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Hotels seem like a simple business. As a guest, you pay a nightly rate for a room of your choice. The better the location, the more you pay per night. The more stars that hotel has, the nicer your stay will be with better service and amenities like business centers, gyms, firepits and pools. During your stay you can pay more for add-ons like breakfast, shoe shining, room service, or laundry. After you check out, youre charged for everything, the hotel cleans up the room, and rents it out to the next guest. Rinse and repeat. Hotels have high fixed and variable costs. Lets say you run the luxury JW Marriot in downtown Los Angeles. 21 floors, 900 rooms, complete with a full-service spa, fitness center, outdoor pool, meeting rooms, rooftop bar, and valet. Youre in the low season and only 30% of the rooms are occupied. Rooms still have to be cleaned. Hallways have to be vacuumed. Housekeeping still has to deliver toothpaste, towels, and laundry upon request
