There is a sentence in the latest IATA industry outlook that should make every hotelier pause.
It belongs to airlines, but it could easily be about hotels.
According to IATA, global airline profitability is expected to halve in 2026, mainly due to disruptions in the Middle East and a sharp increase in fuel prices. Net profit is forecast to fall from $45 billion in 2025 to $23 billion in 2026. Net margin is expected to drop from 4.2% to just 2.0%.
That is the real headline.
The airline industry is still filling planes. Passenger numbers are expected to grow. Load factors are forecast to reach record levels. Revenues are also expected to increase.
And yet, profitability is being squeezed. This is the lesson for hospitality.
A busy hotel is not necessarily a profitable hotel. A high occupancy hotel is not automatically a healthy business. A strong ADR does not always mean the hotel is winning.
The question is not only, “how much revenue are we generating?” The better question is, “how much profit are we keeping?”
When revenue grows but profit falls
In the airline outlook, IATA expects total industry revenues to rise by 9.4% in 2026. That sounds positive. But operating expenses are expected to rise faster, by 13%.
That gap is where profit disappears. Hotels know this story very well.
Labour costs rise. Energy costs rise. Distribution costs rise. Insurance, maintenance, technology, laundry, amenities and financing costs all move upwards. At the same time, guests become more price sensitive and competition remains aggressive.
So, the hotel may increase ADR, but the extra revenue does not always reach the bottom line.
This is where many hotels still make a mistake. They celebrate top-line growth without understanding the cost of producing that growth.But not all revenue is equal.
A room sold through a high-commission channel is not the same as a direct booking. A low-margin package is not the same as a profitable upgrade. A full restaurant with poor menu engineering is not the same as a strong F&B operation. A spa treatment sold at the wrong time, with the wrong staffing model, can look good in revenue terms and still disappoint in profit terms.
The airline industry has lived with this reality for years. Hotels are now facing a similar pressure.
Airlines are leaning harder into ancillary revenue
One of the most interesting parts of the IATA outlook is the growth of ancillary and other revenues. IATA expects this category to rise by 12.6% in 2026, reaching $165 billion.
That is not a small side business anymore.
Ancillary revenue has become part of the airline survival toolkit. It helps airlines improve customer revenue when their core product is under pressure and when external costs are difficult to control.
Hotels should pay attention.
For too long, many hotels have treated ancillary revenue as something nice to have. A few upgrades at reception. Some late check-outs. A bottle of wine. A parking charge. Maybe a spa offer.
But in a low-margin environment, ancillary revenue cannot be an afterthought. It needs to become a structured part of the commercial strategy.That does not mean charging guests for everything. It means understanding what guests value, when they are most likely to buy, how to present the offer naturally, and how to make sure the extra revenue is operationally realistic.
The best ancillary revenue is not forced. It is relevant.A family arriving early may value early check-in. A couple on a weekend break may value a room upgrade, breakfast in bed or a late check-out. A business traveller may value parking, laundry, meeting space, express services or flexibility. A guest staying five nights may value convenience more than discount.
The opportunity is not just to sell more. The opportunity is to serve better, while improving profit.
Occupancy is not enough
Airlines use load factor as one of their key indicators. Hotels use occupancy. Both metrics matter. But neither tells the full story.
An aircraft with a strong load factor can still be under financial pressure if fuel costs increase dramatically. A hotel with high occupancy can still underperform if acquisition costs, payroll, energy and operational complexity are too high.
This is especially relevant for hotels that still manage too heavily around rooms revenue only.
RevPAR matters. But it is not enough.
Hotels need to move towards a more complete view of performance, including TRevPAR, profit per available room, contribution by segment, revenue per guest, cost of acquisition, and ancillary spend by journey stage.
A hotel cannot manage total profit with a rooms-only mindset.
The same guest who books a room may also buy breakfast, parking, spa, F&B, meeting space, destination experiences, transport, room upgrades or flexibility. But if those opportunities are not designed, measured and trained, they remain invisible.
And invisible revenue is usually lost revenue.
Price increases have limits
The IATA outlook also shows another important reality: airlines are increasing fares to recover part of the fuel shock, but they are still absorbing part of the impact.
Hotels face the same limitation.
Yes, pricing power matters. In periods of strong demand, hotels should not be afraid to push rate. But there is a ceiling. At some point, the market resists. Guests compare. Corporate buyers negotiate. OTAs expose alternatives. Domestic demand weakens. International demand shifts.
So the answer cannot only be, “raise ADR”. Sometimes the better answer is to improve the revenue mix.
Can we convert more direct demand? Can we reduce dependency on expensive channels? Can we improve upselling at check-in? Can we package better? Can we monetise flexibility? Can we improve F&B attachment? Can we use pre-arrival communication more intelligently? Can we create paid experiences that guests actually want?
This is where hospitality can learn from airlines. Airlines have become very disciplined at separating the core product from optional value. Hotels do not need to copy every airline practice, and they should be careful not to damage the guest experience. But they can learn the commercial logic.
Give guests choice. Price that choice properly. Make the value clear. Measure the result.
The real shift: from revenue management to margin management
The next stage for hotels is not just better revenue management. It is margin management.
That means looking at demand, pricing, ancillary revenue, channel mix and operational cost together. Not in separate departments. Not in separate reports. Not once a month.
Hotels need commercial conversations where revenue, operations, finance, front office, F&B and marketing are looking at the same picture. Because the problem is rarely isolated.
A revenue manager may increase ADR. But if the hotel fills with the wrong segment, at the wrong cost, with high operational pressure and limited ancillary spend, the result may not be as good as it looks.
A front office team may have upselling potential. But if they are not trained, incentivised and supported by the right availability rules, the opportunity disappears.
A marketing team may drive campaigns. But if those campaigns attract low-value guests or fail to promote profitable extras, the hotel is leaving money on the table.
A general manager may see occupancy and ADR moving in the right direction. But if payroll, commissions and energy are rising faster, profitability can still deteriorate.
This is why total revenue management needs to become much more practical.A weekly operating discipline.
The hospitality takeaway
The airline industry is showing us a very clear warning: even when demand is strong, profit can be fragile.
External shocks can arrive quickly. Fuel for airlines. Energy for hotels. Labour pressure. Distribution costs. Regulation. Inflation. Geopolitical uncertainty. Financing costs. Supply constraints.
Hotels cannot control all of these factors. But they can control how prepared they are.
They can build a stronger direct channel. They can train teams to identify guest needs. They can design better ancillary products. They can measure total guest value. They can review channel profitability. They can connect commercial decisions with operational reality.
A full hotel is good. A profitable hotel is better.
And in the next cycle, the winners will not simply be the hotels that sell more rooms. They will be the hotels that understand where profit is created, where it is lost, and how every guest interaction can contribute to a stronger, more resilient business.
Let’s talk about how your hotel can grow revenue by serving the guests who truly value what you do. Visit torreshospitalityconsulting.com or connect directly on LinkedIn.
