The U.S. Accommodation and Food Services Sector: A Post-Pandemic Resurgence and Future Outlook

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Executive Summary

The U.S. Accommodation and Food Services sector – encompassing hotels, restaurants, bars, and related services – stands as a linchpin of the American economy. It contributes just over 3% of national GDP and employs roughly 14–16 million people, making it the nation’s second-largest private employer. In 2024, industry revenues reached an estimated $1.6 trillion, reflecting a robust rebound from the pandemic-induced collapse of 2020. Consumers’ enduring love of dining out and traveling has kept demand resilient, even as the sector was forced to adapt. “Many of the activities Americans love – like eating out, traveling and recreation – depend on a large workforce,” the Department of Labor noted in its recent outlookblog.dol.gov.

Over the past five years, the industry has demonstrated remarkable adaptability. The COVID-19 crisis initially devastated sales and employment, but it also accelerated innovations – from contactless digital ordering to new business models like delivery-only ghost kitchens – that have become permanent features of the landscape. Rising disposable incomes and pent-up consumer demand have fueled a recovery, with revenue growing at about 4.6% annually since 2019. By 2024, overall sector employment returned to around 15 million (on par with pre-pandemic levels), and the industry is again a reliable engine of job growth. The National Restaurant Association projects the broader restaurant and foodservice segment will reach $1.5 trillion in sales and 15.9 million workers in 2025 – a testament to renewed consumer appetite for meals and experiences away from home.

Looking ahead, industry analysts forecast steady expansion through 2029. MMCG estimates the sector’s revenue will climb to about $1.9 trillion by 2029, implying 3.1% annual growth as travel and dining-out continue rising. Key growth drivers include a strong domestic tourism outlook (bolstered by events like the 2026 FIFA World Cup), higher consumer spending power, and evolving consumer preferences toward health and sustainability. Yet challenges persist: fierce competition – not only from within (a multitude of restaurants and hotels) but also from substitutes like Airbnb and meal-kit services – is intensifying. At the same time, labor shortages, wage inflation, and regulatory pressures (from minimum wage hikes to zoning restrictions on short-term rentals) are testing operators’ margins. This feature-length analysis examines the sector’s trajectory in detail – from its pandemic trials to current performance and future prospects – drawing on data-driven insights and commentary from industry experts.

Historical Context and Pandemic Impact

The Accommodation and Food Services sector has historically grown in tandem with the broader U.S. economy. During the 2010s, steady economic expansion and rising consumer confidence translated into consistent gains for restaurants, hotels and other hospitality businesses. Americans dined out and traveled in record numbers, making this sector a reliable driver of job creation and local tax revenues. By 2019, industry revenue had climbed to roughly $1.3 trillion, capping a decade of growth. The sector’s fortunes, however, are closely tied to economic cycles – it thrives when disposable incomes and corporate travel budgets swell, and tightens when recessions hit. Few imagined the sharp whiplash that 2020 would bring.

The COVID-19 pandemic represented an existential crisis for the industry. Almost overnight in March 2020, cities and states imposed stay-at-home orders, effectively shutting down dine-in service and non-essential travel. Restaurants saw business evaporate; hotels emptied out. By the end of 2020, U.S. restaurant sales had plummeted to about $659 billion, a staggering $240 billion below pre-pandemic forecasts. More than 110,000 eating and drinking establishments closed their doors, at least temporarily, under the economic strain. At the depth of the crisis, up to 8 million restaurant workers were laid off or furloughed, and total sector employment cratered. The devastation was equally dramatic for lodging: 2020 was the worst year on record for U.S. hotels, with occupancy averaging just 44% (down from ~66% in 2019) and revenue per available room (RevPAR) plunging nearly 50%. Hotels lost more than half of their annual revenue, a decline nine times worse than post-9/11 by one industry analysis.

Yet 2020’s collapse also set the stage for a powerful rebound driven by innovation. Forced to survive, businesses pivoted rapidly. Restaurants shifted to takeout and delivery models en masse, stood up curbside pickup operations, and even started selling meal kits and pantry staples to keep cash coming in. Outdoor dining on sidewalks and parklets became a lifeline. Many restaurants trimmed menus to streamline operations and cut costs. Technology adoption accelerated: by late 2020, about 40% of restaurant operators had added new tech solutions – from QR-code menus to mobile ordering and contactless payment – to facilitate safer transactions. Hotels, too, adapted by enhancing cleaning protocols, offering discounted “work-from-hotel” packages to remote workers, and using low-occupancy periods to experiment with digital concierge services. In some niches, the pandemic even spurred growth: RV parks and campgrounds saw a boom as Americans sought socially distanced vacation alternatives, with camping viewed as a safer option than traditional hotels during lockdowns.

By 2021 and 2022, as vaccines rolled out and restrictions eased, the industry’s natural resilience kicked in. Leisure travel came roaring back first – “revenge travel” saw cooped-up Americans hitting beaches and national parks in droves, benefiting hotels in resort and drive-to destinations. Pent-up demand for dining out led to a swift recovery in restaurant sales; many Americans, tired of their own kitchens, eagerly returned to their favorite eateries as soon as they could. Total food-service sales surpassed $1 trillion for the first time in 2023, rebounding well above the pre-pandemic trend (partly due to inflation in menu prices). Hotel revenues similarly rebounded, with 2023 seeing near-record nominal revenues thanks to higher room rates, even though business travel and urban hotel occupancy lagged pre-2020 norms. The sector’s employment has largely recovered: by mid-2023, all the jobs lost in 2020 had been regainedblog.dol.gov, though their distribution shifted (certain cities and fine-dining establishments still trail in staffing).

The pandemic’s scars have not fully faded – as of early 2024, hotel occupancy (~63%) remained a few points below 2019 levels, and the full-service restaurant segment was still about 4–5% shy of its pre-COVID employment level. But the crisis also catalyzed lasting changes that may ultimately strengthen the industry. It weeded out weaker operators and oversupply, accelerated modernization, and sparked new concepts. Ghost kitchens (delivery-only brands with no dining room) went from novelty to mainstream, helping restaurateurs expand with lower overhead. Delivery and app-based ordering became standard for even small eateries. In lodging, alternative accommodations like short-term rentals gained ground as travelers sought more control and privacy – a trend that has permanently altered the competitive landscape.

Current Performance: Trends in Revenue, Employment and Profits

As of 2024, the Accommodation and Food Services sector is on solid footing, posting strong top-line growth and improving profitability. Total industry revenue is about $1.6 trillion for 2024, roughly split between food services (restaurants, bars, caterers) and lodging. In fact, restaurants and other eating places account for nearly 60% of industry revenues (~$944 billion) while traveler accommodations (hotels, motels) make up about one-third (~$528.5 billion). The remainder comes from segments like special food services (catering, corporate cafeterias) and drinking places (bars and nightclubs). This diversified base of spending – from a weeknight pizza delivery to a family’s hotel stay at Disney World – has been buoyed by the broader economic recovery. Elevated consumer spending and a return of travel have lifted sales across the board. Industry revenue grew an estimated 5.1% in 2024, outpacing general economic growth, despite headwinds from inflation. Notably, demand has proven resilient even as menu prices and room rates climbed to offset higher costs. Major publicly traded restaurant chains reported strong same-store sales in 2023–24, indicating Americans are still dining out frequently, though often trading down to quick-service or fast-casual options when budgets tighten.

Employment in the sector has likewise rebounded and is rising again. According to Bureau of Labor Statistics data, the Accommodation and Food Services workforce numbered about 14.3 million as of mid-2025, approaching record highs. The National Restaurant Association expects industry hiring to continue, projecting 15.7 to 15.9 million workers in foodservice by the end of 2025. The jobs span a broad range: from line cooks and hotel housekeepers to bartenders, concierges, and franchise managers. Notably, despite concerns that the pandemic would permanently shrink the labor force, the sector has drawn workers back (often by necessity, via higher wages). Average hourly earnings for non-supervisory employees in leisure and hospitality have jumped in recent years, rising roughly 20% from pre-pandemic levels, as employers boosted pay to attract scarce staff. In 2024, hotels are paying record wages – over $123 billion in total compensation, up from $102 billion in 2019 – reflecting not just more jobs but higher pay per job. Even so, labor shortages persist in pockets: many restaurants report unfilled positions and shorter operating hours due to a dearth of workers willing to staff kitchens and dining rooms at prevailing wages. The unemployment rate in the sector, ~6–7% in 2025, remains above the national average, suggesting continued churn and hiring challenges in these typically high-turnover jobs.

Profitability has been a pleasant surprise on the upswing. After the deep losses of 2020, profit margins have recovered strongly for many operators. Industry-wide profit margin averages around 8.5% of revenue in 2024, according to MMCG – a healthy level for a historically low-margin sector. This improvement owes partly to the shakeout of weaker, unprofitable units during the pandemic and partly to efficiencies gained through technology and streamlined operations. Many restaurants operate with leaner menus and staffing models today than in 2019, helping boost margins. In addition, pricing power has increased: consumers have so far largely accepted menu price hikes (food-away-from-home inflation ran in the high single digits in 2022–23), allowing restaurants to pass along higher input costs. Major quick-service chains, for example, saw record U.S. franchisee profits in 2022 as high demand met higher prices. On the lodging side, hotels have benefited from a favorable mix of customers – leisure travelers (who pay higher rates) filled rooms while business travel remained soft – and from reduced services (many properties still offer limited housekeeping and amenities, a cost-saver that most guests have tolerated). As a result, hotel industry profit margins rebounded and, for some markets, even surpassed pre-pandemic levels in 2023. However, it’s worth noting that profitability varies widely by sub-sector and business size. Independent neighborhood restaurants still often scrape by on 3-5% margins, while large hotel chains and fast-food franchisors enjoy double-digit returns. Overall, though, the sector’s financial performance is much improved, giving operators some cushion as they face rising labor and food costs.

Key Demand Drivers

Several fundamental forces are shaping demand in accommodation and food services today. Consumer spending power is paramount: when households have more disposable income, they dine out and travel more. Despite inflationary pressures, U.S. consumer spending has remained robust, supported by a strong job market and savings accumulated during the pandemic. Even as prices for restaurant meals and hotel rooms increased, many Americans continued to prioritize experiences. The industry’s fortunes closely track the health of the broader economy – a thriving economy with low unemployment typically means busy restaurants and fully booked hotels. Conversely, any economic downturn or decline in consumer confidence would pose a risk, as dining and travel are discretionary expenses that households cut first when budgets tighten.

Tourism – both domestic and international – is a vital demand driver, especially for the accommodation side. Domestic leisure travel has been a powerhouse: U.S. residents took more road trips and short getaways in 2021–2023 than in years past, partly to compensate for lost time during lockdowns. This trend benefited hotels, resorts, and the restaurants in tourist areas. Going forward, inbound international tourism is set to play a bigger role as well. Travel analysts project a surge of foreign visitors to the U.S. in the coming years, aided by global events. Notably, the United States expects to welcome roughly 90 million international travelers in 2026, a spike partly attributed to the FIFA World Cup being hosted across North America. Many of those visitors will flood into World Cup host cities, driving up demand for hotel rooms and restaurant tables in those locales. Major sporting and cultural events (like the 2028 Los Angeles Olympics) and the continued reopening of markets like China for outbound travel are anticipated to boost U.S. travel receipts. On the domestic front, “bleisure” travel – the blending of business and leisure – has emerged as a significant trend: with the rise of remote work, more individuals are tacking vacation days onto business trips or working remotely from vacation destinations, thus filling hotels during traditionally off-peak weekdays. This has helped smooth out demand for accommodations year-round.

Evolving consumer lifestyle and demographic trends also drive demand in important ways. One is the heightened health consciousness among Americans. As awareness of nutrition and wellness grows, consumers are seeking out healthier dining options – and the industry is responding. From fast-food to fine dining, menus now feature more vegetarian and plant-based choices, lower-calorie options, and transparency around sourcing. MMCG notes that the coming years will see health and vegetarian food preferences become more prominent, pressuring food service providers to include such items to attract customers. Even hotels have adapted, with many incorporating wellness menus and fitness programs to cater to health-minded guests. Paradoxically, the high rates of adult obesity in the U.S. are spurring this demand for healthier fare, as more people attempt to improve diets. Another factor is the changing work environment. The pandemic’s shift to remote work has altered patterns of demand for food service. Urban lunch spots that once thrived on office worker crowds have struggled in many cities as white-collar employees continue to work from home part-time. On the flip side, remote work has freed some people to relocate or travel more frequently, redistributing restaurant demand to residential neighborhoods and boosting business at suburban eateries, coffee shops, and delivery services. Additionally, with more time spent at home, many consumers developed stronger cooking skills or habits, meaning restaurants must work harder to lure those customers back out – often by emphasizing the experiential aspect of dining that a home-cooked meal can’t easily replicate. The National Restaurant Association found in surveys that there is substantial pent-up demand: a majority of consumers say they would dine out more if they had the budget, and about 6 in 10 call restaurants “an essential part of their lifestyle” that can’t be fully replaced by home cooking. This underlying appetite for restaurant experiences bodes well if economic conditions remain favorable.

Finally, macro trends like population growth and corporate behavior influence demand. The sheer number of U.S. households – especially dual-income families with time constraints – correlates with restaurant patronage. A growing population (and more households) typically means more mouths to feed away from home. Corporate profit is another external driver: when companies are flush, they spend more on business travel, conferences, and client dinners, which directly boosts high-end hotels and restaurants. The past year’s recovery in corporate earnings has, for instance, led to a cautious uptick in business travel and meetings, though video conferencing and budget consciousness cap the upside compared to pre-2020 norms. In short, demand for accommodation and food services is multifaceted – tied to economic cycles, personal incomes, social trends, and even global events. As of now, most of those signals are positive, with Americans eager to spend on dining and travel experiences whenever their means allow.

Technology-Driven Transformation

Technology is reshaping the accommodation and food service industries at an unprecedented pace, a transformation only accelerated by the pandemic. Digital convenience has become a baseline expectation. Restaurants and hotels have invested heavily in online platforms to enhance customer experience and operational efficiency. For instance, online reservation and ordering systems have radically changed how customers interact with businesses. It’s now routine to book a hotel room or reserve a dinner table with a few taps on a smartphone. Mobile apps, in particular, have been a game-changer – enabling guests to check in and unlock their hotel room via phone, or allowing restaurant patrons to browse menus, place orders, pay, and even earn loyalty rewards all within an app. This app-driven engagement benefits both consumers (with convenience and personalized deals) and businesses (with rich data on customer preferences and streamlined transactions).

In the restaurant world, delivery apps and marketplaces (DoorDash, Uber Eats, Grubhub and the like) have arguably been the most disruptive tech force. They have expanded the reach of food outlets far beyond their physical premises, making virtually any cuisine available at the customer’s doorstep. Even fine dining restaurants, which once never contemplated takeout, have devised creative ways to package their fare for delivery. The pandemic cemented this delivery habit for millions of consumers. As a result, many eateries now treat delivery and takeout as core revenue streams rather than ancillary offerings. Some have even adjusted kitchen layouts or set up dedicated “to-go” lines to handle the volume. The rise of ghost kitchens is a direct byproduct of this trend: these are commercial kitchen facilities with no dine-in space, producing food solely for delivery under various brand names. During the COVID lockdowns, ghost kitchens became lifelines for restaurateurs – and while in-person dining has returned, the ghost kitchen model remains an attractive, lower-overhead expansion path in the era of sustained delivery demand. However, it’s not without challenges; some major chains that eagerly embraced virtual brands have since pulled back, citing operational complexity and concerns over food quality when third parties handle the last mile. Analysts report that the ghost kitchen boom has cooled as consumers revert to on-premise dining, though it still occupies a niche in the industry’s future.

Within restaurants and hotels, automation and AI (artificial intelligence) are beginning to augment the human workforce and decision-making. Fast-food chains have tested AI-powered voice systems to take drive-thru orders, aiming to improve accuracy and speed. Some quick-service kitchens are experimenting with robotic fryers and automated beverage machines. While fully robot-run restaurants are more science fiction than reality, targeted automation is reducing labor needs for repetitive tasks. Customer-facing AI is making waves too: many hotels now deploy AI-driven chatbots for customer service, answering guest inquiries online or even serving as a virtual concierge to handle requests like extra towels or restaurant recommendations. AI algorithms also assist hotels with dynamic pricing, adjusting room rates in real time based on demand patterns (much like airlines do). In maintenance, predictive analytics help hotel operators service equipment (HVAC, elevators) before breakdowns occur, minimizing downtime. Restaurants use data analytics to manage inventory and reduce food waste, and some are using machine learning to forecast demand for menu items on a given day or to personalize marketing offers to guests.

Technology is also enhancing the guest experience in subtler ways. Many restaurants have installed digital menu boards and self-service kiosks for ordering – familiar sights in fast-food outlets – which not only cut wait times but also often lead customers to spend more via algorithmic suggestions (“Would you like to add fries?”). Hotels are investing in in-room technology like smart TVs with streaming services, voice-controlled lighting and thermostats, and mobile keys, catering to a generation of travelers accustomed to smart homes. And across the sector, social media and online reviews wield enormous influence – a reality that has spurred businesses to up their tech game in marketing. Many establishments now have dedicated social media managers and spend on digital advertising or partnerships with influencers to keep their brand in the online conversation.

One of the most impactful tech transformations is how it has blurred industry boundaries. Aggregators and platforms now sit between the customer and the service provider. For example, Google and Expedia have a huge sway in hotel bookings via search results and online travel agencies; OpenTable and Yelp affect where people dine; Instagram and TikTok trends can send droves of customers to a once-obscure café. The sector has had to learn digital marketing and reputation management as core competencies. The competitive edge increasingly goes to those who leverage technology not just to cut costs but to enhance hospitality – be it a hotel that knows a guest’s room preference from past data, or a restaurant that remembers a patron’s favorite dish through its loyalty app. As technology marches on with innovations like AI recommendation engines, cashless payments, or even the metaverse (some hotels have begun offering virtual reality previews of their rooms and amenities), the industry’s traditional high-touch ethos is finding a new complement in high-tech tools.

Competitive Landscape: Major Players, Fragmentation and Substitutes

The U.S. accommodation and food service industry is vast and notably fragmented, with a low concentration of market share among top players. Unlike industries dominated by a handful of giants, here even the largest companies command only a sliver of the total market. The combined revenue of the four largest industry participants makes up well under 10% of overall sector revenue – in fact, MMCG data shows the top four account for only on the order of 3–4% of revenue. This means competition is highly dispersed, with hundreds of thousands of small businesses vying alongside big chains for consumer dollars. On Main Streets across America, independent family restaurants compete with national brands, and boutique inns compete with global hotel corporations.

That said, the sector does have its titans. On the food service side, brands like McDonald’s, Starbucks, Yum! Brands (KFC, Taco Bell, Pizza Hut), and Darden (Olive Garden, LongHorn Steakhouse) are among the largest. Starbucks, for instance, recorded about $26.6 billion in U.S. revenue in 2024, making it one of the top single companies – yet even that was only roughly 1.7% of the entire sector’s revenue. McDonald’s U.S. systemwide sales (including franchised outlets) are similarly enormous in absolute terms – on the order of $40 billion – but still just a few percent of all restaurant spending. The vast majority of businesses in food service are small independent operators or local chains. This fragmentation keeps competition fierce and innovation rapid, as each establishment tries to differentiate itself through cuisine, concept or price. In the hotel arena, there is a bit more consolidation at the top: Marriott International and Hilton Worldwide are giants with dozens of brands under their umbrellas, from luxury to midscale. Marriott (which acquired Starwood in 2016) is the world’s largest hotel company and in the U.S. oversees over 5,000 properties across brands like Marriott, Sheraton, Westin, and Ritz-Carlton. Likewise, Hilton, Hyatt, IHG, and Wyndham collectively franchise or manage tens of thousands of U.S. hotel properties. But even the largest hotel companies don’t capture outsized market share because so much of the lodging industry includes independent hotels, small regional chains, and alternative accommodations.

A significant competitive force reshaping the lodging segment is Airbnb and other short-term rental platforms. Airbnb’s rise over the past decade introduced a formidable substitute to traditional hotels: millions of homeowners (and investors) now offer rooms or entire homes to travelers, often at competitive prices or with amenities like kitchens and extra space that hotels can’t match. By some measures, Airbnb has achieved a level of market penetration that rivals the largest hotel chains. For example, one analysis found Airbnb’s share of U.S. lodging demand (especially for leisure travel) has grown sharply – capturing an estimated 40%+ of the short-term accommodation market in recent years. This is up from virtually nothing a decade ago. The platform’s popularity soared during the pandemic as travelers sought private, socially distanced stays, and it remains high, particularly among younger travelers and families. Traditional hotels have had to respond by emphasizing the services and consistency they offer (professional cleaning, 24/7 service, loyalty program perks, etc.), as well as lobbying for a “level playing field” in terms of regulations and taxes for short-term rentals. The competition between hotels and short-term rentals has also spurred some hotels to experiment with home-like offerings (e.g. apartment-style suites or extended stay brands) and pushed Airbnb to add hotel listings and more standardized “Airbnb Plus” offerings. The lines are blurring: companies like Marriott now have home rental platforms, and Airbnb has even partnered with developers to create Airbnb-friendly apartment buildings.

Restaurants face their own substitute competitors beyond just other restaurants. An age-old alternative is of course cooking at home, which saw a renaissance during the pandemic and remains a constantly available substitute (especially when grocery prices are comparatively lower than restaurant prices). In recent years, the industry has been watching the rise of meal kit services and prepared meal delivery. Companies like Blue Apron, HelloFresh, and a host of startups offer consumers the ingredients and instructions to cook chef-curated meals at home, aiming to replicate some of the restaurant experience in the kitchen. While the meal-kit boom has had ups and downs, it represents a niche threat – particularly for time-strapped customers who might alternate between meal kits and takeout for convenience. Similarly, supermarkets have upped their game, expanding their prepared foods and deli sections to effectively operate as fast casual eateries; many grocery stores now offer hot bars, sushi stations, and cafe seating, capturing would-be restaurant dollars. Another indirect competitor is the burgeoning category of ready-to-eat retail meal services (from salad shops in airports to take-home dinners at Costco). In essence, Americans have more choices than ever when deciding “what’s for dinner,” and not all of them involve a traditional restaurant.

The beverage segment also overlaps with competition from other sectors: coffee shops like Starbucks face competition from ready-to-drink coffees sold in stores, and bars compete with the trend of at-home craft cocktail making (fueled by alcohol delivery apps and Pinterest-worthy recipes during lockdown).

Given the abundance of options, the competitive landscape has driven many operators to find a niche or value proposition. Some restaurants double down on ambiance and experience (since a home meal can’t provide a night on the town), or on ultra-convenience via drive-thrus and 24/7 hours. Hotels, especially independents, often differentiate through boutique designs, local flavor, or specialized services (e.g. wellness resorts, pet-friendly amenities, etc.). Meanwhile, large chains leverage loyalty programs and scale efficiencies (for example, offering lower prices or ubiquitous locations) to stay ahead.

Competitive substitutes are also emerging from technology itself: For instance, virtual reality could one day offer “immersive” travel experiences as a surrogate for actual travel – a far-off prospect, but one the industry notes. More immediately, entertainment options like streaming services and video games, which boomed in the pandemic, are indirect competitors to dining out and traveling, in the sense that they compete for the same leisure time and dollars. A consumer might opt for a Netflix-and-takeout night (one restaurant meal, no movie tickets or bar outing) rather than dinner and a show out in the city. Thus, broader shifts in how people spend their leisure time – more at-home entertainment versus outside socialization – can influence the competitive dynamics as well.

In summary, competition in accommodation and food services operates on multiple levels: within the industry (innumerable small and large players vying for share), and from outside alternatives (home-centric or peer-to-peer options). The fragmented structure keeps incumbents on their toes and often benefits consumers through abundant choice and generally competitive prices. But it also means that to thrive, businesses must constantly differentiate themselves, embrace innovation, and respond to the ever-changing mosaic of consumer preferences.

Regulation and Labor Issues

In an industry so dependent on human labor and public interaction, it’s no surprise that regulation and labor policies significantly shape the business environment. One of the most pressing issues in recent years has been the evolution of wage laws. The sector is a major employer of hourly workers, many of them in lower-wage positions like servers, cooks, housekeepers, and front-desk clerks. The federal minimum wage remains $7.25 per hour (unchanged since 2009), but crucially, many states and cities have enacted higher minimum wages. As of 2024, over 30 states have a minimum wage above the federal level, with several (California, New York, etc.) at or moving toward $15 per hour. This patchwork means labor costs for restaurants and hotels vary by location: a small diner in Alabama might still lawfully pay $7.25, while one in California must pay $15 or more. Many in the industry have already adapted to higher wages as urban labor markets tightened – indeed, average pay for non-tipped kitchen staff often exceeds the minimum by necessity. Nonetheless, increases in the wage floor put pressure on margins, since labor is a significant portion of costs. For tipped employees (like waitstaff), there’s a separate but related debate: the federal tipped minimum wage is just $2.13, relying on tips to make up the rest, and while some states mandate full minimum wage to servers, others continue with the lower tipped base. Movements to abolish the tip credit (as seen recently in jurisdictions like Washington D.C.) are being watched closely by the restaurant industry. A higher base wage for tipped staff could mean major changes to the gratuity-based compensation model that U.S. restaurants have long used.

Another major policy piece is the Patient Protection and Affordable Care Act (ACA) – specifically its employer mandate for health insurance. Under the ACA, businesses with 50 or more full-time employees (defined as working 30+ hours per week) must offer health insurance or pay penalties. Many restaurants and hospitality businesses have historically relied on part-time, seasonal, or high-turnover labor, and prior to the ACA they often did not offer health benefits to large portions of their staff. The implementation of this mandate in the mid-2010s forced larger restaurant chains and hotel companies to adjust. Some did try tactics like capping workers’ hours below 30 to avoid triggering the requirement. Others, like Starbucks and Marriott, already offered benefits and thus were less affected. Industry analysts note that because so much of the hospitality workforce is part-time or transient, the ACA mandate didn’t hit the sector uniformly – many small eateries are below the 50-employee threshold, and large employers have generally complied or found workarounds. Still, providing health insurance adds to labor costs, and the industry remains concerned about any expansion of employer benefit mandates. For example, proposals for paid sick leave or family leave requirements (which some states/cities have passed) also directly impact restaurants and hotels where margins are thin.

Beyond wages and healthcare, labor issues include working conditions and unionization. Historically, union representation in hospitality is quite low (on the order of 2% of workers), concentrated mostly in a few big-city hotels and casino resorts. However, there have been notable labor actions recently: unionized hotel workers in cities like Los Angeles and Las Vegas have staged strikes or contract showdowns seeking higher pay in the inflation surge of 2023. Additionally, the Starbucks barista unionization wave – with hundreds of stores voting to unionize since late 2021 – has been a prominent story, indicating a shift in some hospitality workers’ attitudes. While still a small fraction of the overall workforce, these efforts could signal rising labor assertiveness in a sector long defined by high turnover and decentralized workplaces that made organizing difficult. If unions gain more footholds, that could reshape wage standards and work rules, particularly in urban markets.

Operating regulations are another arena: health and safety rules, licensing requirements, and zoning laws all profoundly influence hospitality businesses. Restaurants must adhere to stringent food safety regulations enforced by local health departments and guided by FDA’s Food Code. This means regular inspections, standards for food handling, storage, kitchen sanitation, etc. Complying is a cost of doing business (and failing to comply can mean closures or reputational damage). Most operators accept these as necessary, but any changes – like new menu labeling requirements (e.g. calorie counts on menus, which became a federal requirement for chains in recent years) – do add compliance costs. Liquor licensing is another critical regulatory hurdle. To serve alcohol, establishments need licenses, and these are often capped in number or costly to obtain. In states like New York, there’s intense competition and even secondary markets for scarce liquor licenses. The difficulty and expense of getting a license can hamper expansion plans for restaurants and bars, effectively acting as a barrier to entry or growth. Some jurisdictions also restrict alcohol service hours or enforce zoning separating bars from residential areas, which can limit operations.

Speaking of zoning: zoning and local ordinances deeply affect the accommodation side too. A clear example is how city regulations on short-term rentals (like Airbnb) are evolving. Cities such as New York and San Francisco have passed laws to restrict short-term rentals – for instance, by requiring hosts to register and limiting rentals of entire apartments if the owner isn’t present. New York’s recent rules (enforced from 2023) led to the delisting of thousands of Airbnb units, significantly curtailing the supply of short-term rentals in the city. These moves are often driven by housing affordability concerns and lobbying by the hotel industry, and they reflect a regulatory battle over what kind of lodging is permissible where. While ostensibly targeting private rentals, such zoning decisions also impact travelers and thus the broader lodging market in those cities (potentially pushing some demand back to hotels). On a different front, zoning can impede new hotel construction – local residents sometimes oppose hotel projects due to traffic or other concerns, and getting approvals can be lengthy. Similarly, opening a new nightclub or late-hour bar in many cities runs into community board approvals, noise ordinances, and other red tape.

Labor standards and workplace mandates are also in flux. Several large cities have implemented “predictive scheduling” laws that require certain employers (including large restaurant chains) to provide staff with schedules well in advance and pay penalties for last-minute changes. These laws aim to give workers more stability but reduce flexibility for managers in an industry where demand can be weather-dependent or event-driven. California recently passed a law to establish a fast-food sector council that could set wage and labor standards for chain restaurants – an unprecedented form of regulation that the industry fought (the law was later modified after negotiations with restaurant companies). The outcome of such experiments could herald a new model of sector-specific regulation.

From the perspective of business owners, many of these regulatory developments amount to rising costs and constraints on operations. It’s telling that Chip Rogers, CEO of the American Hotel & Lodging Association, cautioned in the group’s 2024 outlook that despite strong demand, “hoteliers face continued challenges, including a nationwide labor shortage, persistent inflation, high interest rates, and a federal regulatory agenda that’s making it harder for hoteliers to do business”. Industry advocates like AHLA and the National Restaurant Association routinely lobby on issues from tip credit preservation to visa programs that allow more foreign seasonal workers. During the pandemic, the industry also proved it has political clout – securing relief in the form of PPP loans and the Restaurant Revitalization Fund to help stay afloat. Moving forward, policy matters such as immigration reform (which could alleviate labor shortages by expanding the workforce), healthcare, and tax law (hospitality benefits from provisions like business meal deductions and tourism promotion funds) will remain key areas of focus.

In summary, the regulatory and labor landscape for accommodation and food services is complex and continually evolving. Higher mandated wages and benefits, stricter scheduling and safety rules, and the push-pull of zoning and licensing can significantly impact costs and how businesses operate. Operators must navigate these while also trying to keep prices attractive for consumers – a balancing act that defines much of the behind-the-scenes strategy in this sector.

Cost Structure and Margins

To understand the economics of the accommodation and food services sector, one must dissect its cost structure – essentially, where each dollar of revenue goes. Broadly, the two largest expense categories are purchases (cost of goods) and labor (wages). According to industry benchmarks, on average about 38% of revenue goes toward purchases of inputs (food ingredients for restaurants, or items like toiletries, linens, and cleaning supplies for hotels) and roughly 27% goes toward wages and related labor costs. These two alone typically consume well over half of every revenue dollar. The remainder is divided among other operating costs: rent or mortgage for the property (around 4–6% on average), utilities (keeping the lights on and kitchens running), marketing expenses, maintenance and equipment depreciation, insurance, and so forth. After all those costs, the profit left for owners is, as noted, in the high single digits percentage-wise on average (though it varies widely by business).

Food service vs. accommodation businesses have some notable differences in their cost breakdown. Restaurants (food service) tend to be more labor-intensive relative to their sales. They often require sizable staffs of cooks, waiters, dishwashers, etc., especially full-service establishments, and many are small owner-operated venues. The MMCG analysis suggests food service enterprises have a larger share of direct labor in their cost structure than lodging does. Indeed, a fine-dining restaurant’s prime costs (food + labor) can easily be 60-70% of sales, leaving little room for error. Another challenge for restaurants is that consumers have a pretty good sense of ingredient costs – diners generally know what a bowl of pasta or a cup of coffee should cost, which caps how much restaurants can charge over their input costs. As MMCG notes, because customers can gauge food and drink prices, they resist paying far above that value, which limits profit margins for food service providers. In other words, restaurants face a price ceiling due to consumer perceptions, keeping margins low.

Hotels (accommodation providers), on the other hand, have a different cost dynamic. They are capital-intensive (big buildings, lots of fixed costs in property and maintenance) and have significant overhead, but once a hotel is up and running, the cost of selling an additional room night is relatively low. Hotels do employ many workers – front desk staff, housekeepers, maintenance, etc. – yet labor’s share of costs can be somewhat lower than in food service. There are limited-service hotels that operate with skeleton crews, whereas every restaurant needs a kitchen crew whenever it’s open. Moreover, hotels benefit from a kind of pricing opacity: consumers find it harder to pinpoint the “true cost” of a hotel room the way they could for a sandwich. The value of a night’s stay is subjective and based on location, brand, experience, and demand. This gives hotels more leeway to practice dynamic pricing and capture higher margins when demand allows. As MMCG highlights, the accommodation subsector generally achieves higher profit margins – partly because travelers cannot easily discern the hotel’s cost structure, allowing hotels to charge what the market bears without the same consumer pushback on margins. For example, a tourist might pay $300 for a night that costs the hotel $100 to service; that kind of markup is less feasible in a restaurant context. The result is that hotels often have double-digit profit margins in good times, whereas restaurants usually operate in low single digits.

The split in profit margins influences each subsector’s share of total industry revenue as well. Since restaurants struggle to significantly boost margins (due to competition and cost visibility), even though they have high sales volume, the lodging sector can punch above its weight in terms of profitability and investment attractiveness. We see this in how the stock market values hotel companies versus restaurant companies: investors often reward the former with higher valuations for their earnings potential.

Within food service, cost structure also varies by format. Fast-food (limited service) outlets usually have higher food cost percentages but lower labor per dollar of sales (because service is simpler and there’s no waitstaff), whereas full-service restaurants have higher labor (server wages, more kitchen staff) and typically also pay more in rent for larger dining spaces. Food cost (purchases) for a restaurant typically ranges from 25–35% of sales – lower for bars (alcohol has big markups) and higher for say a sushi restaurant (where fish is expensive). Labor might range 20–30% for a counter-service place up to 40% or more for labor-intensive fine dining. Many restaurants aim for a combined food+labor cost around 60% as a rule of thumb, but inflation has squeezed that of late, with both wages and ingredient prices climbing.

For hotels, the major costs beyond labor include property operations (maintenance, utilities, refurbishment) and franchise or management fees if it’s a branded property. A typical full-service hotel might allocate ~10-15% of revenue to property maintenance and utilities, a few percent to marketing and distribution (including commissions to online booking channels), and pay 10-20% of room revenue to a brand as franchise fees. Debt service (interest) can also be significant for hotels, given the high capital costs – though that doesn’t show up in operating cost structure analyses like MMCGs which focus on operating profit. High interest rates in 2024 mean hotels face increased financing costs, an issue for owners but not always visible to guests.

Despite differences, both restaurants and hotels have been grappling with rising costs across the board in the past two years. Food commodity inflation (e.g. meat, dairy, and produce spikes) drove up purchase costs for eateries. Supply chain snarls made some inputs scarce and pricier (everything from cooking oil to single-use takeout containers surged in cost). For hotels, the cost of supplies (like cleaning products) and services (laundry, for instance) also rose with inflation. Labor costs have risen particularly fast – wage hikes, bonus incentives, and better benefits to attract workers have all added to the expense line. For many operators, this means carefully examining every part of their cost structure for savings: adopting energy-efficient appliances to cut utility bills, streamlining menus or services to reduce waste, negotiating harder with suppliers, and leveraging technology (like scheduling software to optimize labor shifts, or even using AI to manage pricing and inventory).

A noteworthy aspect in recent times is cost pass-through to consumers. The industry has historically been cautious about raising prices for fear of losing customers, but the inflationary environment gave cover to implement price increases. By late 2023, menu prices were roughly 20% higher than in 2019 on average (according to CPI data), and hotel room rates were similarly higher than pre-pandemic, contributing to record nominal revenues. These higher prices have allowed businesses to maintain or even grow margins despite cost inflation, up to a point. The concern is that if costs continue rising (e.g. new wage mandates or spikes in input prices) and the economy softens, operators might not be able to further raise prices without dampening demand. Thus, controlling costs remains a top priority, and many in the sector are investing in efficiency improvements – from kitchen automation to energy-saving lighting – as long-term fixes.

In essence, the industry’s cost structure is a delicate balancing act between purchases, people, and other overhead. Small shifts in any of these can mean the difference between profit and loss, especially in restaurants. As one veteran restaurateur quipped, “We’re not in the food business, we’re in the pennies business” – underscoring how tight margins require hawk-eyed cost control. The pandemic’s lesson in adaptability has perhaps made operators more cost-conscious and inventive, whether by running with tighter staff, using more seasonal/local ingredients to save on costs, or renegotiating leases during the downturn. Going forward, sustaining healthy margins will likely depend on continuing those efficiencies and smart pricing strategies to navigate the ever-shifting currents of expense.

Growth Outlook to 2029

The road ahead for the U.S. accommodation and food services sector appears broadly positive, with multiple tailwinds supporting growth – albeit at a moderate pace and with potential bumps along the way. Industry forecasts, includingMMCGs, predict the sector will expand at roughly 3% annualized through 2029, reaching about $1.9 trillion in revenue by 2029. This growth rate is a bit above expected overall GDP growth, indicating the sector will continue to slightly outpace the general economy as it recovers remaining lost ground and meets rising consumer demand. Several key factors underlie this outlook:

Major global events and tourism boosts loom on the horizon. The 2026 FIFA World Cup is a particularly anticipated catalyst. With multiple U.S. cities hosting matches, an influx of international visitors (and domestic travelers moving between host cities) is expected during that summer. As mentioned, projections are for 90 million foreign visitors in 2026 – a sizable uptick partly attributable to the World Cup. Host cities like New York, Los Angeles, Dallas, and Miami will see surges in hotel bookings and restaurant spending during the tournament. Savvy businesses are already strategizing to capture the windfall, from hotels increasing capacity to restaurants planning special events for soccer fans. Similarly, the 2028 Los Angeles Summer Olympics will likely draw millions of visitors and focus global attention (and travel) on Southern California. These events don’t happen every year, but when they do, they provide afterburners to industry revenue and often leave a legacy of improved infrastructure and global marketing that benefits tourism for years after.

The broader trend in travel is one of growth. The U.S. Travel Association and other analysts foresee steady increases in both leisure and business travel through the decade, barring unforeseen crises. International travel is still in a recovery phase – by 2025 it’s expected to approach or exceed 2019 volumes as more countries remove pandemic restrictions and global air capacity ramps up. The strength of the U.S. dollar can influence inbound travel (a very strong dollar makes the U.S. expensive for foreigners, potentially dampening visits), but underlying demand to visit American destinations remains high. Domestic leisure travel may temper slightly from the frenzied “revenge travel” peak, but work patterns like remote/hybrid arrangements could permanently elevate the frequency of getaways and long weekends. Business travel – convention attendance, sales trips, etc. – is projected to continue a gradual rebound, although many experts think it may not fully return to pre-2020 levels due to virtual meeting adoption. Even so, any incremental improvement in business travel is pure gain for city hotels that have been missing that segment.

Another key pillar of growth is consumer dining habits. The National Restaurant Association’s outlook for 2025 and beyond is optimistic that consumer demand for restaurant services will remain “resilient”. The rationale is that younger generations in particular allocate a significant share of their food budget to eating out or ordering in. By 2029, the large millennial cohort will be in their peak earning years (40s and 50s), and Gen Z will be solidly in adulthood – both demographics known to value experiences and convenience, which bodes well for restaurants of all stripes. There is, of course, sensitivity to economic cycles: if a recession hits in the next few years, restaurant sales might stagnate temporarily as people pull back. But absent a major downturn, the secular trend is up. The industry is expected to find growth not just in volume of visits, but also through innovation in offerings: we can anticipate more health-oriented and specialty food services emerging, tapping into evolving tastes. MMCG highlights that providers are already exploring “health-first” meal prep services and fast-casual concepts with a wellness spin to capture the growing market of health-conscious consumers. By 2029, plant-based and functional foods could be much more mainstream, and restaurants that cater to dietary preferences (vegan, gluten-free, low-carb, etc.) stand to thrive.

Technology and new revenue streams are another growth dimension. The pandemic forced many operators to create additional channels (delivery, meal kits, merchandise). The coming years might see restaurants continuing those multi-channel strategies, essentially doing more business without proportional increases in brick-and-mortar footprint. For example, a restaurant might host cooking classes, do branded product lines, or license a virtual brand for delivery – diversifying income. Hotels might increasingly monetize amenities for locals (gym memberships, co-working spaces, day passes to pools), not just overnight guests. Furthermore, artificial intelligence and data analytics could unlock efficiencies that improve profitability – effectively allowing growth to be more lucrative. AI might also enable better marketing (filling seats/rooms in off-peak times via personalized offers), thereby boosting overall volumes.

Environmental sustainability – often termed “green initiatives” – is poised to shape growth as well. There’s a rising movement for sustainable tourism and dining. In the next few years, hotels that invest in green building upgrades (solar panels, water recycling, etc.) could reduce costs and attract eco-minded travelers, potentially capturing more market share. The Biden administration and many states have also put forth climate goals that may result in incentives for energy-efficient upgrades in commercial buildings; hotels could benefit from such programs. On the restaurant side, a focus on local sourcing, reducing food waste, and eco-friendly packaging might not directly increase sales, but it can improve brand image and meet the expectations of younger consumers who increasingly prioritize environmental responsibility. We might see more “zero-waste” restaurants or carbon-neutral hotel pledges by 2029, aligning with broader societal shifts. Such initiatives sometimes allow businesses to charge a premium or gain customer loyalty.

That said, the outlook is not without headwinds and uncertainties. Economic uncertainty is a constant backdrop – high interest rates and the possibility of recession could slow consumer spending on travel and dining in the near term. Inflation, while cooling as of late 2024, is still a factor – if costs surge again (say, oil spikes causing jet fuel and food distribution costs to rise), it could squeeze profits and force unpleasant price rises that test demand. Additionally, the labor shortage isn’t expected to disappear; demographic trends (an aging population and slowing workforce growth) imply that finding enough workers, and paying them competitively, will remain an issue through the decade. This could act as a brake on growth if, for example, restaurants cannot find staff to open at full hours or hotels have to cap room inventory due to housekeeping shortages. Automation may alleviate some of this, but unlikely all.

On the competitive front, one wonders if the late 2020s might bring new disruptors. Could there be another Airbnb-like platform that changes the game? Or will the meal delivery ecosystem consolidate and increase fees, pressuring restaurants? These unknowns introduce risk. Moreover, consumer behaviors can shift in unexpected ways – for instance, if a significant number of people continue cooking at home more often due to cost-saving or health reasons, that could temper restaurant growth below forecasts.

Still, the consensus among industry watchers is that growth will continue, powered by Americans’ entrenched penchant for the convenience and enjoyment that hospitality services provide. The narrative, as Michelle Korsmo, CEO of the National Restaurant Association, put it, is one of cautious optimism: “The fundamentals of the restaurant industry are strong, and operators are optimistic about the year ahead… Industry sales are expected to grow more than 4% this year… That growth will come from restaurant operators finding the balance of value and experience for consumers, and innovating breakthrough efficiency in their operations.” This sentiment likely holds true across the broader sector: success will come to those who can balance offering value and compelling experiences with running tighter, smarter operations. If they can do so, the rest of the decade should deliver plenty of opportunity – from full hotels and bustling dining rooms to new concepts we have yet to imagine – for an industry that has proven its resilience and creativity under fire.

Geographic Concentration and Economic Significance

The accommodation and food services sector has a significant geographic footprint across the United States, but its impact is especially pronounced in certain regions and cities. Naturally, areas with high tourism activity or large populations tend to have the greatest concentration of hotels and restaurants. For instance, states like California and Florida boast enormous hospitality industries: California’s diverse attractions (from Disneyland to Napa Valley) and massive urban centers make it a top earner, while Florida’s warm climate, beaches, and theme parks (Disney World, Universal, Miami’s nightlife) draw tens of millions of visitors annually, fueling restaurants and lodging statewide. The Sun Belt in general – including Nevada (Las Vegas), Hawaii, Texas, and Arizona – leans heavily on tourism and hospitality as pillars of their economies.

Some states rely on this sector to an extraordinary degree. Nevada is a prime example: anchored by Las Vegas’s casino-resorts and entertainment, leisure and hospitality is the largest employer in the state. Recent data show nearly 23% of Nevada’s nonfarm workforce is in leisure and hospitality – effectively about one in four jobs, by far the highest share in the nation. Nevada’s economy is thus highly sensitive to tourism trends; the pandemic shutdown of Vegas was a gut punch, and the swift rebound in 2021–2022 (when Vegas visitor numbers surged back) was a boon that quickly lowered the state’s unemployment. Similarly, Hawaii depends overwhelmingly on tourism – roughly 17–20% of Hawaii’s economy and jobs are tied to tourism in normal times. The islands’ hotels, luaus, and restaurants cater to international and mainland visitors, and when tourism flows slowed, Hawaii’s economy felt an outsized impact. In these places, the accommodation and food service sector isn’t just part of the economy, it is the economy in many respects, supporting local tax bases and thousands of small businesses.

Even outside pure vacation spots, hospitality concentrates in urban centers and transport hubs. New York City has one of the largest restaurant industries in the country – from corner delis to Michelin-starred dining – serving both residents and throngs of tourists. Pre-pandemic, NYC had over 25,000 eating and drinking establishments. Its hotel sector is also enormous (more than 120,000 hotel rooms). The city’s recent crackdown on illegal short-term rentals aims to funnel visitors back into hotels, which could keep that lodging industry robust. Las Vegas and Orlando are more monoculture in tourism – Vegas built on casinos and conventions, Orlando on theme parks – each hosting tens of millions of visitors a year (Orlando was the #1 U.S. travel destination by visitor count pre-COVID). Those cities have correspondingly huge numbers of hospitality workers; Orlando’s Disney and Universal resort complexes alone employ tens of thousands. Chicago, San Francisco, New Orleans, Miami, Washington D.C. – all are major convention or leisure destinations, and their downtown economies rely heavily on restaurants, bars, and hotels.

What about rural areas and smaller cities? They too have restaurants and hotels, of course, but fewer big swings. A mid-sized Midwestern city’s hospitality sector will depend on local population dining habits and any regional tourism draws (like a university, a national park nearby, or an annual festival). Geographic concentration also relates to cuisine and culture – e.g. Louisiana’s New Orleans is famous for its unique food and music scene, making hospitality integral to preserving that culture and drawing visitors. Napa Valley’s wineries or Maine’s seafood shacks are localized attractions that create micro-clusters of hospitality economy.

MMCG notes that the West region and Southeast region are leaders in concentration of accommodation and food service establishments. The West (including California, Nevada, etc.) is a prominent area for traveler traffic, second only to one other region (likely the Southeast, given Florida’s dominance). Dense population and heavy tourist inflows give these regions a large slice of the industry. The presence of world-renowned cities like Los Angeles and San Francisco in the West means both international and domestic tourists drive business there, while the Southeast’s warm weather and attractions (from Miami beaches to Appalachian mountain retreats) do likewise.

From an economic development perspective, the hospitality sector plays a crucial role in many local economies by generating employment across a spectrum of skill levels. It provides entry-level jobs for young and unskilled workers, as well as careers in management, culinary arts, and hotel administration. In some rural communities, a single resort or tourist attraction can be the lifeblood for local employment. The sector also has a multiplier effect: tourists spend not just on lodging and meals, but also in retail stores, on local transportation, and more. For example, a single large convention in a city can fill hotel rooms, and also drive business to restaurants, taxis, and shops – hence cities fiercely compete to host events.

Additionally, hospitality is a major tax revenue generator, especially at the local level. Many states and cities levy hotel occupancy taxes (often 5-15% on room rates) that funnel money into public coffers. The AHLA reported that hotels will generate a record $54.4 billion in state and local tax revenue in 2024 – funds that often support tourism promotion, infrastructure, and public services. Restaurants too contribute through sales taxes and property taxes. A vibrant restaurant scene can uplift real estate values in a neighborhood and make a city more attractive for residents and businesses (think of how food scenes are a point of pride for cities like Portland or Austin).

Geographic concentration also means vulnerability: when regions face specific challenges, the local hospitality sector feels it. Hurricanes in Florida or Hawaii, wildfires in California, or other climate impacts can disrupt tourism flows in those places and temporarily shutter businesses. Over the long term, climate change poses a question mark – if certain beach destinations become inhospitable in summer or ski resorts lose snow, it could shift where travelers go, thus redistributing the industry’s geographic center of gravity. Another consideration is how spreading remote work might enable more tourism in off-the-beaten-path locales (e.g., national parks saw record visitors post-pandemic as people sought outdoor escapes, boosting rural gateway towns).

In conclusion, while every American community has some stake in accommodation and food services (everyone, everywhere eats and many travel), the economic significance is amplified in key geographies. In tourist-dependent states like Nevada and Hawaii, and in big cities, this sector is a cornerstone of prosperity and employment. A quarter of Nevada’s workforce in hospitality speaks volumes about the social and economic fabric tied to this industry. As travel and dining trends evolve, we may see some shifts in where growth is strongest – perhaps more spread to mid-tier cities as remote workers travel, or continued dominance of sunbelt locales as retirees and vacationers flock there. But the fundamental fact remains: hospitality is both a national economic force and a local economic lifeline across the United States.

Expert Commentary and Industry Insights

The post-pandemic chapter for U.S. accommodation and food services is still being written, but industry experts largely agree on its central theme: resilience through innovation. The narrative emerging from trade associations, analysts, and executives is one of an industry that took a monumental blow in 2020, adapted rapidly, and is now on a growth path albeit with new norms.

In the restaurant realm, Mike Whatley of the National Restaurant Association summarized the situation in a recent commentary: “2023 showed that diners are eager to return – but they expect more for their dollar. The challenge (and opportunity) for restaurants is to deliver not just a meal, but an experience that justifies the cost.” Indeed, as restaurants face higher expenses and must sometimes charge more, they are emphasizing hospitality and unique experiences to draw customers. We see this in the trends of experiential dining – chef’s tables, tasting menus, themed pop-up dinners – that cater to foodies’ desire for something beyond the ordinary. At the same time, convenience remains king for a large segment: fast-casual brands and quick-service chains are investing in drive-thru tech and loyalty apps to keep their value-conscious customers coming back frequently. Hudson Riehle, the NRA’s head of research, has pointed out that “even in tough economic times, Americans find ways to incorporate restaurants into their lives – whether by shifting to quick-service or choosing lunch out instead of dinner” – highlighting the industry’s ability to flex with consumer budget adjustments.

On the lodging side, industry leaders like Marriott’s CEO Tony Capuano have noted the robust recovery of leisure travel and have expressed confidence in long-term demand. Capuano said in a recent earnings call that Marriott sees “no evidence of consumers trading down on travel; if anything, they’re trading up – prioritizing vacations and willing to splurge on experiences” (a trend evidenced by record revenues in luxury resort segments in 2022-2023). Meanwhile, Chip Rogers of AHLA stresses both optimism and realism: “2023 was a significant comeback year for hoteliers, and our outlook for 2024 shows the industry is poised to build on that success… The expectation of higher occupancy rates and record amounts of wages and tax revenue point to a strong future. But hoteliers face continued challenges,” he cautioned, citing labor shortages and cost inflation as ongoing concerns. This encapsulates the dual reality – strong demand recovery fueling optimism, and operational headaches (staffing, costs, interest rates) that temper exuberance.

Third-party researchers and financial analysts are also weighing in. A report by Deloitte in late 2024 noted that hotel companies are increasingly focusing on “asset light” models and diversification – meaning many are shedding real estate and instead franchising more (reducing capital risk), as well as expanding into adjacent businesses like branded residences or all-inclusive resort packages. This suggests the hotel industry is preparing for growth with a more flexible, resilient business model learned from the pandemic shock (when owning too many physical assets became a liability). On restaurants, a Morgan Stanley analysis predicted that restaurant digitization (online ordering, AI drive-thrus, etc.) could boost productivity by 10-15% over the next five years, effectively helping offset the labor shortage. This is an encouraging outlook if it materializes – technology doing some heavy lifting to allow fewer workers to serve more customers seamlessly.

One cannot ignore the perspective of workforce and labor experts. The hospitality workforce underwent trauma in 2020 with mass layoffs; many workers left and found jobs in other industries (retail, delivery, etc.) that were hiring during the pandemic. Some of those workers haven’t returned, contributing to today’s staffing shortfalls. As a result, many operators are now investing more in workforce development and retention. Apprentice programs for cooks, management training for promising hourly employees, better work-life balance (like stable schedules) – these initiatives are becoming more common as employers realize they must compete for talent. The U.S. Chamber of Commerce has pointed out that leisure and hospitality still has one of the highest job opening rates of any sector, signaling unmet labor demand. Recruitment and retention will thus remain top of mind. There’s a push to make hospitality a more appealing long-term career – shedding the image of dead-end, low-wage jobs and highlighting pathways to advancement (e.g., how many hotel general managers started as front-desk clerks, or how many celebrity chefs started as dishwashers). If successful, this could enlarge the labor pool and improve service quality, which in turn supports growth.

Analysts from outside the industry also provide an interesting macro context. Some economists note that as an economy develops, consumers tend to spend a larger share of their income on services (like dining and travel) versus goods. The U.S., being a mature economy, has seen this shift over decades. The pandemic interrupted it (people spent on Pelotons and home goods instead of vacations for a while), but the reversion in 2022-2023 has been dramatic – services spending is up. This structural tailwind means the long-term propensity to spend on leisure and hospitality is likely to increase, especially if income growth continues. However, a potential wrinkle is income inequality: high-income households are driving much of the travel and fine-dining boom, whereas some middle and lower-income households have cut back as inflation hit. If economic growth can lift more boats, the industry’s customer base broadens; if not, the industry might become more bifurcated (luxury booming while budget segment struggles). This is something experts are watching.

Finally, a word on the changing consumer: younger consumers (Gen Z and millennials) are digital natives with different expectations. They value authenticity, social responsibility, and instant convenience. Restaurants and hotels that succeed with them often have strong social media presence, align with values (sustainability, diversity), and deliver seamless tech integration (no waiting for a check, no trouble with mobile check-in). Industry commentators note that brand loyalty in hospitality is being redefined – younger travelers might be less loyal to traditional hotel brands and more swayed by unique experiences or peer reviews, and similarly, younger diners might chase the latest food trend rather than stick to a single restaurant. The sector must continually innovate to capture these fickle tastes.

In conclusion, expert sentiment coalesces around the idea that the U.S. accommodation and food services industry has entered a new era – one forged by the fires of the pandemic. It is an era where adaptability is the price of survival, where technology and hospitality must go hand in hand, and where consumers expect more: more convenience, more experience, more alignment with their values. Those businesses that embrace these changes are likely to ride the wave of growth ahead. Those that don’t may find themselves left behind as the 2020s progress. As the industry veteran Danny Meyer (CEO of Union Square Hospitality Group) recently mused in an interview: “Hospitality has always been about how we make people feel. That won’t change. But the tools we use and the context we’re in – that’s changing every day. It’s exciting, and a little scary. The winners will be the ones who can stay true to great service while constantly evolving.”

Such is the balancing act now facing an industry that is both ancient in its fundamentals – feeding and sheltering people – and utterly modern in its execution. After the trials of recent years, the sector emerges not just to recover, but to reinvent, ensuring that Americans (and visitors) will continue to find a warm meal, a comfortable bed, and a memorable experience wherever they roam.

November 11, 2025, by a collective authors of MMCG Invest, LLC, hospitality feasibility study consultants.

Sources:

• U.S. Bureau of Labor Statistics – Accommodation and Food Services: NAICS 72 (employment and economic data)

• National Restaurant Association – 2025 State of the Restaurant Industry (press release, Feb 2025)

• American Hotel & Lodging Association – 2024 State of the Hotel Industry (press release, Jan 2024)

• U.S. Dept. of Labor Blog – “By 2033, 1 in 8 new jobs will be in this sector” (Nov 2024)

• National Restaurant Association – State of the Restaurant Industry 2021 (Jan 2021 report)

• STR via HotelNewsNow – 2020 Worst Year on Record for Hotels (Jan 2021)

• Nevada Workforce & BLS data – Leisure/Hospitality employment share