In 2025, U.S. hoteliers are navigating a regulatory landscape more complex and consequential than ever before. From federal rule changes on pricing transparency to state and local crackdowns on short-term rentals, these shifts carry real risk—and real opportunity.
Every policy update has bottom-line consequences: hidden-fee bans can compress margin, STR restrictions can redirect demand back into hotels, labor laws push up operating costs, and zoning or permitting rules may slow growth pipelines. Miss one change and you risk lawsuits, reputation damage, or lost bookings.
In this post, you’ll get 5 actionable strategies to adapt, plus:
- The new FTC “Junk Fees / Drip Pricing” rule and how to comply
- The evolving short-term rental (STR) regulatory landscape
- Key labor, zoning, and tax law shifts hoteliers should monitor
- Case examples and tactical moves (e.g. pricing updates, product repositioning)
By the end, you’ll have a legal playbook for 2025 that you can operationalize across your revenue, operations, and group sales teams.
Be Transparent with Pricing: Complying with the FTC Junk Fees Rule
One of the most consequential legal changes for hotels in 2025 is the FTC’s Final Rule on Unfair or Deceptive Fees (commonly known as the “Junk Fees / Drip Pricing Rule”). (Federal Trade Commission)
What the rule requires
- Hotels and short-term lodging providers must display the “true total price” (including all mandatory fees) up front in any advertisement, offer, or display. (Federal Trade Commission)
- The total price must be “clearly and conspicuously” displayed—i.e. more prominent than other line items. (Hotel Dive)
- The rule does not ban resort, cleaning or service fees per se—but those fees must be included in or disclosed alongside the base rate. (Morgan Lewis)
- Exclusions: government taxes, shipping, and optional ancillary services may be excluded from the “true total” but must be clearly disclosed. (Federal Trade Commission)
This rule becomes effective May 12, 2025. (Federal Trade Commission)
Why it matters for hotels and group sales
- Hidden-fee practices (“drip pricing”) have been challenged for years; this rule codifies that they are no longer acceptable. (Wikipedia)
- Complaints about resort and service fees have historically eroded consumer trust. The rule seeks to level the playing field among fair competitors. (Federal Trade Commission)
- Non-compliance exposes hotels to enforcement actions, fines (per-violation penalties), and class actions. (Morgan Lewis)
- From a marketing perspective, compliance can become a differentiator—advertising transparency can be a trust signal to guests.
Tactical moves to comply
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Audit your rate engines (CRS, booking engines, OTA feeds) to ensure all mandatory fees (resort, cleaning, facility, service, etc.) are consolidated or clearly disclosed.
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Update rate display logic so the “total price” appears first, and line items come secondary or beneath.
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Train revenue, distribution, and marketing teams about the new rule and get cross-team alignment on communications.
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Monitor OTA and meta platforms for how they display your rates—your upstream compliance must survive downstream manipulation.
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Track consumer feedback/artifacts (e.g. screenshots, complaints) to catch any unintended drip pricing exposures early.
By making transparency your standard, you can strengthen guest trust and reduce legal risk going into 2025.
The rise of Airbnb, Vrbo, and platform-based rentals has forced many municipalities to regulate STRs intensely. In many cases, that regulation is shifting market share back toward hotels. (Cornell Law School Community)
Major STR regulation trends in 2025
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Strict registration and host-occupancy rules: New York’s Local Law 18 (enforced from September 2023) prohibits short-term rentals in many apartment buildings unless the host lives on-site and remains present during guest stays. (Wikipedia)
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Limits or bans on whole-unit rentals in residential areas, guest-night caps, and licensing mandates. (InnStyle)
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State preemption laws: Some states (e.g. Arizona) have passed laws curbing cities from banning STRs entirely. (Rent Responsibly)
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Platform obligations: Platforms are required in many jurisdictions to block unregistered listings or remit lodging taxes automatically. (InnStyle)
Case in point: New York City’s illegal STR crackdown reportedly reduced listings by over 80%, pushing many guests toward hotels and tightening hospitality supply. (InnStyle)
Impacts and opportunities for hoteliers
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Recovered demand: Hotels may regain guest segments formerly captured by STRs—especially in urban cores or premium neighborhoods.
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Higher room rates: With fewer unregulated alternatives, hotels can command better rates during peak periods.
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STR-to-hotel migrations: Some hosts are converting STRs to long-term rentals or 30+ day furnished leases. (Cornell Law School Community)
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Competitive differentiation: Hotels can advertise safety, consistency, loyalty program benefits, and regulated compliance—advantages many STRs struggle to match.
What hoteliers should do now
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Monitor STR rules in your markets: Whether you operate in New York, San Francisco, or mid-tier cities, local STR law can shift demand dynamics.
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Position your offerings: Emphasize the value-adds hotels have over STRs—service, amenities, loyalty, reliability, regulatory compliance.
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Consider hotel-STR hybrid models: Many hotel brands (like Marriott Homes & Villas) operate vetted home-rental platforms to capture STR–desiring customers.
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Engage in policymaking: Use data (e.g. impact on housing, tax revenue) to advocate for fair STR regulation rather than outright bans.
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Watch enforcement: Regulation is only meaningful when enforced. Monitor city-level enforcement activity (permits revoked, listings removed) for strategic insight.
Pair this smart positioning with smarter market segmentation strategies to attract the right group and leisure travelers. Read our blog to know more.
Wage Floors, Scheduling Laws & Labor Protections: Rising Operating Costs
One of the longstanding pressures on hotel operating models is labor regulation. In 2025, tightening local and state labor rules continue to reshape staffing, scheduling, and wage strategy.
Key labor policy shifts to watch
- Many U.S. states and cities have raised minimum wages above the $7.25 federal baseline; key jurisdictions like California, New York City, and Seattle now target $15+/hour or more.
- Changes to overtime eligibility thresholds may bring more salaried managers under overtime rules if their salaries don’t meet new cutoffs.
- Local “fair workweek” or predictive-scheduling laws require employers to post schedules in advance and penalize sudden changes.
- Worker safety mandates (e.g. panic buttons or anti-harassment rules), especially for housekeeping staff, are being adopted in cities like Seattle.
In response, restaurants and hotels have already felt the pinch: Around 80% of hotels have increased wages but still report staffing shortages. (AHLA)
Why group sales and revenue teams should care
- Labor cost increases must be baked into group rate negotiations and contract modeling.
- Flexible scheduling laws constrain last-minute upsell labor during a group’s peak activity.
- Paying more without boosting productivity leads to disillusionment in the P&L.
Adaptation tactics
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Cross-train staff so team members can flex across roles (front desk, kitchen, banquet) during variable demand periods.
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Leverage automation and self-service: mobile check-in, digital room service orders, chatbot guest requests, housekeeping automation help reduce headcount needs.
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Streamline services: shift to optional housekeeping or scheduled cleaning, reduce labor-intensive amenities (e.g. eliminate daily turndown in low-demand periods).
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Design group contracts with labor buffers: build in clauses or service layers that scale with guest volume (e.g. tiered service staffing).
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Focus on retention: industry turnover is costly; loyalty, training, better shifts, and workplace culture reduce hiring burden.
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Offset with non-room revenue: revenue from F&B, events, amenities or subscriptions helps absorb wage pressure.
Zoning, Permits & Land Use: Growth Constraints in Key Markets
For hotel expansion, renovation, and redevelopment, land-use and zoning policy remain among the thorniest constraints.
Recent and emerging trends
- Cities increasingly require special permits / discretionary approval (instead of “as-of-right”) for new hotel development. New York City’s 2021 rule now subjects nearly all new hotel builds to public review. Separate local laws, such as labor-peace or worker-safety requirements, may also apply depending on the project type or location. (ArentFox Schiff)
- Municipalities may demand community benefit agreements, affordable housing contributions, or local labor guarantees tied to permitting.
- Adaptive reuse policies are gaining favor: cities are encouraging conversion of obsolete office buildings into hotels via zoning relief, parking waivers, and tax credits.
- Environmental and historic preservation regulations, coastal zone management, and moratoria on growth (e.g. “pause orders”) are frequently used during community planning reviews.
Strategic implications
- New hotel projects in highly regulated cities may see longer project timelines, higher approval risk, and greater political exposure.
- Controlled supply can help pricing for existing properties but may hamper expansion and brand growth strategies.
- Hotels that invest in renovation or conversion (versus new ground-up builds) may benefit from lower regulatory drag.
Developer and operational levers
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Engage early with stakeholders: community groups, city planners, neighborhood councils. Offer amenities or infrastructure upgrades (green spaces, parking, public art) as tradeoffs.
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Select flexible locations: if core cities are constrained, consider bordering jurisdictions with more permissive zoning but good demand capture.
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Pursue incentives: historic tax credits, TIF (tax-increment financing) zones, redevelopment grants can help absorb cost overhead.
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Modular design: design adaptable structures for future expansion or facility pivot (e.g. convert F&B space to meeting rooms).
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Partner with local governments: In some markets, hotels offer to co-invest in tourism infrastructure or support workforce housing to gain approval goodwill.
Tax & Fiscal Policy: Maintaining Margin in a Shifting Landscape
Taxes—in the form of occupancy levies, property assessments, corporate tax, and relief programs—directly shape hotel profitability and investment decisions.
Key developments to monitor
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FTC Junk Fees Rule indirectly alters tax structure: mandatory fee inclusion can change how occupancy taxes or “bed taxes” are applied and passed through.
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Lodging tax increases: cities are continuing to raise hotel tax rates to fund tourism promotion, convention centers, or bond obligations.
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Short-term rental tax parity: Many states now require platforms like Airbnb to collect occupancy taxes for STRs, leveling competitive dynamics. (hotelbusiness.com)
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Property tax reassessments: hotels may face higher property tax burdens as assessors revalue assets post-pandemic recovery.
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Tax incentives / credits: opportunity zones, green energy credits, renovation deductions (e.g., bonus depreciation of Qualified Improvement Property) remain important levers.
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Relief programs: though many pandemic-era programs (PPP, ERTC) have expired, lessons remain on how industry can advocate for targeted support.
What hoteliers need to do
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Align pricing & tax strategy: embed occupancy or local taxes transparently, and ensure your rate strategy absorbs increases.
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Track tax incentives for capital projects: e.g. energy saving upgrades (e.g. solar, HVAC) may be eligible for credits or accelerated write-offs.
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Lobby effectively: engage with city and state governments to ensure new hotel tax dollars fund demand drivers (e.g. events, marketing) rather than purely cost recovery.
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Model scenarios: run sensitivity P&L models that reflect tax rate increases, higher assessments, or new special district taxes.
If you’re mapping the bigger picture for the next few years, don’t miss checking out our blog on AI in Hospitality: What to Expect in 2025 and Beyond.
Regulations and public policy are not peripheral forces for U.S. hotels in 2025—they are central to strategy execution. Between required transparency under the FTC’s Junk Fees rule, tightening short-term rental laws, evolving labor mandates, restrictive zoning regimes, and shifting tax burdens, the legal environment is reshaping hotel operations, supply, pricing, and competitive positioning.
That said, your hotel doesn’t have to be reactive. Use these five strategic pillars—transparency, regulatory intelligence, operational flexibility, community engagement, and financial planning—as your anchor.
As you update your group contracts, booking policies, expansion pipelines, and marketing messaging, integrate legal compliance early—not as an afterthought. In doing so, you not only mitigate risk but can convert regulation into a differentiator of trust, efficiency, and competitive advantage.
Frequently Asked Questions
What is the FTC “Junk Fees Rule” and how does it impact hotels?
The FTC’s rule (effective May 12, 2025) prohibits hotel price advertising that excludes mandatory fees (resort, service, cleaning, etc.). Hotels must display the total price upfront in a clear, prominent way. (Federal Trade Commission)
Can hotels still charge resort or service fees under the new rule?
Yes—those fees are not banned per se. But they must be included in or clearly disclosed as part of the total booking price (except for taxes, shipping, and optional fees). (Federal Trade Commission)
How do local STR (short-term rental) laws affect hotel demand?
Strict STR rules (licensing, host-occupancy, caps, bans) reduce supply in key markets, often redirecting guests back to hotels. For example, NYC’s Local Law 18 cut listings by 80+ %, tightening lodging demand for hotels. (InnStyle)
How does the FTC “Junk Fees” rule interact with state consumer-protection laws already regulating hotel pricing?
The FTC rule establishes a federal baseline—it prohibits deceptive or unfair fee disclosures nationwide. However, it does not pre-empt stricter state laws. That means hotels must meet both federal and state standards where applicable. Practically, hoteliers operating in multiple states should apply the strictest disclosure framework across all properties to avoid inconsistent compliance. Multistate brands are adopting “total-price first” booking templates to simplify this.
Are OTAs (Expedia, Booking.com) or hotel brands ultimately liable if price displays violate the FTC rule?
Both can be. The FTC’s jurisdiction extends to any entity participating in consumer misrepresentation. If a brand provides non-compliant rate data to an OTA, both parties could face joint liability. Therefore, franchise systems must ensure their CRS and distribution feeds produce compliant “total-price” outputs—and monitor downstream platforms. Many chains are now embedding compliance clauses in OTA contracts, transferring liability to the platform if it edits or re-ranks prices.
How do zoning and “labor peace agreement” requirements in cities like New York affect smaller or boutique hotel developers?
Special-permit rules requiring labor peace agreements (LPAs) and union construction labor significantly raise entry costs for independents. Developers without union relationships face delays or higher build costs, often deterring boutique projects. Many smaller brands respond by partnering with management companies already compliant with union standards, or by targeting secondary boroughs and suburban zones outside special-permit jurisdictions. Essentially, zoning has become a de facto labor-policy tool, influencing which business models can viably enter the market.
How should hoteliers prepare for potential federal climate-related building standards or “green audits”?
With the DOE promoting Building Performance Standards (BPS) at the state and municipal level, energy benchmarking is becoming mandatory for large hotels. Owners should prepare by auditing energy consumption now—installing smart meters, upgrading HVAC, and certifying under LEED or WELL frameworks. Compliance won’t just be about fines; municipalities may tie BPS scores to eligibility for tourism grants or tax abatements. Hotels that exceed thresholds could even use sustainability compliance as a marketing differentiator to ESG-conscious travelers and corporate RFPs.