (Days 61–90): Lock It In
- KPI dashboard. Weekly reporting on labor cost per occupied room, minutes per room, utility cost per occupied room, vendor spend versus contract, cost of goods sold, OTA mix, and preventive maintenance compliance.
- SOP updates. New scheduling rules, purchasing thresholds, comp room approvals, PM checklists, and inventory controls, written down so the gains do not erode in six months. I like to treat this step the same way I treat any hotel SOP that is meant to drive profit: if it is not written down, it will not survive turnover.
- Training and accountability. Department-head training, weekly cost reviews, monthly vendor scorecards, and quarterly contract reviews.
What This Actually Saves
In my experience, a 90-day audit like this typically saves about 5 percent each in labor, procurement, and energy, plus a few additional points from reduced revenue leakage.
I like to run the math on a 100-room hotel at a $150 average rate and 70 percent occupancy. That works out to more than $200,000 in annual savings from one disciplined 90-day audit, with no layoffs required.
Where I Would Suggest Starting
Here is where I would begin, before the next leadership meeting.
I like to pull the trailing 12-month P&L by department first, then calculate overtime as a percentage of total labor cost. Above 5 percent, that is usually the first fix worth making. From there, I walk through every vendor contract older than 12 months and flag the ones with auto-renew clauses, and I walk the property myself to note every HVAC zone running in an unoccupied space.
Picking one department to benchmark, whether that is minutes per room, covers per labor hour, or check-ins per hour, tends to surface the next opportunity quickly. The technology gap costing the most labor hours right now, whether that is mobile check-in, digital housekeeping boards, or automated night audit, is usually worth solving first.
I like to pick one place and start there. The rest tends to follow once the first win is proven.
Want help running a 90-day cost audit? I work directly with owners and operators to find the savings hiding in plain sight. Let’s talk. For more industry insights, sign up for my free newsletter.
