Sun Belt and coastal cities see higher hotel labor costs Article originally posted on CoStar on July 7, 2025 U.S. hotel labor costs per occupied room (POR) have surged across major markets, with the steepest increases concentrated in Sun Belt and coastal destinations. Rising labor expenses are a growing concern for hotel operators, particularly as wage legislation ramps up in key markets. The San Diego and Phoenix markets top the list with 33% increases in labor cost per occupied room from 2019 to 2024. St. Louis followed closely at 32%, with Los Angeles and Miami at 29%, reflecting significant pressure in urban leisure markets. In Los Angeles, this trend will likely continue since city legislation passed in late May will incrementally raise the hotel minimum wage to $30 per hour by July 2028. New Orleans, Atlanta and Denver each saw an increases of between 24% and 26%, while markets including Orlando, Seattle and Dallas registered slightly lower but still notable growth between 22% and 24%. In contrast, hotel labor cost inflation was far less severe in Northeastern and Midwestern markets. Houston and Philadelphia posted increases of less than 10%, while the New York market saw virtually no change at all. A closer look at year-to-date data through April 2025 shows that labor costs per occupied room continue to climb in most markets. Nashville and New Orleans lead the pack with double-digit increases of 18% and 17%, respectively, compared to 2024 year-to-date levels. Notably, California coastal destinations such as San Francisco, Orange County and San Diego remain under pressure, while some urban centers like Las Vegas show signs of stabilizing. This sustained upward trend in labor expenses further compresses hotel margins heading into the summer travel season, especially for properties with exposure to unionized labor or elevated minimum wage thresholds. Moving forward, hotel owners and operators are reevaluating staffing models and exploring operational efficiencies to protect profitability.