Despite rising gas prices across the U.S., hotels and travel accommodation companies such as bed and breakfasts have seen an increase in customers, resulting in the highest net profit margin for the sector since the recession, according to financial data company Sageworks.
By the end of 2013, the industry's net profit margin exceeded 7 percent, compared to its negative 6.2 percent margin in 2009. While the rate of sales growth has dipped a bit for privately held companies, these businesses are still growing sales positively, and at a fairly consistent rate since the recession.
“In some ways, business owners would be happy to trade sales for profits, as hotels did in 2013,” says Sageworks analyst Kevin Abbas. “However, when the rate of growth begins to slide, it’s difficult to sustain high profit margins. We’ll be keeping our eyes on that growth metric in 2014.”
Hotels, B&Bs and others in the travel accommodation sector have seen significant financial improvement since the recession, when they hit rock-bottom in terms of profits and sales, says Sageworks analyst Libby Bierman.
“People weren’t traveling then, but since the recession ended, these companies have grown sales and consequently had a bump in net profit margin, meaning the companies are making more from every dollar of revenue,” she says.
Travel accommodation isn’t the only industry that stands to benefit from better business. Especially during the summer months, retailers of all sizes may also see sales rise due to increased tourism.
“That bump in profitability will give these businesses some cushion to invest back in the business, whether that’s through additional hires and staff or through facility improvements," Bierman says. "Investments that give their customers a better experience may bolster future demand so the industry can hopefully sustain its strong growth.”