As hotel and restaurant operators, we know you’re in the thick of planning for 2026. But it’s worth slowing down for a moment to take an honest look at how last year stood up to our expectations (or not!) and what we can expect from the year ahead.

Fear versus facts: Why hospitality outperformed expectations

At the beginning of last year, with lots of uncertainty around a new political climate, the CORE team recommended that operators get ready for change. And we were right about that. However, while we won’t argue that 2025 was challenging, it turned out to be far more manageable than what most forecasts predicted. Understanding why matters – and it should inform how operators think about planning, budgeting and negotiating in the coming year.

The 2025 “fear narrative” said we should expect:

  • A renewed surge in inflation
  • Widespread, tariff-driven cost increases
  • Major labor disruption
  • Significant margin compression
  • Softening travel and dining demand

What actually happened:

  • Headline inflation cooled into the high-2% range.
  • Supply chains continued to normalize.
  • Wage growth slowed from prior peaks.
  • As we predicted last January, cost increases were category-specific, not across the board.
  • Travel, foodservice and experiential spending remained resilient
  • Operators who followed our advice and stayed nimble, strategy-led and disciplined were able to protect – and in many cases improve – their margins.

The bottom line? While 2025 brought pressure, it did not deliver the level of disruption many feared.

Micro inflation, not macro panic

When it comes to hospitality, national inflation numbers only tell part of the story. The real business impact comes from actual, line-item costs like food, labor, utilities, insurance and services. Here’s how those key cost drivers costs actually behaved, and what CORE sees heading into 2026.

  • Food and beverage prices were elevated but uneven in 2025, with around 3% inflation. We expect that to moderate in 2026 to around 2-2.7%. Instead of broad-based inflation, we’ll see volatility remain concentrated in categories such as beef, seafood, and certain imports.
  • In terms of labor, wage pressure persisted, particularly in service roles. However, the pace of increase slowed meaningfully compared to prior years and many operators saw improved retention and more stable staffing.
  • Utilities and energy costs remained volatile, but far from runaway inflation. And operators who renegotiated contracts or invested in efficiency saw measurable relief during the year.
  • Insurance and services are still a pressure point across the industry. However, increases are becoming more predictable – which is a critical shift for budgeting and forecasting.
  • While tariffs were a major concern for many last year, in the end, the impact proved targeted rather than widespread. The broad inflationary shock many predicted never materialized and was isolated.We saw restraint in the reaction from the supply chain – those that did pass through costs held off until the third quarter and others are still holding off while trying to find ways to take costs out of the system. 

Good news emerging

As a CORE team, we saw several encouraging themes emerge in 2025. First, while costs didn’t disappear, inflation became more predictable, and therefore far easier to manage than volatility.

Second, we saw that pricing power held. Hotels and restaurants were able to implement thoughtful rate and menu pricing without triggering a meaningful drop in demand.

Third, we were happy to find that operators got smarter and achieved better discipline across the board in all the areas we are constantly preaching about: tighter procurement strategies, more aggressive contract reviews, smarter category management and data-driven vendor negotiations. These improvements will carry forward and continue to drive success in 2026.

And finally, demand proved resilient in 2025. Despite higher interest rates and constant negative headlines, travel and dining demand held up better than expected. The soft landing many doubted turned out to be real.

Focusing on facts

Outlook for 2026: Execution over survival

Looking ahead, CORE’s view is straightforward. We believe that inflation will likely settle in the mid-2% range, and food inflation will continue to cool. Labor will remain competitive but continue to stabilize. Energy and insurance costs will require attention from operators but not alarm. And margin performance will increasingly favor well-run, well-negotiated operations.

To put it simply: 2026 will be about execution, not crisis management.

Five actions to focus on NOW

As the new year gets underway, the CORE team recommends that operators take five actions to make sure 2026 builds on progress made in 2025:

  1. Lock in multi-year pricing where leverage exists
  2. Treat procurement as a margin strategy, not an administrative task
  3. Continue selective, data-backed price optimization
  4. Audit service and supplier contracts aggressively
  5. Plan for “normal” not emergency inflation

And if you need experienced partners to help you make it happen – The CORE Insights Group team is always here to support you as much – or as little – as you need. Just give us a call!