Hotels (except Casino Hotels) and Motels — U.S. Industry Primer

NAICS 2022 code 721110

(NAICS = North American Industry Classification System, the standard code set the U.S. government uses to group businesses.)

1. Overview

This is the business of renting rooms by the night: full-service hotels, limited- and "select-service" hotels, resorts, and roadside motels. Rooms are the core product, but these establishments may also sell food and drink, meeting and event space, parking, laundry, and recreation [3]. In 2022 the operating establishments in this code took in about $206.2 billion in receipts [1], and as of 2023 they employed roughly 1.5 million people across about 55,900 locations [2].

The single most important thing to understand is that the famous names — Marriott, Hilton, Hyatt, Wyndham — usually do not own the buildings that carry their signs. Three jobs are split among three companies: a brand licenses the name and the reservation system, an owner holds the real estate, and an operator (a management company) runs the front desk and housekeeping. One hotel can involve all three at once, plus a fourth party — the distribution channel (direct booking, corporate accounts, group sales, or an online travel agency) — that fills the rooms [5]. That split is why there are two very different ways to get exposure, with very different economics:

• The public route: buy shares of the brand companies (which license brands and collect fees), or shares of hotel real estate investment trusts (REITs — companies that own the buildings and pay out most of their income as dividends).
• The private route: buy or build an actual hotel — most commonly a franchised limited-service property — invest through a private real-estate or private-equity fund or joint venture, or provide hotel debt.

Both routes ride the same demand cycle, but they behave differently in a downturn, which is the theme running through this primer.

2. What it is and how it's structured

Scope. NAICS 721110 covers establishments primarily providing short-term lodging in hotels, motor hotels, seasonal and resort hotels (without casinos), and motels, plus hotel-management operations that supply operating staff [3].

What it excludes (each sits in its own code, so federal totals for 721110 leave them out):

• Casino hotels — hotels with a casino on premises — are 721120.
• Bed-and-breakfast inns are 721191; hostels, guest houses, tourist homes, and housekeeping cabins are 721199 (both grouped under "Other Traveler Accommodation," 72119) [3].
• RV parks, campgrounds, and recreational camps are 7212.
• Apartments and other long-term housing (leases, not nightly stays) sit in real-estate codes such as 531110.
• Online travel agencies (OTAs) like Expedia and Booking, which resell hotel rooms, are travel-arrangement services, not lodging.

The four-party structure. In the U.S., branded hotels are overwhelmingly franchised: the owner licenses a flag (say, Hampton by Hilton) and pays the brand a royalty, rather than the brand owning or directly running the hotel. Branded properties are more than 70% of U.S. room supply, and roughly four of every five branded rooms are franchised rather than brand-managed [6]. Because the brand companies deliberately hold almost no real estate — an "asset-light" model — the buildings are owned by a highly fragmented base: individual entrepreneurs, families, local partnerships, private-equity real-estate funds, pension funds, insurers, and publicly traded hotel REITs. Day-to-day operations are frequently outsourced again to third-party management companies such as Aimbridge or Highgate [5][20].

Ownership mix. The result is a striking split. The branding side is concentrated in a handful of global companies; the owning side is one of the most fragmented parts of American real estate, with 44,768 firms counted in 2022 [1]. Crucially, the NAICS classification describes the operating establishment — it does not identify the ultimate owner of the real estate.

3. How big it is

Federal statistics for this specific code (ground-truth figures; dollar amounts were reported in thousands and converted to billions):

Concentration (2022 Economic Census). The four largest firms held 18.2% of receipts (CR4), the top eight 23.0% (CR8), the top twenty 30.5% (CR20), and the top fifty 38.3% (CR50) [1]. The Herfindahl-Hirschman Index (HHI, a standard concentration measure) is suppressed in the federal extract, so no value is stated.

A caveat about what these numbers do and don't capture. The $206 billion is revenue booked at the hotels themselves — rooms, food, and so on — and only for properties classified in this code (so casino-hotel and B&B revenue is elsewhere). It is not the same as the reported revenue of the big brand companies. A Marriott-franchised hotel's room revenue shows up at the operating property; Marriott's own franchise and management fees are booked under its corporate structure, in different codes. So the brand giants' influence is far larger than their footprint in these establishment totals suggests. Note also that establishment and firm counts do not equal the number of properties, rooms, brands, or ultimate owners, and payroll-based tables can understate very small owner-operated lodging businesses.

For a broader sense of scale, the industry's trade group, the American Hotel & Lodging Association (AHLA), estimates that hotel guests spent about $747 billion in 2024 across lodging, food, transportation, and retail (a wider basket than room revenue), that hotels directly employed about 2.15 million people, and that the industry generated roughly $54 billion in state and local tax revenue [8]. These AHLA figures use a broader definition than NAICS 721110 and are not directly comparable to the Census receipts above. The industry is not undercounted the way government-dominated or hobbyist sectors are — hotels are overwhelmingly private, taxpaying, employer businesses, well captured by payroll statistics. The main measurement subtlety is the brand-vs-building split, not missing operators. The supplied data do not provide a government/private ownership split.

4. The investable universe

There are two clean groups of public companies, plus a large private world.

A. Brand companies ("asset-light" franchisors). They license brands, run loyalty programs and booking systems, and collect royalty and management fees. They own very little real estate.

(An "ADR" here means American Depositary Receipt — a U.S.-traded proxy for a foreign-listed share. Accor, a large French brand company, is another global player but trades in Paris.)

B. Hotel REITs (own the buildings). These trusts own real estate, hire brands and managers, and pass most income to shareholders as dividends. They give exposure to the property and the cycle, not to franchise fees.

Other publicly traded owners include Sunstone (SHO), RLJ Lodging (RLJ), Xenia (XHR), DiamondRock (DRH), Summit Hotel Properties (INN), and Service Properties Trust (SVC) [19].

C. Private and other owners. This is where most of the industry actually sits. It includes tens of thousands of independent and franchisee owners; third-party management companies (Aimbridge — roughly 1,100+ hotels, now merging with Interstate; Highgate; HHM; Hotel Equities); and private-equity and real-estate investors such as Blackstone, Starwood Capital, KSL Capital Partners, MCR Hotels, Driftwood Capital, and Noble Investment Group [7][15][20]. A management company is not necessarily the owner of the hotel it operates, and private ownership is often held through fund-level subsidiaries and joint ventures, making complete ownership rankings difficult. For most private investors, the practical "hotel play" is buying or developing a single franchised property, not buying a stake in a brand.

5. How the money works

A hotel sells a perishable service: an unoccupied room tonight cannot be sold tomorrow, so pricing and occupancy change constantly by day, season, location, customer type, and event calendar. Because the industry is split into brands, owners, and operators, so are its economics.

The operating metrics (how any hotel earns). Hotel performance runs on three numbers:

• Occupancy — rooms sold ÷ rooms available. In 2024, U.S. occupancy was about 63% [21].
• ADR (average daily rate) — room revenue ÷ rooms sold; about $158.67 in 2024 [21].
• RevPAR (revenue per available room) — room revenue ÷ rooms available, i.e., occupancy × ADR, and the headline efficiency measure. U.S. RevPAR hit a record $99.94 in 2024, up 1.8%, with essentially all the growth coming from higher rates rather than fuller hotels [21].

Beyond rooms, revenue comes from food and beverage, meetings and events, parking, resort fees, spas, and retail. Costs include labor, utilities, insurance, property taxes, maintenance, marketing, franchise and management fees, rent, interest, and capital spending. Hotels have high fixed costs and high operating leverage: a building, front desk, and housekeeping crew must be staffed whether occupancy is 55% or 75%. So when RevPAR rises, extra revenue drops heavily to profit; when it falls, profits collapse fast. That leverage is the core reason the business is cyclical.

The franchisor's economics (the brand companies). Marriott and Hilton essentially sell brands and technology. They earn a royalty (a percentage of each franchised hotel's room revenue) plus management and loyalty-program fees, while owners fund the buildings. This is a capital-light, high-margin, fee-based model: it grows by adding rooms to the system ("net unit growth"), needs little of the brand's own money, and holds up better in downturns than owning hotels does — though fees still fall when hotel revenue falls. Investors prize these companies as steady compounders.

The owner's economics (REITs and private owners). Owners capture the hotel's full profit after paying the brand royalty and the manager's fee — but they also carry the real estate, the debt, the property taxes, the insurance, and the renovation bills. A manager typically earns a base fee tied to revenue plus an incentive fee tied to profit. Owner returns come from operating profit plus changes in property value, usually amplified by mortgage leverage. This is where the cycle bites hardest: in a good year owners earn far more than the fee companies; in a recession, high fixed costs plus debt can wipe out cash flow. Useful owner-side measures include gross operating profit (GOP), EBITDA (earnings before interest, taxes, depreciation, and amortization), FF&E reserves (cash set aside for furniture, fixtures, and equipment replacement), and comparable ("same-hotel") RevPAR, which strips out acquisitions and new openings. REIT investors typically watch RevPAR growth, hotel-level margins, funds from operations (FFO), and the dividend.

6. What drives demand

Room demand comes from several partly independent sources — leisure travel; business/corporate travel; meetings, conventions, weddings, and sporting events; international visitors; and project-based demand from healthcare, education, construction, government, and emergency lodging. Location sets the mix: airport hotels track airline schedules and business travel, urban hotels track offices and conventions, resorts track leisure spending and seasonality, and highway/economy hotels track road trips and price-sensitive guests.

Key drivers:

• The economy. Room demand tracks GDP, employment, corporate profits, and consumer confidence closely; lodging is discretionary for both companies and households.
• Business travel and group/convention demand. Corporate transient travel and meetings fill weekday and big-box hotels. Business travel has recovered slowly — roughly $317 billion in 2025 — while group and meetings demand has been a relative bright spot strengthening into 2026 [22].
• Leisure travel. Household vacation spending drives resort and weekend demand; a growing niche is youth-sports travel, now roughly a $40 billion market [22].
• International inbound travel. Foreign visitors are high-value guests. Inbound spending was soft in 2025 — about $175 billion, still well below the 2019 level in real terms, a persistent drag on big-city hotels [23]. Over the medium term, government forecasters are more constructive: the National Travel and Tourism Office (NTTO) projects total international visitation rising about 25%, from 68.3 million visitors in 2025 to 85.2 million by 2030 (with a 3.2% uptick to 70.5 million projected for 2026) [24]. Treat the near-term weakness and the longer-term recovery as two honest, coexisting facts, not a contradiction.
• Interest rates and construction costs. Cheap financing fuels both hotel development and property transactions; high rates slow new supply (which supports pricing at existing hotels) but squeeze leveraged owners.
• Supply growth. New openings in a market can outrun demand and depress everyone's RevPAR; high building costs have recently kept new supply restrained.

National averages mask wide dispersion — market selection, customer mix, pricing power, and local new supply matter more than the headline growth rate.

7. Regulation

Hotels are regulated as public accommodations and local real estate, not as a financial industry. Compliance is spread across federal, state, and local layers.

• Accessibility. The Americans with Disabilities Act (ADA) treats hotels and motels as public accommodations; new construction, alterations, reservations systems, guest rooms, and communication features must meet Title III standards. Non-compliance is a common source of lawsuits [27].
• Fee transparency ("junk fees"). The Federal Trade Commission's Rule on Unfair or Deceptive Fees took effect for short-term lodging on May 12, 2025. Mandatory fees (e.g., resort fees) must be included in the displayed total price up front, and fee descriptions cannot be misleading [25].
• Franchise law. Selling a franchise is governed by the FTC's Franchise Rule, which requires brands to give prospective owners a Franchise Disclosure Document (FDD); several states add their own franchise registration and relationship laws [26].
• Lodging/occupancy taxes. State and local transient occupancy taxes ("bed taxes") are levied on room bills; hotels are major tax generators, contributing tens of billions annually [8]. Policymakers increasingly extend the same taxes to short-term rentals.
• Labor. Federal minimum-wage, overtime, and safety rules apply, and some cities (e.g., Los Angeles, Long Beach) have hotel-specific worker ordinances setting higher minimum pay, workload limits, and "panic button" safety devices; unions such as UNITE HERE are active in gateway cities. Labor is a major operating and compliance issue because hotels employ large numbers of housekeepers, desk clerks, and food-service and maintenance staff [31].
• Health, safety, and licensing. Zoning and entitlements, fire and building codes, health inspections, and liquor and pool permits apply locally.
• Short-term-rental policy. How cities regulate and tax Airbnb/Vrbo-style rentals is an active battleground; the hotel lobby generally pushes for parity in taxes and rules [28].

8. Competitive dynamics and consolidation

Two different competitive maps. Federal concentration ratios for this code describe the owning/operating side and look only moderately concentrated: the top four firms held 18.2% of receipts in 2022, the top eight 23.0%, the top twenty 30.5%, and the top fifty 38.3% [1]. The branding side is far more concentrated: a handful of companies flag well over 70% of U.S. branded rooms [6]. These ratios should not be confused with brand share or local-market concentration — a single firm can own many properties, while a major brand may franchise properties owned by hundreds of unrelated businesses. Concentration depends entirely on which lens you use.

Consolidation has been mostly a brand-side story. Marriott's 2016 purchase of Starwood created the world's largest hotel company; Choice bought Radisson's Americas business in 2022. The most notable recent attempt failed: Choice Hotels pursued an ~$8 billion hostile takeover of Wyndham in 2023–24 but abandoned it in March 2024 after Wyndham's board and shareholders resisted, citing a low premium and antitrust risk in the economy segment [29]. Even as brands consolidate, individual property ownership stays dispersed.

Where competition actually happens. Brands compete on loyalty programs (Marriott Bonvoy, Hilton Honors) and on distribution — steering guests to book direct rather than through OTAs like Expedia and Booking, which charge commissions. At the property level, hotels compete on location and real-estate quality, price and segment (luxury, upscale, midscale, economy, extended-stay), service and online reputation, and pricing/revenue-management technology. Scale helps large brands through marketing, loyalty data, procurement, and corporate accounts.

9. Risks

• Cyclicality and operating leverage. High fixed costs mean RevPAR downturns hit profits hard; the 2020 pandemic, when occupancy briefly collapsed, showed the tail risk vividly.
• Labor cost and availability. Wages are rising and staffing remains tight; payroll is the largest controllable cost, and union activity adds pressure in gateway cities.
• Rising non-labor costs. Property taxes and especially property insurance have jumped, squeezing owner margins.
• Capital demands. Required renovations, FF&E replacement, and brand-mandated property improvement plans (PIPs) force recurring spending owners cannot defer indefinitely.
• Interest-rate and refinancing risk. Leveraged owners and REITs face higher rates and walls of maturing hotel mortgages that must be refinanced at higher cost; floating-rate and lease obligations amplify this.
• Competition and distribution. Short-term rentals compete for guests, and OTA commissions pressure margins; cyberattacks, data breaches, and fraud are live operational threats.
• Soft international inbound and business travel, both still below pre-2019 strength.
• Location and weather. Coastal resorts face hurricanes, wildfires, and rising insurance costs or coverage gaps.
• Brand-owner tension. Franchisees and brands periodically clash over fees, mandated renovations, and loyalty-program economics.
• Private-investment risks. Illiquidity, sponsor execution, opaque fees, valuation uncertainty, and difficult exits.

10. How to invest and the outlook

Public routes.

• Brand/franchisor stocks (MAR, HLT, H, IHG, WH, CHH) offer capital-light, fee-based exposure that tends to hold up better in downturns; emphasize fee growth, net room additions, contract retention, and loyalty strength. These are growth-and-compounding plays rather than income plays.
• Hotel REITs (HST, PK, RHP, APLE, PEB, and peers) offer direct exposure to hotel real estate, the cycle, and dividend income; emphasize property-level cash flow, debt maturities and interest costs, capital needs, asset quality, and distribution coverage. Higher beta to the economy and to interest rates.
• Diversified travel/leisure ETFs (e.g., PEJ, AWAY) bundle hotels with airlines, cruise lines, and booking platforms; there is no large pure-play "hotels only" ETF.

Private routes.

• Owning a hotel directly — most often buying or building a franchised limited-service property and either self-managing or hiring a third-party operator. This is a combined real-estate-plus-operating business, usually financed with a mortgage. Underwrite the individual property, not national averages: local demand generators, seasonality, competitive supply, occupancy/ADR/RevPAR, labor cost, property condition and renovation needs, franchise and management terms, debt structure, insurance, taxes, reserves, and exit assumptions.
• Private real-estate and private-equity funds that acquire, reposition, and sell hotels, or provide hotel debt.
• Passive owner structures such as non-traded hotel REITs, syndications, and 1031 tax-deferred exchanges into hotel property.

Outlook (forward-looking judgment). The near-term picture is low-single-digit RevPAR growth driven mostly by rate rather than occupancy, with restrained new construction supporting pricing power at existing hotels [21][30]. Group and meetings demand is the firmest tailwind heading into 2026, while soft international inbound and slow-to-recover corporate travel are the main drags [22][23]. For owners and REITs, the swing factor is financing cost: the direction of interest rates will largely decide transaction volumes, refinancing stress, and property values. Asset-light brand companies are likely to keep being rewarded for their steadier economics, while owners offer more upside if demand accelerates and rates ease — and more downside if they don't. The best opportunities are likely to be selective rather than broad: treat each hotel as a local real-estate business connected to a national distribution network, not a uniform national commodity. These are judgments about an inherently cyclical industry, not guarantees.

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Sources

1. U.S. Census Bureau, 2022 Economic Census — Concentration of Largest Firms (EC2200SIZECONCEN), NAICS 721110: receipts $206.19B, 44,768 firms, CR4 18.2%, CR8 23.0%, CR20 30.5%, CR50 38.3%, HHI suppressed (2022). https://data.census.gov/table/ECNSIZE2022.EC2200SIZECONCEN?codeset=naics~721110
2. U.S. Census Bureau, County Business Patterns 2023 (NAICS 721110): 55,895 establishments, 1,497,840 employees, $58.98B annual payroll, $14.29B Q1 payroll (2023). https://www.census.gov/data/datasets/2023/econ/cbp/2023-cbp.html
3. U.S. Census Bureau, NAICS 2022 Definition — 721110 Hotels (except Casino Hotels) and Motels; exclusions 721120, 721191, 721199, 7212 (2022). https://www.census.gov/naics/?details=721110&year=2022
4. U.S. Small Business Administration, Table of Size Standards, effective March 17, 2023 — NAICS 721110 ($40 million) (2023). https://www.sba.gov/document/support-table-size-standards
5. msourceideas / Umbrex, How the Hotel Industry Is Structured — brands, owners, operators, distribution (2024). https://msourceideas.com/how-the-hotel-industry-is-structured/
6. Statista, Branded and Franchised Hotel Room Share in the U.S. (2024). https://www.statista.com/chart/32462/branded-hotel-room-share-in-the-us-and-world/
7. CoStar, Lenders take majority ownership of Aimbridge in debt restructuring; Aimbridge–Interstate merger (2025). https://www.costar.com/article/28284794/
8. American Hotel & Lodging Association, 2025 State of the Industry / Economic Impact Report — 2024 guest spending ~$747B, ~2.15M direct jobs, ~$54B state & local tax (2025). https://www.ahla.com/resource/2025-state-industry-report
9. Marriott International, 2024 Annual Report / Form 10-K — ~$25.1B revenue, ~1.7M rooms, 30+ brands (2025). https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001048286&type=10-K
10. Hilton Worldwide Holdings, 2024 Form 10-K — ~1.25M rooms, ~$1.15B net income (2025). https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001585689&type=10-K
11. InterContinental Hotels Group, Annual Report and Form 20-F — ~1M rooms; London-listed with U.S. ADR (2025). https://www.ihgplc.com/investors/annual-report
12. Hyatt Hotels Corporation, 2024 Form 10-K — ~$1.4B net income (2025). https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001468174&type=10-K
13. Wyndham Hotels & Resorts, 2024 Form 10-K — ~$1.4B revenue, ~9,200 hotels, ~90% franchised (2025). https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001722684&type=10-K
14. Choice Hotels International, 2024 Form 10-K — ~$1.5B revenue; Comfort, Quality, Econo Lodge (2025). https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001046311&type=10-K
15. CompaniesMarketCap, Market capitalizations — Marriott ~$99B, Hilton ~$85B, IHG ~$20B, Hyatt ~$18B, Wyndham ~$7B, Choice ~$6–7B, Host ~$16B (2026). https://companiesmarketcap.com/hotels/largest-hotel-companies-by-market-cap/
16. Host Hotels & Resorts, FY2024 Annual Report / Form 10-K — ~80 hotels, ~47,000 rooms; largest lodging REIT (2025). https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001070750&type=10-K
17. Ryman Hospitality Properties, Portfolio — 9 convention resorts, 10,400+ rooms (2024). https://www.rymanhp.com/
18. Apple Hospitality REIT, FY2024 disclosures — ~220 hotels, ~30,000 rooms, 37 states (2025). https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001418121&type=10-K
19. Benzinga, Best Hotel REITs — Park Hotels, Pebblebrook, and peer overviews (2026). https://www.benzinga.com/money/hotel-reits
20. Mews, Types of hotel ownership, management contracts, and franchise disclosure (2024). https://www.mews.com/en/blog/types-hotel-ownership
21. CoStar / STR, U.S. hotels post record ADR ($158.67) and RevPAR ($99.94) in 2024; occupancy ~63% (2025). https://www.costar.com/products/str-benchmark
22. U.S. Travel Association, Travel forecasts — business travel ~$317B (2025), group-travel rebound for 2026, youth-sports travel ~$40B (2026). https://www.ustravel.org/research/travel-forecasts
23. Deloitte / Hospitality Net, Declining international inbound travel — ~$175B in 2025, still well below 2019 in real terms (2025). https://www.hospitalitynet.org/news/4127015.html
24. U.S. Department of Commerce, National Travel and Tourism Office (NTTO), Travel and Tourism Forecasts — 68.3M international visitors (2025) rising to 85.2M (2030); 70.5M projected for 2026 (2026). https://www.trade.gov/travel-and-tourism-forecasts
25. Federal Trade Commission, Rule on Unfair or Deceptive Fees — took effect for short-term lodging May 12, 2025 (2025). https://www.ftc.gov/news-events/news/press-releases/2025/05/ftc-rule-unfair-or-deceptive-fees-take-effect-may-12-2025
26. Federal Trade Commission, Franchise Rule — required disclosures (FDD) and prohibited conduct. https://www.ftc.gov/legal-library/browse/rules/franchise-rule
27. U.S. Department of Justice, 2010 ADA Standards for Accessible Design — Title III public accommodations (2010). https://www.ada.gov/law-and-regs/design-standards/2010-stds/
28. Avalara MyLodgeTax, Short-term-rental regulation and transient occupancy tax trends (2026). https://www.avalara.com/mylodgetax/en/blog.html
29. CNBC / CoStar, Choice Hotels abandons ~$8B hostile takeover bid for Wyndham (2024). https://www.cnbc.com/2024/03/11/choice-hotels-surrenders-its-8-billion-hostile-takeover-attempt-of-rival-chain-wyndham-.html
30. CBRE, 2025 Global Hotel Outlook — modest RevPAR growth (2025). https://www.cbre.com/insights/reports/2025-global-hotel-outlook
31. U.S. Bureau of Labor Statistics, Accommodation: NAICS 721 — industry employment and wages (2026). https://www.bls.gov/iag/tgs/iag721.htm