Revenue management software is a digital tool designed for the hospitality industry to optimise room rates based on predicted demand. It uses data analytics to forecast hotel room demand, allowing hoteliers to adjust prices accordingly to maximise revenue. This dynamic pricing strategy takes into account various factors, such as seasonal demand, local events, competitor prices, and historical data, to set the optimal room rate at any given time.

The primary goal of revenue management software is to sell the right room to the right customer at the right time for the right price. By doing so, it helps hotels increase their Revenue Per Available Room (RevPAR) and overall profitability. In an industry where room rates can fluctuate frequently based on external and internal factors, having a software that can quickly and accurately adjust prices can be a game-changer.

Choosing the right revenue management software, like SiteMinder, can be a transformative decision for a hotel’s bottom line. This page will guide you through the essential considerations when evaluating potential technology partners, ensuring you make a choice that aligns with your hotel’s needs and goals.

Why do you need revenue management software for your hotel?

Revenue management software is an indispensable tool for modern hotels, streamlining various crucial aspects of hotel operations. By analysing factors like market demand, competitor prices, and local events, the software optimises room pricing, ensuring neither underpricing nor overpricing. It offers real-time updates to adapt to the dynamic nature of the hotel industry and integrates seamlessly with other hotel systems, creating a unified operational platform.

Furthermore, it aids in forecasting future room demand, efficiently managing inventory across distribution channels, and providing in-depth performance analytics. This not only enhances the guest experience by anticipating busy periods but also significantly boosts profitability.

In a competitive landscape, such software not only automates manual tasks, reducing errors, but also ensures hotels stay ahead of their competitors by quickly responding to market changes.

If you’ve decided to purchase hotel revenue management software, you’ve really only started your journey. Understanding what the software is and the benefits it provides is the easy part. Now you’ve covered that, there is plenty to do in regards to making a final purchase decision.

Choosing the best provider for your individual property and business case means a lot of research is required to sift through the many options on the market.

We could tell you the obvious course of action is to move forward with an established industry leader like SiteMinder but no one should make a blind choice when investing in such critical software that’s going to impact the success of a business.

Example of a revenue management software solution

There is no shortage of hotel revenue management software that could suit your needs. Some will present very similar offerings, while others will work in more specialised or niche territory.

For example, some will be based largely around rate setting and some may focus specifically on revenue strategies related to food and beverage services. It’s a broad sector of hotel technology, meaning you have to be especially clear about what you want and what results you expect from a provider.

An easy example to give is SiteMinder’s hotel business intelligence software, which enables you to understand the local market and your competitors, and set rates to deliver the maximum amount of revenue to your property. This is regarded as a rate shopping and market intelligence tool.

SiteMinder has decades of industry experience and more than 47,000 hotel customers, pioneering some of the most powerful hotel technology solutions that exist today.

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Types of hotel revenue management software 

Revenue management software solutions consist of a broad range of products. They can serve many different purposes and be suited to a whole spectrum of properties, including:

• Tools targeted towards smaller, independent, hotels
• Tools targeted towards larger, enterprise, groups
• Specialised services for accounting and financial management
• Tools that specialise in food and beverage management
• Tools that focus on room pricing etc

That’s why it’s very important to clearly understand what you want for your property. You don’t want to make the mistake of using the wrong tool or buying one that doesn’t include all functions you need.

Generally speaking, hotel revenue management software can be placed into two groups:

• Standalone: All-in-one revenue management solutions offer features like forecasting, pricing and reporting, and are built to handle large inventories and dynamic pricing complexities. This type of RMS can be particularly useful for large chains and resorts, or properties that offer (relatively complex) package deals.
• Integrated: An integrated revenue management software solution connects seamlessly to existing hotel software, allowing it to provide additional features and functionalities. This type is most commonly used by smaller properties who don’t need the analytical power of a standalone RMS, and can benefit from the extra efficiency and flexibility that an integrated solution can offer.

Some of the most useful RMS tools are focused on rate shopping. If you can set your prices accurately to maximise revenue and profit, it gives you a lot more freedom to manage revenue across the rest of your business.

Reports generated by revenue management software

RMS solutions are capable of generating a wealth of different reports, with each providing insight into the fiscal state of play within your hotel. Examples include:

• Revenue performance reports: Track revenue against your forecasts, budgets and historic data, breaking data down by time, segment, channel or product.
• Demand and booking reports: Identify current and future trends around bookings, cancellations, and no-shows to better anticipate fluctuations in demand.
• Pricing and rate reports: Compare your current prices with competitor rates to identify opportunities and craft strategic pricing that gives you an edge.
• Occupancy and availability reports: Understand your current and projected occupancy levels, room availability over specific periods, and potential oversell risks.
• Segment and channel reports: Analyse revenue by customer segment (e.g. business vs leisure) or distribution channel (e.g. Direct vs OTA vs GDS).
• Forecasting reports: Predict future demand, revenue, and occupancy based on historic data and current booking trends.
• Performance KPIs: Track key metrics like RevPAR, ADR, TRevPAR and GOPPAR to ensure they’re moving in the right direction over time.

Benefits of having a revenue management software in your hotel

The best revenue management software is capable of delivering a wealth of (very literal) value to your hotel. Here are just some of the most compelling perks that come with the implementation of pricing and revenue management software.

Increased revenue

By predicting demand and optimising pricing, the best hotel revenue management software helps you to maximise both occupancy and room rates, which in turn maximises revenue.

Dynamic pricing

Dynamic pricing ensures that your room rates always reflect demand, increasing when demand is high to maximise revenue during peak periods, and decreasing when demand is low to maximise occupancy during lulls.

Better decision-making

Revenue growth management software drives data-driven decision making. There’s no need to rely on instincts or gut-feel–more often than not ,your answer can be found by analysing the data.

Integration support

The best revenue management software companies will ensure your RMS connects seamlessly to your current hotel tech stack, which will allow you to generate deeper insights and set up all manner of time-saving automations. 

Better guest experience

By implementing revenue management software, hotels can ultimately enhance their guest experience by offering loyal guests consistently fair and transparent pricing.

Revenue management software pricing

Price will obviously vary based on the type of tool you’re looking at. In the case of tools based around market intelligence and rate shopping, price will be very reasonable.

Look for providers who offer a flexible pricing model. This means no lock-in contract or commissions. The preferred way of paying is by set monthly fee.

You can always move to a contract later if you want a discounted price and are happy with the service.

Commonly, the amount you pay each month will depend on the size of your property. The more rooms you have, the higher your fee will be. However the price will remain pretty static for hotels with less than 70 rooms. See a pricing example for your property.

Comparing free hotel revenue management software companies 

Before deciding on the right RMS for your property, it’s important to weigh your options against relevant criteria. You can use review sites such as Hotel Tech Report to perform your competitive analysis. On Hotel Tech Report you’ll be able to see scores and user ratings for factors such as:

• Ease of use
• Range of functions
• ROI
• Customer support
• Implementation process
• Integration
• Price

Additionally, you can view full customer reviews and recommendations from hoteliers just like you to gain real-life user insight. 

Social media pages such as Facebook provide another medium to check whether an RMS provider could be a good fit for your business. Do they interact with their audience? How many followers do they have? Are there positive reactions to their content? All of this can serve to help inform your decision.

How to find the best hotel revenue management software 

Your RMS provider shouldn’t just unlock and analyse large amounts of market data for your hotel, it should also make the information digestible, and therefore actionable.
Before you make your investment, ensure your tool has these features:

All-day visibility of local supply and demand

Your chosen RMS should be able to continuously monitor shifts in demand and competitor availability throughout the day, then respond with timely pricing advice or decisions. You should have the option of allowing the RMS to change rates automatically while receiving pricing notifications.

Compare room rates with competitors in one view

You should be able to view your pricing alongside multiple competitors in a single dashboard. This provides perfect transparency in terms of where you sit in the market at any given moment, and powers fast benchmarking and better strategic alignment.

Know local market pricing up to one year in advance

Find an RMS solution that allows you to access forward-looking data on market rates and trends to support long-term pricing and inventory planning.

Unlimited rate shopping

There shouldn’t be any limit on how much market research you can do, so avoid subscription revenue management software that impose rate shopping limits. Let your team conduct checks of competitor pricing across dates, room types and channels without any restrictions.

Exportable reports

Pick an RMS that allows you to download detailed performance, pricing and forecast reports in whatever format you choose, so that insights are easily shared with and analysed by your entire team.

Rate strategy rule creation

Look for RMS tools that allow you to build custom rules when automating pricing responses. These rules can be based on predefined triggers like levels of occupancy and demand, or changes in competitor pricing.

Constant access to the latest market information 

The best RMS tools will serve up real-time market insights in a visual and accessible form, to ensure you’re always offering the most competitive rate for your rooms.

Analysis of how your property is performing online

Another important RMS feature allows you to see your rates as your guests see them. By analysing relevant listings across leading global OTAs, you get a clear picture of where your hotel offering sits against your competitors.

Alerts and preset rules

Automation is a key feature of leading revenue management tools. You should be able to set up notifications that inform you of key market developments, and you should be able to set rules that trigger automatic actions, e.g. if a set of competitors increases their rates by 20% for certain dates, your prices rise too.

Direct booking functionality

The purpose of a revenue management solution is to make your hotel more money, so the best will offer a direct booking engine that allows you to avoid the sky-high commission fees – usually 15-25% – that you’re forced to pay to OTAs and third-party booking sites.

How to improve your cash flow using hotel revenue management software 

Amidst the constant work of managing a hotel day-to-day, being bogged down by data might seem like the last thing you want to do. But with the right tools and know-how, it can be out of the most beneficial updates you can make in your daily operations. 

By analysing the facts and figures across your hotel operations, you’ll be able to find plenty of opportunities to grow your revenue stream and further the success of your business. Often it can only take a small tweak to have a big impact on your annual revenue.

To help raise your bottom line, practice these data strategies at your hotel to maximize your revenue potential:

1. Re-evaluate your revenue channels

When it comes to your hotel distribution channels, it may seem like your “golden goose” is the channel that drives the most demand and highest number of bookings.

However, to truly understand which channels are your most valuable, you need to look at them from a net revenue perspective. This means you need to ask how much profit you’re actually generating from each channel after deducting the associated overhead costs of running them. 

If you find that your most profitable channel is actually the one you place less focus on, you get an opportunity to grow the demand for it. This allows you to lower your cost per booking ratio to ultimately improve your overall profitability day-to-day.

2. Balance the pros and cons of channels over time

It’s important to constantly track the performance of marketing and distribution channels. While one strategy may have worked perfectly two years ago, you need to investigate if it’s still giving you the same benefit today. Perhaps the spend has gone up, while the revenue has gone down.

On the other hand, some channels may have added benefits like brand awareness that counteract a lack of revenue creation, and are still very useful. An example is holiday deal sites that you might advertise on. The rate is going to be low and the commission is likely to be high, but the exposure will also be significant. In this instance you would have to weigh  whether it’s worth it for your brand to be on such websites, and for how long.

3. Use your hotel guest data to optimise your offering

The insights you can gain from each guest that stays at your hotel are invaluable. If you can detect trends in your customer base e.g., what their preferences are, how long they typically stay, their purpose of travel etc. you can start to meaningfully shape a successful marketing and distribution strategy.

From here, you’ll be able to identify any superfluous strategies and replace them with a more targeted approach, using tactics like emails or social media campaigns, to boost your conversion rates and improve your bottomline.

4. Use technology to your hotel’s advantage

A lot of the data you need to make informed decisions can be gleaned from the technology your hotel uses such as your channel manager or booking engine and website. Run reports and generate insights that you can act on almost immediately.

Of course, a revenue management system is one of the best solutions to keeping on top of your income, profits, and data. The right tool can ensure the revenue management at your hotel is down to a science and offers real-time automation.

One such tool is Pace, and CEO Jens Munch makes a pertinent statement about the state of hotel industry today:

“Many industries, including travel, still suffer today from low quality data hidden away in proprietary systems. However, there’s a trend emerging with modern cloud providers to alleviate those problems by enabling connectivity layers for their customer’s data. This lets solutions like us democratise our services and give hoteliers better access to state-of-the-art revenue management.”

Pace, and other machine learning services, generate significant optimisations and competitive advantages for their customers, and should be a serious consideration for any hotel wanting to boost their revenue.

A hotel revenue management system (RMS) is a technology platform that helps hotels make smarter pricing and inventory decisions. It collects and analyses data, like occupancy rates, booking patterns, local demand, and competitor pricing, to automatically adjust room rates in real time.

Think of it as a behind-the-scenes strategist. While you focus on running your property, the RMS is working in the background to make sure you’re charging the right rate, to the right guest, at the right time.

For hoteliers who are still using spreadsheets or ‘gut instinct to set prices’, switching to a revenue management system means gaining a data-driven, automated way to maximise revenue without increasing workload.

And it’s not just for large chains anymore. Many modern RMS platforms are now accessible to medium-sized hotels and growing groups, especially those juggling multiple locations and seasonal fluctuations.

In this article, we’ll show you why hotels that adopt revenue management software report an average increase in revenue per available room (RevPAR) of between 7% and 20%, and how your hotel can effectively adopt the best possible tool for your specific needs.

Why is a revenue management system for hotels important?

Running a hotel is already complex. Between staff management, guest experience, and day-to-day operations, pricing strategy can quickly fall to the bottom of the list, despite being one of the biggest levers you have for success. For hotel owners managing multiple properties, the challenge grows. Coordinating rates across locations without a centralised system is time-consuming and risky. 

A revenue management system removes the guesswork. It uses live data to automatically adjust your prices based on demand, seasonality, competitor behaviour, and booking trends. An RMS gives you a single source of truth so you can manage pricing and performance from one dashboard rather than toggling between spreadsheets or systems. 

Instead of reacting after the fact, you’re staying ahead of the curve. More importantly, it frees up your time. Time you can reinvest into your team, your guests, and your business strategy.

Hotels that implement revenue management systems report measurable improvements in both operational efficiency and financial performance. In fact, the global hotel RMS market is expected to grow from USD 16.4 billion in 2023 to over USD 29.4 billion by 2031, driven largely by increased adoption among mid-sized hotels.

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How do hotel revenue management systems work?

In short, an RMS is a data connector. It pulls in data from various sources, including your hotel’s booking history, current occupancy, competitor rates, market demand trends, and even local events. It analyses all this information in real time and recommends optimal pricing for each room type.

Many RMS platforms also update your rates automatically across your direct booking site and connected OTAs, so you don’t have to log in to multiple platforms. You can set rules and thresholds, such as minimum and maximum prices or lead-time strategies, so the system aligns with your business goals.

Some tools go a step further by offering demand forecasts and performance dashboards. These insights help you plan staffing, promotions, and even room availability across different distribution channels.

Instead of spending hours adjusting rates manually, you can focus on strategy while the system keeps your pricing competitive and your inventory selling efficiently.

Use of revenue management system examples

• A 60-room coastal hotel sees spikes in demand during long weekends. With a revenue management system, it detects booking surges early and raises rates automatically, adding thousands in incremental revenue each season. 
• A multi-property hotel group uses an RMS to align pricing strategies across three locations. With a centralised dashboard, the revenue manager saves hours each week and responds faster to market changes.

Key benefits of revenue management systems (RMS)

A revenue management system isn’t just a pricing tool. It’s a business growth tool. For hotel owners managing multiple properties, or just looking to make smarter decisions, the right RMS can:

Improve profitability

By analysing live demand and competitor pricing, an RMS helps you charge the optimal rate for every room. This means capturing high-value bookings when demand is strong and staying competitive when demand softens.

Increased efficiency

Instead of updating rates manually across multiple channels, an RMS can automate this process. That means fewer mistakes, better rate parity, and more time for you and your team to focus on guests, not spreadsheets.

Better decision-making

Dashboards and forecasting tools provide a clear view of your performance and market trends. You can see what’s working, spot opportunities, and make proactive decisions that support your revenue goals.

Enhanced customer experience

With smarter pricing, you avoid underpricing during peak periods or overpricing in slow seasons. Both hurt guest satisfaction and bookings. The right RMS helps ensure your rates match what guests are willing to pay, improving conversion and perceived value.

“At first I thought it was just a myth that using SiteMinder could boost revenue. But it turned out to be true. Revenue did increase, we are also more efficient in terms of time; we can get more work done.”

Shadi Wijaya,

Corporate Director of Revenue

The Phala Group

Read more

How to find the best hotel revenue management systems

Choosing the right RMS comes down to finding a system that matches your property’s needs today and can scale with you tomorrow. Here are some essential features to look out for:

• Rate comparison: See how your pricing stacks up against competitors in real time, so you can stay competitive without constant manual research. 
• Forecasting: Predict future demand using historical data and booking trends, helping you prepare for high and low seasons with confidence. 
• Dashboard with reporting: Get a clear, centralised view of performance across one or more properties. Ideal for tracking KPIs like occupancy, ADR, and RevPAR. 
• Integrates with existing systems: The best RMS will plug into your PMS, channel manager, and booking engine, syncing data and reducing double-handling.

Not every system offers the same depth or flexibility, so it’s worth trialling options that let you see the tools in action.

The top 5 hotel revenue management systems

If you’re ready to invest in a revenue management system, these platforms are worth exploring. Each offers different strengths. Some are built for simplicity, others for advanced strategy, but all aim to help hoteliers grow revenue and work smarter.

1. Duetto

Duetto gives hotels more control over pricing than many other systems. Its open pricing model means you can set rates by room type, channel, and customer segment without sticking to rigid pricing structures. It also offers smart automation with custom rules, so you can decide when the system should take over and when you want to stay hands-on.

2. Cloudbeds

Cloudbeds’ RMS uses data from across its platform to automate pricing and inventory decisions. Its user-friendly interface is great for independent hotels and small groups that want to get started quickly with smart pricing.

3. BEONx

BEONx focuses on holistic revenue strategy. It’s particularly strong for hoteliers who want to blend revenue management with guest experience metrics, offering features that help align pricing with guest value.

4. IDeaS Elevate

A well-established RMS with a deep feature set, IDeaS is known for its forecasting accuracy and strong analytics. It’s popular with larger hotels and chains that need robust data modelling.

5. Diamo

Diamo is a more recent entrant focused on making revenue management accessible to mid-sized hotels. Its interface is clean, and it provides helpful decision-support tools for teams that aren’t ready for a full enterprise solution.

These platforms vary in cost, complexity, and integration options, so the best choice depends on your size, tech stack, and growth plans.

But OpenAI’s Operator, launched earlier this year, revived concerns about the lifespan of long-standing industry players in the wake of new technologies.

The AI agent not only reads data, but can also interact with a browser.

This means in addition to generating travel recommendations and plans, Operator can make bookings, only asking users to take over for tasks that require login and payment details, or to solve CAPTCHAs.

Adding to the momentum, Perplexity recently partnered with fintech platform Selfbook and Tripadvisor to bring hotel bookings directly into its AI-powered ‘answer engine’ – another clear sign that agentic AI is on the rise.

Currently, Online Travel Agents (OTAs) are still the biggest drivers of hotel booking revenue, having withstood and adjusted to decades of technological advances – including mobile, a revolution that many thought would leave OTAs behind and instead has seen them use to further their competitive advantage.

Yet new tools like Operator and Perplexity raise questions.

Does the advent of AI agents signal the beginning of the end for third-party bookings, or are we simply entering a new phase in the evolution of online hotel distribution? And, how can other key industry players, particularly hotels, learn from the action OTAs have already taken?

Glimpse into the AI-led future

As with any industry where multi-layered intelligence is key to achieving the ultimate goal of personalisation, data is king in travel.

For this reason, revenue managers and OTAs analyse a range of past, present and future factors to sell the right rooms at the right times, at the right prices, to the right guests.

So when looking for their next stay, today’s guests are offered broadly personalised options largely based on the type of traveller profile they fall into, according to their demographic’s general preferences.

AI tools like Operator could take things a step further and tailor accommodation offers to suit each individual guest, thanks to the large pool of data at AI’s disposal and the technology’s ability to analyse and act on all of that information quickly.

Even with this potential, Simone Puorto, founder of consulting firm Travel Singularity and AI-powered start-up Rebyū, does not believe AI tools will make OTAs obsolete.

But he can imagine a world where OTAs transform to become data hubs from which AI agents would draw information, leading the hotel industry into a new era of “hyper-personalisation”, led by both OTAs and revenue managers.

“With more information, what you could do is create a rate for [Guest A], then create a rate for [Guest B],” Puorto says. “This will become more than revenue management. I think it will become traveller management – you will really optimise for that specific person rather than just try to create boxes [to sort them into].”

In addition to guest profiles splintering from demographics into individuals, Puorto expects an upcoming explosion of AI-powered tools will further fragment the travel industry’s tech stack offerings in the short-term.

This would compound pre-existing industry issues, with hotels already facing the challenge of trying to connect data across a throng of sometimes-incompatible OTA and other third-party systems.

But this won’t be the case forever.

Puorto predicts the natural accumulation of closures and mergers of AI tools will eventually result in a more centralised travel tech ecosystem.

Founder and CEO of Catala Consulting, Thibault Catala, expects the technologies could even morph into a single form of AI.

“I do believe the opportunity in the next few years will not be about fragmentation, but centralisation, of data,” Catala says. “And AI will allow this because that would be the only [thing able] to handle that amount of data and to be able to identify those different systems, which humanly is currently not possible.”

Slow on the tech uptake

Puorto points out we already live in a hyper-personalised world.

Think of Netflix or Amazon; no two homepages are exactly alike, as the companies target customers with suggestions for products that will interest them most as individuals rather than as members of demographic groups.

But apart from OTAs, which have proven to remain at the forefront of new tech adoption and increased personalisation, the rest of the travel industry lags behind.

Catala estimates the vast majority of hotels, particularly those on the smaller scale of the market, are unaware of the tools and technologies already at their disposal.

“I’m blown away every day by the state of the technology in the hospitality industry,” he says. “Even people reading [this] blog are quite advanced, because they are aware of revenue management.

“To talk about a system, to talk about connection, AI and so on, that seems super-duper advanced compared to the real state of the market. So for me, the biggest opportunity in the next few years, it’s education; increasing awareness of tools, best practices and so on.”

Optimising for AI

As travel hurtles towards an AI-centric environment, OTAs are working fast to accommodate the technology and have a significant head start.

So, how can they improve even further, and how can hotels catch up? First, consider all options with an open mind.

Digital transformation consultant Howard Phung says: “Many hotels, especially traditional operators, are risk-averse and reluctant to cede control to AI, particularly in areas like pricing and guest interactions.”

Compounding the reluctance to move on with new technology is the practical difficulty of adopting that technology, with Phung, like Puorto, emphasising the fragmented state of the industry.

“Many hotels still operate on legacy systems that don’t easily integrate with modern AI solutions,” he says. “Unlike industries with standardised tech stacks, hospitality tech is fragmented, requiring custom APIs and middleware for AI adoption.”

“However, AI doesn’t need a perfect ecosystem to be impactful. It will adapt to the fragmentation by working within existing tools, leveraging cloud-based integrations, and offering modular AI capabilities that don’t require a complete tech overhaul,” Phung adds.

To smooth the road for AI, an Agent Experience (AX) website audit is in order, according to Puorto. He says with the tech moving from search engines to “do engines” as AI agents are now capable of acting on a guest’s behalf, there needs to be greater understanding of how these agents work in order to optimise websites as necessary. Beyond OTAs, this is especially relevant for hotel websites, which remain a significant source of direct booking revenue for properties.

It follows, then, that AX Optimisation (AXO) may eventually surpass SEO in importance.

Catala says it was enough to be among the first 10 results of a Google search page in the past. Looking ahead, an AI agent may only present guests with a single recommendation, customised according to its in-depth knowledge of the guest.

Luckily, AXO and SEO share many common values: just as broken links are not good for SEO, neither are they for AXO, Puorto explains. Likewise, meta titles and descriptions are equally important for human user and AI agent experiences.

But some adjustments still need to be made for both hotel and OTA websites.

For example, Puorto says the use of CAPTCHA may need to be reviewed, as AI agents cannot solve the tasks. Agents also dislike pre-contracted static rates, instead preferring real-time inventory.

And although minimalistic website design is trending right now, AI agents “love to read”, Puorto says.

“It could be a good idea to start getting a little more text on your website,” he says. “I was completely against that before. Nobody’s reading blog pages on hotel websites… but [AI] agents, yeah, why not?

Puorto adds, “Probably we will see a return to a little more ‘90s design, just because [AI] agents, they don’t freaking care if it’s beautifully designed. They want the information.”

Travellers still prefer a human touch

Hotels do not adopt shiny new technology just based on trends, Phung says; they adopt it when it has proven to solve a problem.

In terms of AI, he says hotels are seeking tools that enhance efficiency, reduce costs, and improve the guest experience.

“The industry sentiment is cautiously optimistic – hotels are open to AI but want to ensure it is secure, scalable, and easy to integrate without disrupting operations,” Phung says.

Whether or not hotels adopt up-and-coming tools, the strength of AI’s future grip on online hotel distribution will be determined by the extent to which guests are willing to abandon older technology and platforms to embrace the new.

And this is where OTAs have the advantage.

In 2024, SiteMinder research found OTAs were still the biggest drivers of total revenue for hotels. SiteMinder also found travellers are hesitant to adopt a fully AI-centric hotel model, with only 1 in 10 agreeing the technology should do it all.

OTAs have proven to be resilient and adaptable to decades of technological advances.

“Booking a hotel in 2002 and booking a hotel now, it’s not that different if you want to do it online,” Puorto says.

“Nothing big really changed.”

Much of the enduring popularity of OTAs can be attributed to the simplicity of browsing and booking on their websites. And instead of a favourite hotel or brand, Catala says many travellers are instead loyal to a particular OTA.

But that does not mean accommodation providers can rely solely on OTAs to gain them new and repeat guests.

“That’s very important to think about the way people find [out] about us, but at the end of the day, the relationship, the experience, the connection … that’s human-to-human,” Catala says.

“That’s what will differentiate [you from] someone who is relying only on OTAs and doesn’t care about the guest.

“But that’s up to you to make sure you go to the check in, you go to the reception and you connect with your loyal guests. You talk to them, you have your own communication program, marketing activities to reach out to those guys.”

Evolve now to avoid to avoid future extinction

While AI agents like Operator could theoretically bypass OTAs by offering hyper-personalised booking experiences, Phung, like Puorto, does not see OTAs disappearing anytime soon.

Instead, he says, AI will likely strengthen OTAs in several ways.

“Rather than being a death knell for OTAs, AI is more likely to encourage them to become more innovative, faster, and more automated distribution channels,” Phung says.

“The future isn’t about OTAs disappearing – it’s about AI-powered travel experiences that blur the lines between direct and third-party bookings.”

But in order to be strengthened, not eaten, by AI, Catala says the technology needs to be embraced correctly by OTAs and revenue managers.

He warns those who only focus on the old status quo may disappear, while those who evolve and build more diverse expertise by experimenting with new technologies will stay competitive.

Several major OTAs are fully onboard and already years into investing in an AI-led future. Companies like Booking.com and Priceline have partnered with Operator. They, alongside other OTAs like Kayak, Expedia and Ixigo, have developed onsite AI programs which further personalise services for customers – something most hotels cannot afford to do at the same level.

Meanwhile, revenue managers could be in a more precarious position than OTAs; Catala says some people in the industry expect the role of revenue manager could disappear in the next five years, either being replaced by AI or integrated into other positions.

How revenue managers adapt to new technology will mean everything for their future.

Just like OTAs, Puorto says it could serve revenue managers well to start working hand-in-hand with AI agents. He predicts revenue managers who have a good understanding of the market could become sought-after as consultants and trainers for AI agents.

But even in the age of AI, it is important to remember human connection goes a long way.

“Those kinds of tasks [like reporting on pricing] can be automated by AI with more accuracy,” Catala says.

“But the strategic elements, the experimentation elements, the influence, the communication, that’s something which AI cannot do.

“We are still operating not in [business-to-business], but in [human-to-human].”

Event-driven travel is undeniably booming, with its influence seen in hotel occupancy and room rates. As Allied Market Research reports, the global events industry is projected to reach US$2 trillion by 2032 – nearly doubling its 2019 size of US$1.1 trillion – suggesting that events are set to become an even more important revenue source for the hospitality industry.

While events have long been a reliable driver of hotel bookings, their growing importance in the hospitality industry is now being driven by shifting dynamics of supply and demand. As Fabian Bartnick, Founder of revenue management solutions Infinito and PerfectCheck, points out: “Everybody is now looking to monetise events … and someone is controlling their supply.” In other words, key players – be it governments, airlines or event organisers – now play a crucial role in deciding when, where and how events happen and are made available, often creating scarcity amid growing demand.

Citing the Singapore leg of Taylor Swift’s Eras Tour as an example of controlled scarcity, Bartnick explains how the local government effectively controlled the supply of Swift’s concert in Southeast Asia by securing an exclusive contract with the artist, creating a unique market where the event’s limited availability enabled other business sectors to charge higher prices.

“You and I might think $700 for a ticket is crazy,” says Bartnick. “But if you are a Swifty living in Thailand or the Philippines and have the chance to see her in your backyard, you’re going. So, the entire spectrum of revenue management that is happening [for events] has widened from just ticket sales. Airlines and hotels have capitalised on the trend.”

Changing attitudes to travel

The rise of event travel is also closely linked to the influx of travellers arriving en masse at these events, as seen with Swift’s tour. Bartnick notes that this shift points to a deeper change in attitudes towards travel, where consumers are increasingly prioritising life-enriching experiences.

“After Covid, there was a fundamental shift in what it actually means to have a certain kind of freedom, to have a certain ability to travel, see the world and do something,” he explains.

Additionally, with travel becoming more accessible, more people are choosing to travel for events simply because they now can. Pablo Torres, hospitality consultant and founder of Torres Consulting, explains: “It’s not just that more events are happening. It’s also because more people can now afford to attend them.”

Maximising demand through dynamic pricing

The control of event supply by a handful of key players, combined with a public more eager to travel than ever, has pushed hotels to turn to technology to capture this demand effectively. Revenue management solutions offering market intelligence have been indispensable, and the need is clear; hotels must rely on tools that allow them to keep track of demand round-the-clock, especially for events attracting a more global audience.

“No human, regardless of their experience or skill, can think faster than a machine,” says Torres. “There are tools on the market that already show, for example, the increase in searches and flights to your destination, demand for bookings and the events you might have in your city. You could do that manually and spend the entire day compiling the information, or you can press a button and have a dashboard on your screen and then decide.”

With this information, innovations in hotel tech have given properties the confidence to venture into dynamic pricing, a strategy in which hotels adjust room rates daily or within the day based on real-time demand, allowing them to maximise occupancy and revenue during events. This strategy has become ubiquitous across industries – from airlines to delivery apps – and, as Klaus Kohlmayr, Chief Evangelist and Development Officer at IDeaS, suggests, it’s high time that hotel revenue managers embrace it fully, now that consumers are more familiar with the concept. Indeed, SiteMinder’s Changing Traveller Report 2025 indicates that more than 6-in-10 travellers globally agree that hotels should be able to adjust their rates during peak demand periods.

“Depending on the type of hotel, you could see measurable revenue uplift just by adopting dynamic pricing,” Kohlmayr explains. “From a consumer standpoint, dynamic pricing allows you to pay a lower rate when demand is low, [in the same way] that you accept paying a higher rate when there is high demand. Consumers have been educated on that and they understand that [this strategy] happens in businesses all over the world.”

Avoiding the pitfalls of price gouging

But despite the revenue-generating advantages that dynamic pricing offers, it often attracts scrutiny. Certain ride-sharing services have come under fire for price surges during public emergencies, while ticketing companies have faced backlash for dramatically inflating prices in response to high-demand events in recent months. These instances have caused the line between fair price adjustments and unethical price gouging to blur.

Shannon Knapp, Founder and Director of hotel consultancy SKNapp Consulting, says: “Dynamic pricing is getting an unfair bad rap. A fundamental flaw in retail industry applications of dynamic pricing or demand-based pricing is when they don’t institute a cap or a ‘ceiling’ price point the way we do in hotels, so as to prevent prices shooting up to eleventy jillion dollars when Taylor Swift or Oasis announces dates. The best hotel revenue management systems have configurable ceiling settings to prevent this.”

Knapp adds: “When it comes to dynamic pricing, revenue managers need to remember: price gouging is exploitative and takes advantage of disadvantage, especially during crises. Whereas price optimisation adjusts rates in response to high-demand entertainment events with a ceiling rate configured to ensure responsible application.”

This highlights the need for a thoughtful and data-based approach to pricing, rather than simply reacting to fluctuating demand. Price adjustments should not only respond to market conditions but also consider how guests perceive the fairness and value of the rates offered. In short, dynamic pricing isn’t just about setting prices.

“Unfortunately, the skill set that we have in the industry thinks that dynamic pricing is like playing yo-yo by letting prices go up and down,” shares Bartnick. “Dynamic pricing is a tactical lever with many facets at play. We need to understand how our rates impact pricing power, and our sales and marketing efforts.”

Value-driven strategy

Bartnick adds that the ‘lifetime value of a customer’ must also be factored in when carrying out dynamic pricing for events, keeping in mind loyal, repeat customers and even guests from account-based clients. Balancing dynamic pricing for event customers with these long-term relationships allows hotels to capture immediate revenue without risking future business from high-value guests.

Importantly, at the core of dynamic pricing is the value hotels can offer to guests beyond the room. While revenue managers may have the flexibility to adjust their rates once significant demand from events is detected, their pricing strategies should be paired with meaningful offerings that provide real value for money.

Torres explains, “If your only offer is the same room that cost 20 times less the day before, most customers will find it unfair. Why don’t you include added value? You can create a package with the concert organisers, include transfers to the venue where the event is taking place or include breakfast. Add value in your pricing that guests will find meaningful, so they feel they’re getting a fair price.”

Agility at a time of uncertainty

The rise of event travel signals a future that will only see more demand-driving trends impacting hotels, now that “the macroeconomic factors for hospitality and tourism are very positive”, Kohlmayr points out. “There are a hundred million people every year that are entering the middle class. If you’re in the hotel business, you have to think about the longer term opportunities to tap into that.” This aligns with findings from SiteMinder’s Changing Traveller Report 2025, which reveals that 72% of travellers globally will be travelling internationally in 2025, and that almost all (92%) plan to spend at least the same amount or more on their accommodation.

Nonetheless, as travel becomes even more dynamic, the industry is expected to operate in an increasingly uncertain environment. In this regard, Bartnick emphasises that revenue managers have to be more comfortable with the uncertainty brought by emerging travel trends.

And, it all starts with agility.

“Agility is the name of the game. We now have a game where we don’t really know who’s playing or what the rules are. Airlines have become really good at controlling supply of flights, much like how the Singaporean Government managed to control Taylor Swift’s tour location. In many instances, hotels will be at the receiving end of these shifts. Some factors are outside your power, but if they happen to be coming your way, then you have to be fast enough to monetise,” he says. 

Revenue managers must then be more reflective about their strategies, particularly for unpredictable, high-demand events. Rather than relying solely on historical data or going by a rigid ‘wait and see’ approach, changing pricing decisions when it’s too late, they need to set expectations even before they set their revenue strategies and regularly re-evaluate their decisions.

“We’re not looking at cause and effect at the moment when setting dynamic pricing strategies,” notes Bartnick. “We don’t think ahead – that if I throw a ball at a certain velocity, it’ll come back in a specific spot.”

He adds, “That’s why we need to do [away with] that fundamental, rigid mindset in revenue management and become more agile, more experimental. Nothing is created in the comfort zone. Revenue management itself is a field of experimentation.”

Pricing intelligence, also known as rate intelligence, is a way for hotels to optimise their pricing and profitability. It’s an essential part of a successful revenue management strategy and is implemented via the use of data and dynamic pricing tools.

Pricing intelligence relies on data such as market trends, real-time insights, local competitor rates, and customer behaviour patterns.

Hoteliers can use this data to quickly analyse conditions and make informed pricing decisions, to help drive more bookings and increase revenue.

This blog will cover everything you need to know about pricing intelligence and how to implement it at your hotel.

What is pricing intelligence software?

Pricing intelligence software is a tool that enables hoteliers to optimise their pricing strategies by improving efficiency and highlighting opportunities to increase revenue.

Pricing intelligence software makes it easy to track and analyse key market insights, allowing hoteliers to list their inventory at an optimal price – one that secures reservations for the maximum value possible.

It provides a great return on investment for hoteliers because it enables them to implement dynamic pricing – a crucial strategy for getting ahead of the competition and maximising the revenue from every individual booking.

Some ways your hotel will benefit from using pricing intelligence software include:

• Knowing the market demand for your hotel in advance
• Optimising your room rates
• Accelerating the decision-making process
• Saving time and effort on price monitoring
• Understanding where you stand with competitors

Greater insight, more revenue, less work

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Why is it important to use pricing intelligence tools?

Pricing intelligence tools are important to use if you want your hotel to remain competitive and profitable in a modern travel market.

They are vital for providing valuable data and in-depth analysis in an easily digestible way, which allows tactical decisions to be made accurately and quickly.

Here’s a list of eight important reasons for a hotel to be using pricing intelligence tools:

1.Understand the demand for your rooms

You can see at a glance when your hotel rooms are in highest demand, and when you typically experience less bookings. This information allows you to create a hotel room pricing strategy to maximise your profits year-round.

2. Don’t fall behind your competitors

Ultimately, the main purpose of a rate intelligence tool is to do just that — provide you with valuable information about what other local hotels are charging for their rooms. With this information on hand, you can make slight adjustments to your rates that may give you a competitive advantage in the market.

3. Accurate, instantaneous data

A pricing intelligence tool not only showcases the most recent information about room rates in the surrounding area, but also collects data and gives you the opportunity to generate reports. These reports will provide information about room rates and hotel room pricing trends that are taking place in your destination and across the industry.

4. Rate change notifications

Notifications serve as instant reminders when there are changing trends in the market. The best part is, you have the ability to determine your own rules for when you should be notified of these updates. This means your tool is going to work to the advantage of your specific property, allowing you to accommodate local demand and competition within your specific market.

5. Simplifies the forecasting process

Forecasting can be an overwhelming and cumbersome process, even for the most experienced hotel operator. Given this, you may opt to avoid forecasting for fear of making mistakes. With the right pricing tool however, long-range forecasting is much easier.

6. Information can be acted upon immediately

The figures you glean from your competitors will help you manage your yield as you can increase your average daily rate (ADR) and revenue per available room (RevPAR) by comparing your live minimum/maximum rates against your competitors, based on length of stay (LOS). You can access this information daily or live on request, ensuring you can always hit your targets for the month or the quarter.

7. Revenue management is simplified

With specific solutions like SiteMinder’s Insights and Dynamic Revenue Plus, the data is broken down in a way that makes it easy for hotels to use and consume, again saving time and warding off any uncertainty.

8. A pricing intelligence tool will make life easier on your channel manager

The rates you set in your channel manager need to be more or less on par with your competitors. Underselling will mean a drop in your revenue, while overselling will see a reduction in bookings. Using a pricing intelligence tool means you can easily track the rate activity of your local market, maintain parity across all your channels, and then use your discretion to make changes.

To take full advantage of your channel manager, you need to be agile and change your rates hourly if necessary, depending on what time of day, month, or year it is.

With the up-to-the-minute data you get from a pricing tool, this poses no issue for you and your revenue will always be in line with your targets. With this data behind it, your channel manager becomes an even more powerful tool.

How does hotel pricing intelligence work?

Hotel pricing intelligence works by providing accurate data in real-time and making it accessible in one place.

Instead of dealing with fragmented data, and wasting time trying to bring it together in spreadsheets, hoteliers can quickly view data reports on demand.

Speed, efficiency, and simplicity characterise pricing intelligence tools. Hoteliers are able to combine historical data with real-time insights to get a full picture of their revenue management opportunities.

A room pricing intelligence tool, such as SiteMinder’s Insights, taps into the local market while integrating with the hotel’s channel manager and property management system. It can then automate the process of unifying data and producing reports, instead of relying on a staff member to do it manually.

“Since implementing SiteMinder, our operations have undergone a remarkable transformation. SiteMinder has revolutionised our approach to channel management and proven to be the ultimate solution for our challenges with availability, inventory, and OTA management.”

Pawarisa Hirantanes,

Corporate Director

Chatrium Hotels & Residences

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What to look for in a price intelligence tool

With a number of price intelligence tools available on the market, how do you choose which one is the best investment for your hotel?

As a general guide, it can be beneficial to choose a tool that is already part of a unified platform, rather than being a standalone solution. This will improve functionality, increase data volume, and broaden the number of ways decisions can be applied.

No matter how you are choosing to implement pricing intelligence, here are a seven things to look out for:

1.Make sure you have rate visibility

It’s vital that you have easy access to your rates at all times, everywhere they are listed, in one unified platform – including on OTAs and your own website.

2. Prioritise a dynamic approach

The best tools keep you updated at all times so your pricing is never static. You need to make adjustments in real-time at the right time to maximise bookings and revenue. For example, SiteMinder’s Dynamic Revenue Plus delivers up-to-date data and live alerts, as well as pricing reccommendations that you can action immediately.

3. Focus on ROI

Often, by automating and simplifying data management, a pricing intelligence tool will generally pay for itself as well as increasing staff efficiency.

4. Ensure you’ll gain a competitive edge

While pricing should never be the only way to differentiate yourself from your competitors, with all things being equal, price plays a big part. And there’s no way to ensure that your offering is truly competitive without clear visibility into what your competitors are offering.

5. Look for in-depth reporting capabilities

Generating a report should be instantaneous, and gleaning actionable insights from it should be intuitive to enable fast decision making that can make an immediate impact on revenue.

6. Seek out accurate forecasting abilities

You need to know what to set your rates at, and when – especially during peak and off-peak periods. Real-time market data is crucial to be able to forecast demand.

7. Prioritise simplicity

Many rate management tools are too complex for your hotel’s needs. The end result is that you are never able to truly master it. Look for a tool that makes ease of use a prime selling point.

Popular price intelligence solutions

If you’re looking for some of the most popular price intelligence solutions, you don’t need to look much further than SiteMinder’s Insights.

With Insights you’ll get:

• Real-time insights
• Accurate data
• A competitive advantage
• An integrated platform
• Advanced reporting and analysis

SiteMinder’s platform also seamlessly integrates with a number of other popular revenue management systems on the market, enabling all hoteliers to have access to price intelligence solutions

For smaller properties, who want simplicity but still want to be sophisticated with their pricing, Little Hotelier’s Insights is powered by SiteMinder but designed for small hotels and accommodation providers.

A hotel receipt is a document that is issued by hotels to guests, which offers proof that the invoice for their hotel stay has been paid.

Is a hotel receipt the same as an invoice?

No, a hotel receipt is not the same as an invoice. An invoice outlines all the charges that a guest has accrued during their stay. Once the invoice is paid, a receipt is produced as proof of that payment.

In this article we’ll take a closer look at hotel receipts: what they look like, why they’re important, and how to create and manage them. 

Note: the term ‘hotel receipt’ can be used to describe receipts issues by suppliers to hotels, but in this article we’ll focus on the receipts that hotels give to guests.

What is the format of a hotel receipt?

While hotel receipt formats are more or less up to hotels, the receipt should feature the following information:

• Hotel details
• Guest details
• Stay details and itemised charges
• Fees, taxes and totals
• Payment method

If the payment was made in-person on a card, the hotel receipt may be paired with the receipt generated by the hotel’s point of sale (POS) machine.

Why customise hotel reservation receipts?

Hotel receipts offer a great opportunity to showcase your brand. By adding logos, colours and a custom thank-you message, you can remind previous guests of the fun time they had at your property long into the future, when they’re doing their taxes or sorting their paperwork.

Hotel receipts can also be customised for functional reasons, such as formatting receipts in a way that aligns with the needs of corporate clients.

Integrate your chosen hotel invoicing and receipt tool with SiteMinder

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Role of hotel receipts in financial processes

The traditional billing process for a hotel is made up of four stages:

• Folio: A live document that records guest charges as they are made.

• Bill: A summary of charges for the guest to review at check out.

• Invoice: The official tax document that outlines the finalised charges.

• Receipt: The proof of payment for the invoice.

As the last step, a receipt finalises the billing process for each guest, and gives the guest the documentation they need to comply with tax laws.

How to write an itemised hotel receipt

These days most receipts are automatically created by a purpose-built hotel receipt generator or tool. But it’s good to understand how to write a hotel receipt the old fashioned way, as a backup option that you can use if your power or systems go down.

As mentioned above, a traditional hotel receipt template will feature the details of the hotel, the guest and the stay, it will itemise all the charges accrued over the course of that stay (including subtotals and taxes), and it will outline the payment method used.

Hotel receipt examples

For a clearer idea of what a receipt looks like, let’s check out some hotel receipt samples.

Hotel booking receipt sample

This free hotel receipt template is a generic option that can be used by pretty much any hotel business.

Days Inn hotel receipt

As a budget accommodation option, the hotel receipt for Days Inn (a Best Western brand) is perfectly simple and straightforward.

Best Western hotel receipt

Best Western hotel receipts are traditional hotel stay receipts that feature all the information a guest could require.

Holiday Inn hotel receipt

Holiday Inn hotel receipts (an IHG brand) offer a good example of clear branding on receipts.

How to create and manage hotel receipts efficiently

Wondering how to make a hotel receipt? The good news is that it’s easy to create hotel receipts because modern tools can automate almost the entire process.

Automating receipt generation and storage

Choose a tool that automatically generates a receipt as soon as an invoice is paid, and that places a copy of that receipt in the appropriate folder.

Managing complex payment conditions

The best billing, invoicing and receipt tools will also be capable of handling split payments, group bookings, extended stays, refunds and duplicate requests. (You’ll also need to implement operational processes to ensure these complex tasks are handled correctly.)

Leveraging hotel stay receipt data

Data from receipts can reveal how your guests prefer to pay for their stays, so you can ensure that you support the most popular payment methods. In tandem with invoices, receipts can also help you to track revenue trends, optimise your pricing, and identify new opportunities that you can capitalise on.

“SiteMinder has also improved their solutions by providing business analytic tools. It works effectively and efficiently, and when market demand fluctuates we are able to change our pricing strategy in a timely manner, to optimise the business opportunity.”

Annie Hong,

Revenue and Reservations Manager

The RuMa Hotel and Residences

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How to use technology to simplify hotel receipts

While plenty of tools automate the process of generating hotel receipts, the best will seamlessly connect to your property management and accounting systems.

Integration allows all your solutions to talk to one another, and for data to seamlessly travel around your tech stack. This opens up a world of automation, where repetitive, laborious, time-consuming tasks are done automatically. Automation can save a hotel huge amounts of time, while also minimising the opportunity for human error.

And in SiteMinder, the world’s leading hotel platform, you have a revenue and distribution tool that can open up this world of automation, by seamlessly connecting with whatever your chosen integration might be.

A hotel invoice is a document that is issued by hotels to guests, which provides a detailed record of charges incurred during their stay.

What is the difference between a hotel invoice and a receipt?

Hotel invoices and hotel receipts are slightly different documents. Once the invoice is paid by the guest, a receipt is generated as proof of that payment.

In this guide we’ll reveal everything that hotel businesses need to know about invoices: why they’re important, how and when they’re created, and how a hotel can better manage them.

What is the purpose of a hotel invoice?

The purpose of a hotel invoice is to provide your guests with a detailed record of the charges they’ve incurred during their stay. It offers transparency to guests and shows that your business is trustworthy.

And if the trip is tax-deductible, the hotel invoice also serves as the official record of the transaction if the local tax authorities ever conduct an audit of either the guest or hotel.

Why is streamlined hotel invoicing important?

Invoicing is an unavoidable part of any business’s operations (not to mention the part that ensures you get paid), so you should work to make the process of invoicing as efficient and effective as possible.

By streamlining invoicing and ensuring it is fast and accurate, you can:

• Reduce the time your staff spend on laborious admin, and increase the amount of time they spend on high value tasks like enhancing the guest experience.
• Minimise human errors through automation, to enhance both accuracy and compliance.
• Reduce waiting times for guests, and leave them with a good impression at check-out.

Integrate your chosen hotel invoicing tool with SiteMinder

Boasting 1350+ integrations, you can be confident that SiteMinder will seamlessly connect with the preferred systems or apps you use to manage revenue.

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Understanding the lifecycle of a hotel invoice

Hotel invoices form the third of four steps in the hotel payment process, which goes folio > bill > invoice > receipt.

A hotel invoice is generated from a hotel bill that the guest usually reviews at check-out. The bill is created from a hotel folio – the record of the charges that a guest accrues during their stay. Once the invoice is paid, a receipt is generated as proof of payment.

How to check a hotel booking invoice

When you generate a hotel invoice you should check it over before handing it to your guest. You should verify the guest’s details by asking their name or checking their ID, then briefly review the charges for anything that looks odd or out of place.

Who pays a hotel invoice?

Most hotel invoices are paid by the guest at check-out. But if a guest has pre-paid for the room, and not accrued any extra charges or paid for everything as they went, there may not be any payment to complete at check-out.

There’s also direct billing, where a company or organisation pays for a guest’s stay. This is a common payment option with corporate travellers and tour groups.

How to pay a hotel room invoice

In terms of how a guest pays their invoice, hotels are in total control of which methods they offer. Successful hotels always try to offer all the payment options that their target guests prefer.

Hotel invoice examples

Let’s look at a few sample hotel invoices to understand the look of a hotel room invoice template.

Hotel invoice sample

Looking for a free hotel invoice template? The following generic accommodation invoice template could be used by any type of accommodation business. It could be a hotel invoice template for a small, independent B&B, or it could even be an Expedia hotel invoice.

Marriott hotel invoice

If you want to take inspiration from a booking invoice template used by one of the big hotel chains, here’s what a Marriott hotel invoice looks like.

Hilton hotel invoice

You might also want to use Hilton’s hotel invoice format as inspiration for your own.

How to make a hotel invoice: Format fundamentals

How do I make a hotel invoice? These days most documents are created automatically by hotel invoice generators or billing tools, but it’s good to know how to create one yourself, just in case your power or systems go down. Here are the fundamentals.

What to include in an accommodation invoice

Hotel invoices should include the following information:

• Hotel details
• Guest details
• Stay details
• An itemised list of charges
• Payments and adjustments
• Subtotal, tax and gross total
• Payment terms

Customising invoices for brand identity

Invoices offer an excellent opportunity to display your hotel brand. Add logos and contact details, dress the document up in your brand colours, and place a custom thank-you message at the bottom.

Ensuring tax compliance and accuracy

Work with an accounting professional to ensure your invoices and billing systems meet all relevant tax codes and requirements.

Managing complex room invoicing scenarios

Choose an invoicing tool that can handle situations like group stays, extended stays, cancellations, split payments and bundled services like packages or events.

Streamlining hotel invoicing with technology

The best invoicing tools aren’t standalone solutions. They have the ability to integrate with the rest of your hotel software, which opens up the option of automating and streamlining the entire billing process, reducing errors in the process: a bar bill that is automatically added to a guest’s folio at the end of the evening, for example.

“SiteMinder’s channel manager has streamlined our bookings and inventory management. It’s especially improved efficiency, since it allows us to manage four properties at once by eliminating manual updates.”

Alexandra Rolton,

Strategic Sales & Key Account Manager

Brady Hotels & Apartments

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Hotel invoice data strategies

When data flows freely between your hotel software, it also grants you the ability to analyse the information generated by your invoicing software. The resulting insights can help you to track your occupancy, refine your pricing strategies, forecast revenue and identify service gaps and opportunities.

And if you’re looking for a hotel revenue and distribution tool that can maximise your use of data, by seamlessly connecting to whatever your chosen invoicing solution might be, there’s no better option than SiteMinder.

A hotel bill is a document that summarises the charges incurred by a hotel guest, and forms a record of expenses for the guest to review at the end of their stay.

A bill is generated from a hotel folio, which tracks the charges that a guest incurs throughout their stay. At check-out the folio is converted into a bill that is given to the guest for them to review. If the guest is comfortable with all the charges outlined on the bill, it is then converted into an invoice for payment. Once payment is made, a receipt is generated as proof.

Who prepares the guest bill? That’s usually done during check-out by the front desk staff, to ensure that charges can be added to the folio right up to the very end of the guest’s stay.

Is a hotel bill an invoice?

No, a hotel bill is not an invoice – but it is the document that the guest invoice is generated from. What is the difference between a hotel bill and an invoice? The bill is what the guest reviews, and if all is well, the invoice is what the guest pays.

What is direct billing in hotels?

Direct billing is where a company or organisation is billed directly for a guest’s stay, rather than billing the guest at check-out. It’s a popular option within the corporate travel and tour operator sectors.

In this guide we’ll take a closer look at hotel bills, from how they work with your other systems and processes, to how your hotel can better handle guest billing.

The importance of hotel bills in preventing disputes

Prevention is better than cure for guest billing disputes. Some simple steps can help you to avoid issues at checkout, including:

• Implementing integrated systems that ensure folio data seamlessly and automatically goes where it needs to.  
• Ensuring your staff are trained to efficiently and accurately update folios throughout a guest’s stay.
• Providing clear, itemised, easy to read bills at check-out, and running guests through all the charges.
• Offering guests multiple payment options so they can pay their preferred way.

Can you split a hotel bill?

Some hotels allow guests to split bills, others don’t. The choice is yours: it’s an option that many guests appreciate, but it can mean more work for you and your staff.

Integrate your chosen hotel billing tool with SiteMinder

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Hotel bill format: How to make a hotel room bill

How do you write a hotel bill? Generally speaking these documents are automatically generated by software, but it’s useful to know how to make a hotel bill should your power or systems ever go down.

No matter whether we’re talking a Hyatt hotel bill or a bill from a small, independent hotel, the document should feature:

• Hotel details: Business name, address, contact details.
• Guest details: Name, personal details.
• Itemised list of charges: Including room rate, food and beverage, additional services, taxes, fees, payments and adjustments.
• Notes: Offering relevant context and explanations for any of the information listed on the bill.
• Totals: Subtotal, tax and gross total.

What is a destination fee on a hotel bill?

A destination fee, also called a resort, amenity or facility fee, is a type of hotel charge meant to cover the cost of providing a wide range of extra amenities. A hotel should think carefully about charging such a fee, due to the questions it can generate from guests.

Hotel bill example

What does a guest bill look like? The hotel bill template below gives you an idea, although the look of your document will be determined by your hotel bill generator or tool.

Key principles of hotel billing management

By following these established hotel billing principles, you can minimise billing issues, protect your hotel’s reputation, and ensure that every guest leaves your property with a smile on their face.

1. Ensuring compliance and data security in hotel billing

It is absolutely essential that you follow all relevant rules and regulations to safeguard your guests’ personal and financial data and work to prevent fraud and privacy issues.

2. Enhancing guest satisfaction with transparent billing

By creating a clear, itemised bill, you reduce guest confusion and show yourself to be a trustworthy business.

3. Addressing complex billing scenarios

You need to establish accurate but easy to follow procedures for effectively managing complex billing situations like split bills, third-party billing and the use of multiple payment methods.

4. Training staff about operational excellence in billing management

Train your staff on how to create bills, explain bills and effectively handle billing objections.

5. Dealing with hotel bills for group bookings or corporate accounts

Special billing procedures will need to be established, and specialised billing software may need to be implemented, for groups and corporate clients who want to pay for multiple guests.

6. Handling recurring charges for long-term or extended stays

Implement periodic billing, say once a week or month, to ensure that long-term guests don’t accrue too many unpaid charges.

7. Leveraging technology to streamline billing processes

Implementing automated systems streamlines your billing processes, reduces human error and frees up your team to spend more time on enhancing the guest experience.

8. Using billing data for revenue growth and guest personalisation

Billing is a goldmine of guest data. By analysing it, you identify trends, optimise your pricing, and generate insights on what your guests want from their stay.

“Thanks to SiteMinder, we are now working much more efficiently. I have seen an increase in direct bookings, the revenue has increased, and it has reduced human error. Doing my job is now more enjoyable and easier.”

Kris Vanaerschot,

Chief Commercial Officer

Helios Hotels

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Benefits of an interconnected hotel billing system

What is a hotel billing system? It’s the tool that you run your billing through (and usually your folios, invoicing and receipts too). An interconnected hotel billing system, meanwhile, is one that connects seamlessly with the other tools in your hotel tech stack. This allows data to flow freely between your billing tool and all your other solutions, driving a wealth of benefits, including:

• Improved accuracy: It reduces manual errors by automatically updating guest charges and payments across your hotel as they happen.
• Faster processing: It seriously speeds up check-in and check-out for both guests and staff.
• Enhanced guest experience: It reduces errors, confusion and wait times.
• Better financial reporting: It facilitates more accurate and comprehensive revenue tracking and reporting by generating a wealth of detailed data.
• Streamlined operations: It brings together multiple services across multiple departments (room, restaurant, day spa) in a single, unified system.

And if you’re looking for the ultimate centralised experience, there’s no hotel tool quite like SiteMinder.

A hotel folio is a document that collates charges and payments incurred by a guest during their stay, and helps a hotel to accurately track these numbers. Historically the word “folio” has referred to a ledger or book of accounts, and the hotel industry is one of the few that still uses the term.

That’s the hotel folio definition, but what is the use of hotel folios? This itemised record of all the charges that a guest has incurred over the course of their stay – room, food and drinks, laundry, spa treatments – brings transparency to the dealings between a hotel and its guests.

Who manages guest folios? They’re generated by the hotel throughout the course of a guest’s stay. At the end of the stay the folio is converted into a bill that the guest reviews, then an invoice that the guest pays, and a receipt that is proof of that payment.

What is the difference between folio and invoice?

A folio is a record of charges that is updated in real time throughout a guest’s stay. An invoice is the final official document that collates all these charges.

Is a guest folio a receipt?

No, a guest folio isn’t a receipt. As mentioned above, a guest folio is a live, itemised record of charges, while a guest receipt is proof of payment for the finalised list of fees and charges.

In this guide we will take a closer look at hotel folios to understand what they are, how they work, and how your property can better manage them.

What is the purpose of a hotel folio?

Hotel folios allow properties to track the charges incurred and payments made by a guest during their stay, to ensure that the guest is billed accurately both during and at the end of their visit.

Why is hotel folio so important for billing and payment workflows?

An itemised hotel folio is critical for billing and payment processes, as it accurately tracks and organises charges, prevents discrepancies, and can seriously streamline the check-out process.

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Types of hotel folios

While the term ‘hotel folio’ is often used interchangeably with ‘guest folio’, there are other types of folios in hotel businesses too.

Guest folio

As mentioned above, this folio tracks all charges incurred and paid by a guest staying at your hotel.

Master folio

A master folio in a hotel consolidates the collective charges for a group or organisation, covering multiple guests or even multiple events.

Non-guest folio

This folio records transactions for individuals or entities using hotel services without staying overnight.

Employee folio

This folio monitors any expenses incurred by your staff.

What is included in hotel folio?

A hotel folio includes any charges that can be incurred by a guest. This can include room charges, taxes, food, drinks, tours, service fees, payments and adjustments, as well as any additional costs incurred during the guest’s stay.

Example of a guest folio in hotels

What does a hotel folio actually look like? Let’s bring a bit of clarity to the concept with a hotel folio example:

Common problems when managing hotel folios

If you’re not careful with hotel folio management, a lot can go wrong, including:

Data inaccuracies

Hotel folio errors – incorrect or missing charges, misapplied taxes – can lead to disputes and can ultimately damage the reputation of your hotel.

Folio retrieval issues

Delays or difficulties in accessing folios can slow down the check-out process, wasting the time of guests and staff alike. This can be caused by technical issues, poor collaboration between hotel departments, or a lack of worker training.

Manual processes

The more manual your folio processes, whether updating records, reconciling payments or managing disputes, the more prone they are to errors and inefficiencies.

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Urban Rest

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Hotel folio management strategies

To successfully manage hotel folios you need to implement the right tech, deliver the right training and establish the right systems and processes:

Reinforce payment regulations in hotel folio management

When establishing your hotel folio systems and processes, you need to ensure that they tick all the relevant regulatory boxes, from tax compliance to consumer rights.

Train hotel staff on effective folio handling

The best hotel folio systems and procedures in the world won’t mean much if your staff aren’t trained on them. Make sure that every team member knows exactly what they need to do, and when and how they need to do it.

Leverage on hotel folio data

Once you’ve established the basics, you can maximise the value you gain from hotel folios by leveraging the data you collected. You can create more personalised guest experiences, develop more enticing loyalty programs, and invest in services that have proven most popular with guests.

Integrate folios with hotel systems

The best hotel folio management tools tend to be cloud-based and mobile optimised, so your staff can use them from anywhere.

They should also be easy to navigate, intuitive to use, and perhaps most importantly, they should integrate seamlessly with your other hotel tools, as this opens up opportunities for time-saving, error-minimising automations.

Hotel ROI means return on investment, which evaluates how much money you are getting out compared to what you put in. The aim is to generate a positive ROI, which you can then use to grow and improve the business or take out as profit. Generally recorded as a percentage, it’s a vital financial metric for hoteliers to track if they want to make sure their objectives are being met.

What is a good return on investment for a hotel?

There is no single answer to what constitutes a ‘good’ return on investment for a hotel, since it will vary significantly depending on the size and scope of the property, where it’s located, the goals of the management team, marketing efforts, features of the hotel and more.

A good ROI at your hotel will be relative to what you’re trying to achieve, what part of the business you’re measuring, and also what other opportunities are available to you. For instance, you may be focusing solely on your housekeeping for one calculation and your food and beverage department for another.

Average return on hotel investment

It’s agreed upon within the industry that 6-12% is a reasonable return on hotel investment. However, the average ROI will also depend on the factors we discussed above, including the economic conditions in different parts of the world. As long as you can improve your average return on investment each year, then your business will be on track to be comfortably profitable.

In this blog, we’ll cover what it means to build a strong ROI at your hotel and the tools you can use to maximise it.

Why is hotel return on investment important?

Hotel return on investment is important because it’s both a simple and effective metric to measure the general health of your hotel overall, or individual aspects of the business that you have invested in.

Here are some ways that using ROI at your hotel can help:

• Investment decisions: Helps you decide when to invest and what to invest in.
• Performance analysis: Allows you to understand the effectiveness of strategies and overall operational efficiency.   
• Industry benchmarking: See how you compare to local industry standards and competitors.   
• Financial planning: Gives you insights for future investment decisions and budgeting.
• Operational success: ROI will help you discover which parts of your business are thriving and which departments need to improve. To succeed overall, you can’t afford too many areas to be falling behind.

For example, if you have invested in technology to help you attract and acquire more guests, calculating ROI will let you know if the solution is performing to expectations or not. This will then influence decisions you make, such as investigating whether you are using it to its full potential or if you need to switch to a different provider.

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How to calculate ROI at your hotel

To calculate ROI at your hotel you need to identify your:

• Net profit: Calculate your hotel’s net profit by subtracting your total expenses from your total revenue.   
• Investment cost: Determine the total amount of money invested in your hotel or a specific function. For example, monthly subscription to a hotel software service.

After this, you can divide the net profit by the investment cost and multiply by 100 to get the ROI as a percentage.   

Return on investment formula

As we mentioned above, the return on investment formula is ROI = (Net Profit / Amount Invested) x 100.

An example of the ROI equation for hotels looks like this:

• A hotel generates a net profit of $100,000 on an investment of $500,000.
• ROI = (100,000 / 500,000) x 100 = 20%

This means that the hotel is generating a 20% return on the investment.

Hotel cap rate definition

A hotel cap rate, or capitalisation rate, is a key metric used to estimate the potential return on a hotel investment. It’s calculated by dividing the property’s net operating income by its current market value. This gives investors and owners a snapshot of expected yield without needing to consider financing or tax impacts.

While ROI looks at your return compared to the full investment, cap rate is more specific to property value and operational performance. It’s a useful tool when comparing multiple hotels or analysing whether to buy, hold, or sell a property.

Why you need to know about hotel cap rates

Hotel cap rates help investors and owners assess how a property stacks up in its market. Used as a comparison tool, cap rates reveal which hotels offer stronger income potential relative to their price. A lower cap rate often reflects higher buyer confidence or a more desirable location, while a higher cap rate could signal more risk or operational issues. 

That’s why understanding cap rates isn’t just about valuation, it’s about market positioning.

Cap rates also help buyers and sellers find common ground. By working backwards from a desired cap rate and known income figures, you can estimate a property’s value more realistically, streamlining negotiations and helping both parties spot a fair deal.

However, for new developments or highly unique hotels without reliable income history, cap rates may not tell the full story. In these cases, broader financial modelling or alternative valuation methods may be required.

The current hotel cap rates

Current hotel cap rates vary depending on location, asset class, and market conditions. According to CBRE’s U.S. Real Estate Market Outlook 2024, hotel cap rates averaged 8.0% in Q3 2023. This reflects how investors are balancing opportunity with risk in a post-pandemic market that remains in flux. Luxury hotels in high-demand city centres may command lower cap rates, while midscale or regional properties tend to sit higher on the scale. 

These figures aren’t static. They shift alongside broader economic indicators like interest rates, consumer confidence, and travel trends. For hotel owners and investors, tracking current hotel cap rates helps clarify whether your property is priced competitively and performing in line with the market.

Historical hotel cap rates

Looking at historical hotel cap rates helps you understand long-term trends in property valuation and investor sentiment. Over the past decade, cap rates have generally compressed in prime markets, reflecting strong competition for high-performing assets. For example, in 2010, average cap rates for full-service hotels in major cities hovered around 8%, but many have since dropped closer to 5% in the years leading up to 2020.

Tracking these shifts can help you spot timing opportunities, both for reinvestment and repositioning your hotel. They also give useful context when considering renovations or major capital improvements, especially if you’re planning for a future sale.

Hotel cap rate: Formula and calculations

The standard formula for calculating the capitalisation rate (cap rate) is:

Cap Rate (%) = (Net Operating Income / Current Market Value) × 100

Example 1:

• • Annual Revenue: $1,500,000

  • Operating Expenses: $600,000

  • NOI: $1,500,000 – $600,000 = $900,000

• Market Value: $10,000,000

Cap Rate: ($900,000 / $10,000,000) × 100 = 9%

Example 2:

• • Annual Revenue: $5,000,000

  • Operating Expenses: $2,500,000

  • NOI: $5,000,000 – $2,500,000 = $2,500,000

• Market Value: $30,000,000

Cap Rate: ($2,500,000 / $30,000,000) × 100 = 8.33%

Cap rates by city

Cap rates can differ significantly across various cities due to factors like location desirability, market demand, and economic conditions. Here are sample cap rates for select U.S. cities:

• New York City: 5.64%

• Los Angeles: 5.25%

• Chicago: 6.10%

• Houston: 6.75%

• Miami: 5.50%

• Dallas: 6.00%

• San Francisco: 5.30%

• Atlanta: 6.20%

These figures provide a general overview and can fluctuate based on specific neighbourhoods, property types, and market dynamics.

Common pitfalls to prevent negative hotel ROI

While you may be focusing on returning a positive ROI, preventing a negative hotel ROI is essentially the same thing but attacks the challenge from a different angle.

Some elements of your hotel may not be running smoothly or creating hidden problems that prevent your progress. Some of these may have easy fixes that go a long way to making your mission of a positive ROI more manageable. Examples might include:

1. High fixed costs

High costs are obviously the enemy of profit and it can be worthwhile to see if the status quo really needs to be that way. Are there areas where you can make adjustments, such as with suppliers, energy providers, or waste management that can lower your hotel’s fixed costs?

2. Ineffective pricing strategies

Pricing plays a major role in how successful you are each year when it comes to earning revenue and maximising profit. If you are consistently pricing too low, you’re leaving money on the table. Too high and you risk travellers looking elsewhere.

And if you don’t price based on supply and demand, and market fluctuations, you won’t be hitting your sweet spot regularly. Using a channel manager, booking engine, and business intelligence tool will allow you to price your rooms effectively, book more guests, and easily make adjustments to strategies.

3. Subpar staff training

If staff aren’t performing to high standards, either through poor training or poor hiring, then all aspects of your hotel are going to suffer. Operations won’t be efficient, guests won’t be happy, and revenue opportunities will be missed.

Make sure you are building a highly motivated and skilled team of staff to keep things running smoothly.

4. Overlooking market trends

There are always changes occurring in the hotel and travel markets. If you aren’t keeping your finger on the pulse and tracking real-time trends, you will certainly be missing out on chances to maximise revenue and improve your ROI in the long run.

Using insights tools and a mobile app, such as what SiteMinder provides, will help you track local markets and competitors, and get notified of any significant updates or alerts based on preferences that you set.

Hotel ROI strategies: How to maximise your hotel investment

All the talk is about how AI can help hotels improve profitability, but the good news is that there are also a lot of other ways to impact your ROI so you can achieve a positive outcome for your hotel. Here are five of the best ways to maximise it:

1. Invest in hotel software

Spending money to make money is an often employed strategy, and in the case of hotels it’s certainly necessary. However, one of the most efficient ways to do it is by using technology to support the operations and revenue management of your hotel. 

When you choose a quality provider, all parts of your business can benefit and contribute towards profitability. For example, a hotel platform like SiteMinder will help you find more guests, boost revenue, optimise pricing, enhance the guest experience, improve cash flow, analyse performance, and more.

2. Optimise revenue management

Look at how you can make more money up-front, boost revenue from each individual booking, and minimise expenses. 

Some strategies you should think about include using dynamic pricing, prioritising direct bookings, offering upsells and extras, and connecting more booking channels.

3. Enhance the guest experience

When guests are happier, they’ll spend more and also be more inclined to return to your hotel. Ultimately your profit margins and ROI will improve with satisfied guests. Work on streamlining your booking and check-in processes, providing quality communication, and implementing a rewarding loyalty program.

4. Create operational efficiency

Whether it’s through a property management system or a whole hotel tech stack, becoming efficient on both the backend and frontend of your business will have a flow-on effect on your bottom line. With more spare time on your hands, you’ll be able to focus more strongly on strategies, investments, and analysis to unlock better decision making.

5. Make informed, strategic, decisions

Use any and all data at your hotel to inform your decision making. This includes sales and marketing performance, revenue management metrics, distribution mix, direct booking metrics, staff efficiency, promotion uptake, and more.

Your hotel is a hive of data, which can often be gleaned easily from your software solution reports or senior staff, and you can use data to ensure each plan you make is more successful than the last. 

For example, by using solutions such as a channel manager and booking engine, you’ll be able to see which third-party booking sites are bringing you the most revenue and what percentage of your business is coming to you directly from your own website or other direct channels such as social media or metasearch.

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Heather Minyard,

Director of Commercial Strategy

Smoky Mountain Resorts

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New hotel return on investment key factors

If you’re looking to open a new hotel and want to achieve a positive ROI quickly, there are a few factors that are crucial.

• Location: Where is the hotel (or where do you plan to build it)? Is this area typically popular with tourists and how much competition is surrounding your site? Try to choose somewhere that has high demand but isn’t overly saturated with accommodation options.
• Target market: You need to have a firm vision and understanding of who your hotel is for and how you plan to attract them.
• Staff: Hiring, building, and managing a team of staff can get expensive quickly if you don’t get it right. You need people who see hospitality as a career and have high standards when it comes to service.
• Operations: Plan ahead and see how you can create efficiency – including in energy usage, water usage, waste management, administration and more.
• Profit generators: What extras can you offer at the time of purchase? Which amenities do you plan to install and monetise? How can you attract revenue from people who aren’t guests at the hotel?
• Guest relationships: You need to wow guests from the very start, to build loyalty and create word-of-mouth marketing so your business can get a foothold in the market.
• Partnerships: As a new player, it won’t pay to be isolated. Try to form partnerships with other local businesses that will mutually benefit you.
• USPs: Unique selling points are things that make your property unique. Make sure you have a couple and market them strongly to encourage additional bookings and maybe even some local media coverage.
• Budgeting and forecasting: Understand how much cash you have and how much you need to make to keep the business running long-term. Set and accomplish goals that give you extra breathing room.
• Technology: This will make all the other factors easier to manage and ultimately deliver a positive ROI to your hotel. From automating distribution, bookings, and payments to simplifying revenue management and reporting, there are specialised providers which allow you to do everything at the click of a button.

With industry leading tech support, you can be sure your ROI will thrive and your hotel will remain successful longterm.

CPOR is a crucial metric in the hotel industry that helps measure the efficiency and profitability of a hotel’s operations. It stands for cost per occupied room, which means the expenses that are being incurred by rooms that have guests staying in them.

CPOR can be influenced by a number of factors and can often be a representation of how effective your revenue management and marketing strategies are.

What are variable costs per occupied room?

Variable costs per occupied room are costs that can fluctuate, due the number of guests in the room for example. These may include supplies, utilities, or laundry services.

This is different from fixed costs, which remain stable regardless of guest numbers, such as staff salaries, property taxes, insurance and more.

What is cost per occupied room in housekeeping?

In housekeeping, cost per occupied room has a similar meaning as it does for a hotel generally. It is used to measure the efficiency and cost-effectiveness of housekeeping operations. It calculates the average cost associated with cleaning and maintaining each occupied room.

Labour costs, supply costs, and equipment costs can all play a role in how healthy the CPOR is.

This blog will give you a full overview of CPOR at your hotel and how you can manage it effectively.

Why is cost per occupied room an important metric?

Cost per occupied room is an important metric because it can help you understand how efficient your hotel is and give you ways to improve your revenue management and optimise your profitability.

Using CPOR as a key metric enables:

• Clearer performance evaluation: CPOR provides a clear picture of your hotel’s operational health. A lower CPOR indicates that your business has a good handle on costs and resources.
• Profitability analysis: CPOR can be directly linked to your hotel’s profitability. A lower CPOR means that you are generating more revenue per occupied room, which can lead to higher profit margins.
• Effective cost management: By analysing CPOR, hotels can identify areas where costs can be reduced. This can involve optimising labour schedules, negotiating better deals with suppliers, or implementing energy-saving measures.
• Accurate benchmarking: CPOR can be compared to industry standards and competitors to assess a hotel’s performance. This allows hotels to identify areas where they need to improve and learn from best practices.
• Better decision making: CPOR can be used to inform important business decisions, such as pricing strategies, investment in new amenities, and staffing levels.

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How to calculate cost per occupied room

To calculate your cost per occupied room you’ll need to divide the total operating costs of your hotel by the number of occupied rooms during a specific period.

The result will be influenced by a number of factors, including your:

• Occupancy rate: Higher occupancy rates generally lead to lower CPOR.
• Operating costs: Efficient management of operating costs can reduce CPOR.
• Pricing strategy: Higher room rates can increase revenue and potentially lower CPOR.
• Business mix: The type of guests (e.g., leisure, corporate) can also impact CPOR.

Cost per occupied room formula

The formula for cost per occupied room is as follows:

CPOR = Total Operating Costs / Number of Occupied Rooms for your chosen time period.

For example, if your hotel has 100 rooms and was operating at 70% occupancy during the month of January, you would have 2170 rooms occupied. If your total operating costs were $200,000, your CPOR would equal:

$200,000 / 2170 = $92.17

This will allow you to evaluate how happy you are with your operating costs and make plans to optimise it.

How to optimise your hotel CPOR

To optimise and improve your hotel’s CPOR, you can look at ways at which you can reduce costs, increase occupancy, or increase revenue – preferably all of the above.

Here are some of the best ways to create a healthier hotel CPOR.

Optimise efficiency

There’s a broad range of areas where you can improve efficiency across your hotel that will impact costs, such as:

• Staffing: Ensuring the staff schedule is optimised so you don’t have too many or too few staff working at any given time.
• Processes and procedures: Make sure everyone is aware of the correct way to do daily tasks such as housekeeping, invoicing, checking guests in and out etc.
• Energy use: Power saving methods such as efficiency lighting, eco-friendly water systems, or timers on air conditioners can dramatically reduce your monthly expenses.
• Waste management: Food and beverage, linen, and cleaning are all areas where you can become more efficient, depending on guest preferences and staff effectiveness. For example, giving guests the option NOT to have their linen replaced daily or their room to be cleaned daily.

Cost reduction

Efficiency and cost reduction often go hand in hand but there are specific ways to reduce costs that don’t involve day-to-day operations. These include:

• Resource management: Negotiating better deals with suppliers or finding new suppliers can help you reduce your expenditure.
• Expense tracking: Ensure you have processes in place that allow you to accurately track costs so you know where to take action.
• Automate daily tasks: Save time and money by using automated technology systems to replace inefficient manual work.
• Inventory management: Take steps to ensure you aren’t overordering or wasting stock and supplies.

‍Revenue management

Revenue management is a huge umbrella concept that deserves its own full guide but there’s a few key areas where you can boost revenue and profit:

• Optimise pricing: Make sure you are selling your rooms at the maximum value possible at all times.
• Boost revenue per guest: Offer enticing upsell and package offers to convince each individual guest to spend a little more.
• Increase ancillary revenue: Utilise your amenities and on-site services to drive additional revenue across every booking.
• Implement loyalty programs: Loyalty programs will help you maintain a high occupancy level and reduce your cost of acquisition.
• Create partnerships: Hire the spaces of your hotel out for other businesses to hold classes, training courses, or meetings.

Guest satisfaction

Guest satisfaction can go a long way to boosting revenue and also lowering your marketing costs. 

By improving guest experiences you’ll be able to:

• Drive repeat bookings
• Generate positive reviews
• Increase spend per guest
• Benefit from word-of-mouth marketing

Creating a better reputation will ultimately allow you to charge higher rates for your hotel because guests will have more trust that they will be getting a great experience.

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Shadi Wijaya,

Corporate Director of Revenue

The Phala Group

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Tools to help you improve CPOR 

The hotel industry has plenty of technology solutions that enable you to optimise your cost per occupied room.

Some of the best examples include:

• Property management systems: Your PMS will help you centralise your daily operations and manage tasks and guests more effectively. With automation and real-time processing, you’ll achieve more in less time and with less errors.
• Channel managers: A channel manager will optimise your distribution, allowing you to sell your entire inventory across multiple channels at the same time, with automatic real-time updates ensuring you don’t encounter double bookings and can reach more guests.
• Booking engines: Using a booking engine will allow you to take direct bookings from your own website, via social media, and via metasearch so you don’t have to pay third-party commission fees.
• Guest engagement tools: Guest engagement tools can help streamline the check-in process, build a stronger relationship, and communicate more effectively.
• Business intelligence: Business intelligence enables you to track local market conditions, be aware of your own rate parity, and analyse key performance reports to optimise revenue.
• Pricing optimisation: There are many tools that can enable pricing optimisation, including dynamic tools that give you live recommendations and alert you to demand-driving events and opportunities.

Generally, many of these solutions can be accessed by one provider, such as a smart platform like SiteMinder.

Hotel upselling is the practice of encouraging guests to purchase additional services or upgrades during their stay, beyond their initial booking. This can include offering room upgrades, additional amenities such as spa treatments or dining packages, early check-in or late check-out options, and other premium services. 

In this blog, you’ll learn all the tips you need to make upselling a success at your business.

Why is hotel upselling important?

Hotel upselling is important because it helps both your hotel and your guest get more out of their stay. For your hotel, it’s a way to boost revenue by offering guests extra services or upgrades they might enjoy – for example, a room with a better view, a relaxing spa treatment, or a special dining experience.

For guests, upselling can make their stay more enjoyable by adding those little touches that make a trip feel special. When done correctly, “upselling” is really about enhancing the overall guest experience, making sure they leave happy and eager to return. Plus, satisfied guests are more likely to leave positive reviews and come back in the future, which is great for business in the long run.

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What’s the primary goal of upselling in hotels?

If you think the primary goal of upselling is simply to increase your hotel’s revenue, you’re missing the bigger picture. The true aim of upselling should be to enhance the guest experience. By focusing on what will genuinely benefit your guests—whether that’s a room with a stunning view, a relaxing spa treatment, or a special dining package—you’ll naturally see an increase in positive reviews, guest satisfaction, and ultimately, loyalty. 

When guests feel that you’re putting their needs first, they’re more likely to return and recommend your hotel, leading to sustainable, long-term revenue growth.

How to upsell a hotel room

Upselling needs to be done with care, focusing on the guest’s experience rather than pushing for a sale. Timing, tone, and subtlety are key. Instead of making it a hard sell, think of it as making guests aware of opportunities to enhance their stay. For instance, rather than saying, “Upgrade to a room with a view for $100,” you might suggest, “For just $30 more, you could enjoy a room with a breathtaking view.”

Tailor your upselling efforts by understanding your guests’ preferences. More than 60% of consumers are willing to spend more when an additional service complements their main purchase. A good approach is to send an email before their arrival, asking about their preferences or any special requests. This not only helps in personalising their stay but also sets the stage for a well-received upsell.

Hotel upselling examples and ideas

There won’t be a shortage of options to offer guests at your hotel. Consider the following key areas where you should be upselling:

1. Food and beverage

Encourage guests to begin their stay on a relaxed footing with a drink at the bar, celebrate any special occasions with banquet deals, add fruit and chocolate or other extras to their room, or order dessert after a main meal. Always present as many options as possible so guests are making their own choice rather than just following your recommendation.

2. Spa services

If guests have taken a long flight or arrived late, invite them to add a spa package to their stay, with a massage on their first day and the opportunity to book more treatments throughout their time at your hotel.

3. Room upgrades

This shapes as the obvious tactic and it can often work when executed well. When travellers book a trip they’re saving money for the occasion. If a guest has booked a standard room, you can contact them in the days prior to their arrival and offer an upgrade. They may be surprised by the offer and the extra price will seem smaller, especially since they will have their finances in good order by this stage.

4. Special features in the room

Pay attention to who is coming to stay at your hotel. If a family has booked, it will be important for them to have a bathtub for the children. This presents a good opportunity to upsell or cross-sell a room that has this facility. Other examples might include upselling couples to rooms with a balcony or a larger bed.

5. Exclusive guest offers

Anything that helps create a more memorable experience for your guests will receive a favourable response, such as breakfast in bed, fresh flower bouquets, champagne etc. Even though the guest has to pay extra, it will be a worthwhile expense from their perspective.

6. Leisure activities

Renting and selling things to do like riding bicycles, use of the tennis courts, gym, sauna, cinema tickets, and city tours is usually a no-brainer and not hard to get guests excited about.

“We’re getting more bookings since using SiteMinder. As an added bonus, more than half of those are coming in via our own website. The setup was super easy. Our team quickly learned to navigate the new system and today, we’re operating seamlessly.”

Jan Wichmann,

Owner and Property Manager

Hotel Graf Bentinck

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How to do upselling in the hotel industry: Techniques and strategies

When it comes to upselling there are a few things you definitely should do and some you definitely shouldn’t. Keep these three tips in mind when developing your strategy:

1. Upsell throughout the guest cycle

Upselling doesn’t have to occur prior or during arrival. During the stay guests will become immersed in their experience and may be more likely to accept your offers. Even when they’re checking out you can ask them to join your loyalty program or purchase an option for their next stay.

2. Use the right hotel upselling software

By allowing you access to rich guest data and the ability to automate selling processes, your property management system (PMS) and booking engine can make effective upselling easy.

3. Educate your property’s staff

Let your staff experience everything you want them to sell so they can adequately explain it to the guest. It’s also important that they be prepared for objections or rejections. Awkward or difficult questions need to be responded to in a calm manner. If a customer rejects an offer, don’t chase the sale. Offer an alternative or raise it again at another time.

Good upselling will increase guest satisfaction and by extension provide your hotel with higher revenue and profitability.

Technology has undeniably brought a world of convenience to revenue management. And, as we look to the future, it will take on a greater and more central role as the practice undergoes a fundamental shift.

“If we talk about the future of revenue management, we should start with the very fact that it should no longer be called ‘revenue management’,” says Ira Vouk, a hospitality consultant, acclaimed author of revenue management publications and member of the HITEC Advisory Council. “We need to rename the practice to ‘revenue and profit optimisation’, and start thinking about profit-oriented metrics beyond RevPAR (Revenue Per Available Room).”

In a future that demands a greater focus on revenue and profit optimisation, technology will become increasingly pervasive, driving the convergence of data, systems and people. Indeed, this convergence is already taking place and, looking ahead, these three factors, which have traditionally operated in silos, will become more interconnected than ever before.

The role of data in revenue and profit optimisation

As hotels adopt a more profit-oriented approach to their commercial strategies, the convergence of data sources for revenue management is gaining importance. Enzo Aita, a hotelier-turned-technologist and creator of FunnelTV, an online channel dedicated to hotel technology, believes that the commercial success of hotels relies on the data they have at their disposal.

“High-quality, reliable data is critical for producing optimal outputs,” says Aita, who is also the Vice President of Business Development at HyperGuest. “If current systems are getting data that’s subpar or insufficient, they won’t be able to generate optimal results.”

Aita emphasises that having a sufficient volume of data is increasingly necessary, particularly as artificial intelligence (AI) will enhance the capabilities of revenue management systems (RMSs) and smart platforms in processing data.

“AI and machine learning will improve the quality of recommendations made by RMSs. These systems will be able to adopt open-pricing strategies where they can adjust prices based on factors like demand, competition, reputation, occupancy and historical data, depending on the data they can collect and analyse.”

For this reason, revenue managers will need to get more creative at gathering market intelligence, beyond the historical data provided by their internal systems. A richer data set will allow for a clearer picture of market conditions and improved forecasting.

Vouk emphasises, “There are so many data points available right now that we can aggregate to understand what’s actually happening in the market. Solely comparing whatever is on a property’s books to the same time last year is no longer sufficient. We need to incorporate bookings from metasearch engines, OTAs (online travel agencies), GDSs (global distribution systems), destination data, events intelligence and even data from car rentals and the TSA (Transport Security Administration).”

The need for more modern and integrated systems

If revenue and profit optimisation requires harnessing all possible data sources, it follows that a convergence of systems is likewise necessary. In this regard, Ryan Tuckerman, Group Director of Sales, Revenue and Distribution at Ovolo Hotels, describes the importance of connectivity among systems in shaping the future of revenue management.

“Not only have revenue decisions evolved drastically, but so have the systems and platforms that help us make these commercial decisions,” says Tuckerman. “For the next five years, advancements in technology will definitely influence the practice as we’re seeing a shift in the way that these systems will be connected with each other.”

Yet, despite the industry recognising the need for better connectivity, its struggles with a fragmented tech ecosystem persist. Citing the issue of integration among RMSs and property management systems (PMSs) as an example, Aita notes, “A significant hurdle faced by the industry is the sheer number of PMSs that an RMS needs to connect with in order to work effectively. We’re still seeing a number of technical and commercial barriers to integration on the part of PMSs. It’s almost like these platforms don’t want people to step into their garden and prefer to keep their clients within their perimeters.”

In light of these integration challenges, the industry must work to remove barriers that prevent revenue managers from receiving strategic, real-time insights that accelerate their shift towards profit optimisation.

More importantly, ensuring a convergence of systems will greatly empower independent accommodation properties, a vital segment that accounts for the majority of the global hotel industry but is crippled by a lack of revenue management resources and capability. With more integrated systems, these properties will be able to perform forecasting and optimisation – on par with their large hotel chain counterparts – and acquire revenue management skills in the process.

However, the systems available to these providers have to be automated and integrated into their workflows. As Vouk explains, “The brains behind this technology will need to be very smart because this segment will rely on automation quite a lot. This is where AI comes in, specifically machine learning, which will gather important data from all sources, calculate forecast and optimisation decisions and push these into the PMS.”

The revenue manager of tomorrow

As with many data-driven professions, there has been much debate within the hotel industry on the role of AI and, specifically, whether it will enable or eradicate today’s revenue managers. Diego De Ponga, the current CEO at Port Hotels and former Corporate Director of Revenue Management at Palladium Hotel Group, believes that it ultimately comes down to the ability of revenue managers to evolve at the same pace as the fast-evolving environment around them.

“Revenue managers need to understand the whole hotel, incorporate distribution and cost strategies into a property’s incomes and understand how income flows to profits. If you are able to control that, it won’t be possible for AI to change your job. But if you only measure your work through ADR, if you don’t take care of costs and if your job is only about checking competitors and increasing prices, you’re not going to have a job in two years,” says De Ponga.

Tuckerman echoes this sentiment. He notes that with the changes in today’s practice, the revenue manager of tomorrow should influence much more than just pricing and inventory management, but a hotel’s entire business strategy as well.

“Gone are the days when revenue managers were spending 80% of their time generating reports,” says Tuckerman. “Being a revenue manager now is about improving your position and changing the future. It’s about analysing the data, forming the insights and then taking action.”

Given the growing importance of adopting a comprehensive view of hotel operations, Tuckerman highlights that a successful revenue manager in the future must learn to connect with other departments, especially those which are commercially-oriented.

“A revenue manager five to ten years ago could hide behind the spreadsheet and not engage as much as required now, but with the rise of OTAs and key distribution partners that have much more of a commercial approach, the revenue manager’s mindset needs to get onboard.

“The people leading the forefront in revenue management will have a mixed skill set of revenue, distribution and sales, and they’re able to leverage these internal partners as required. The focus for a successful revenue and distribution department is having that holistic approach to driving revenue.”

Hotel rate shopping is the practice of tracking and monitoring hotel rates amongst your local market and competitors. It also involves tracking your own rates across your connected distribution channels.

Hoteliers use rate shopping to benchmark against other properties, optimise pricing decisions, and find opportunities to maximise revenue and profitability.

This blog will give you a full overview of hotel rate shopping and rate shopper tools, which you can use to boost revenue success at your business.

Why is hotel competitor rate shopping useful?

Hotel competitor rate shopping is important if you want to maintain a competitive advantage in the modern hotel industry. Today’s market demands the adoption of dynamic pricing and hotels now regularly change rates daily or even multiple times in a given day.

Rate shopping your hotel competitor rates gives you the opportunity to:

• Optimise pricing: Understanding competitor pricing helps you set competitive rates, maximising revenue without sacrificing occupancy.
• Identify pricing gaps: You’ll be able to spot chances to increase rates without losing market share.
• Avoid rate wars: By monitoring competitor pricing, you can prevent unnecessary and accidental destructive price competitions.
• Improve forecasting: You can analyse competitor rate changes to predict demand fluctuations and adjust your pricing accordingly.

Keeping an eye on your local market and competitors shouldn’t necessarily dictate your strategy, but it’s invaluable for ensuring you always offer the right price at the right time to optimise profit.

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What are the benefits of hotel rate intelligence?

Hotel rate intelligence isn’t simply about knowing competitor rates. There are a broad range of advantages that it opens up for your business including:

Benchmarking capabilities

Comparing your rates to similar hotels in your area helps you understand your position in the market.

With this knowledge you can identify strengths and weaknesses, set goals, and ultimately optimise operations.

Pricing strategy optimisation

Based on competitor rates and market demand, you can adjust your pricing strategy to optimise revenue.

This includes finding ways to differentiate yourself, targeting specific demographics, and pricing dynamically to boost your average daily rate and profit.

Better revenue management

With up-to-date market information and greater visibility, you can improve overall revenue management.

Increase occupancy and profit by tapping into known supply and demand trends – know when guests are willing to pay more to secure a room or when you need to add additional value to entice a reservation.

Data-driven decision making means you will always make the optimal move for your hotel.

Maintaining rate parity

Regular rate shopping will also allow you to see how your own rate is being displayed across all booking channels. This means you’ll be able to spot any discrepancies and make adjustments to maintain consistency. 

Rate parity is important to avoid revenue loss and guest disillusionment. It will also make sure you avoid any potential penalties from the OTAs themselves.

Enhancing guest experience

With the proper market knowledge at your disposal, you’ll be able to tailor pricing and offers that suit your target segments, resulting in a better chance of conversions to bookings. This will also boost customer satisfaction because the guest will feel like they are getting value for money.

Since pricing intelligence tools will save you time, you can also place extra focus on other tasks including guest satisfaction.

What is a hotel rate shopping tool?

A hotel rate shopping tool is software that enables the practice of hotel rate shopping in an automated, digitalised, manner. You can monitor and compare your property’s rates against those of your competitors without the need to spend a lot of time doing it manually or creating reports. 

A rate shopper provides real-time data on pricing fluctuations and can generate reports instantly, allowing you to make informed decisions about your rate strategy.

Advantages of using hotel rate shopping software

Here are the advantages you’ll gain from using hotel rate shopping software, instead of performing manual research:

• Increased efficiency: Rate shoppers can collect and display data much faster, produce graphs and dashboards for easy viewing, and generate instant reports for analysis.
• In-depth intelligence: With real-time data produced in a digestible format, you’ll be able to identify booking trends, seasonal patterns, and demand fluctuations easily.
• More confident decision making: With a rate shopper, you can be more sure the data is accurate and up-to-date, and you won’t make any mistakes in recording or displaying it.
• A single source of truth: Ideally your rate shopper will be a feature of a larger platform. So, in the case of a platform like SiteMinder, you’ll easily be able to generate the performance insights you need without other integrations.
• Stay on top: With the right data and clarity on what it means, you can always offer the most competitive price which will help you optimise both your occupancy and revenue goals.

How to use a hotel rate shopper

A hotel rate shopper will do a lot of your hard work for you but there’s still some decisions to make and some ins and outs of using one.

Here’s a good process to follow while using your chosen rate shopper:

1. Define your competitive set

Identify which hotels directly compete with yours for the same customer segment. Consider using criteria such as location, star rating, amenities, and target market.

2. Analyse competitor rates

Identify patterns in competitor pricing, such as rate changes based on day of the week, occupancy levels, or special events. You should also check the difference between your rates and competitors’ rates.

3. Track your own rates

Evaluate how your rate is advertised across all booking channels, including your own website, to ensure your rates are consistent.

4. Adjust your pricing 

Use the gathered data to optimise your rate strategy to attract the most valuable guests at maximum value.

5. Track performance and analyse reports

With channel manager integration, you’ll be able to get extremely useful reports that let you see your historical performance, your best performing channels, your pace on previous time periods, and more.

“People who have used numerous systems will find SiteMinder to be extremely user-friendly. Compared to the other complicated systems, it is just so simple to use. When we expand our hotel to other areas, SiteMinder will again be our first choice.”

Pichata Ritchie,

Cluster E-commerce Manager

VALA Hua Hin – Nu Chapter Hotels

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How to choose the best rate shopper for your hotel

Choosing the best rate shopper for your hotel will involve ticking off some of the most important criteria that you need met.

Generally you’ll want a rate shopper that makes it fast and easy to track the local market, and one that delivers powerful insights to aid your strategic decision making.

Look for a rate shopper provider that offers:

• Real-time insights on at least 10 local competitors
• Clear, digestible, data visualisation
• A single interface from which to access your insights
• Unlimited daily rate shops so you can always be in the know
• Transparency on your own rates
• Detailed performance reports
• Channel and country mix analysis
• A demo and/or trial to test suitability

Outside of this it’s important to do your research by reading some reviews and testimonials on rate shoppers you are considering. You should also ask yourself if you’re looking for a rate shopper only or a more sophisticated solution that offers additional revenue optimising features.

If you’re looking for a powerful, reliable, rate shopping tool that comes with a whole platform’s worth of features, then you’re in the right place.

Hotel profit margin is defined by the percentage of a hotel’s revenue remaining after subtracting all business expenses, including staff costs, maintenance, and marketing. It reflects a hotel’s financial health – the higher the margin, the more profitable the hotel.

Margins at hotels and other accommodation properties can be manipulated in a number of ways, from reducing expenses to increasing revenue in specific areas to contribute to better overall finances.

With the revenue of the hotel market projected to have reached US$426.40bn by this year worldwide, it’s important to know how you can maximise your share.

This blog will give you a full guide to hotel profit margins and how you can boost the profitability of your hotel or accommodation business.

Why are hotel profit margins important to measure?

There are a few reasons you should be measuring your hotel’s profit margins:

• It gives you a clear indication of the overall financial health of your business. You need to know if you’re gaining or losing money on a regular basis.
• You can use it to compare your hotel with industry benchmarks and any available data you have on competitors to assess where you stand.
• Understanding your profit margins in detail will allow you to make better, more informed, strategic business decisions such as where to invest your money to further improve.

Additionally, the healthier your profit margin the better position you’ll be in if you ever want to sell your business or if unexpected events occur, such as the COVID-19 pandemic.

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How are hotel profit margins calculated?

Hotel profit margins are calculated by determining the percentage of a hotel’s revenue that remains after taking away all the costs associated with running the business, including staffing, marketing, maintenance, utilities, catering, waste, and more.

Hotel profit margins can be calculated in two main stages:

1. Gross Operating Profit (GOP) Margin: This reflects the efficiency of core hotel operations. It’s calculated by subtracting the cost of goods sold (expenses directly tied to room sales) from total room revenue. Dividing this number by total room revenue and multiplying by 100 gives you the GOP margin as a percentage.
2. Net Profit Margin: This is the ultimate profitability metric. It takes the GOP and subtracts all other operating expenses (salaries, utilities, marketing, etc.) from it. Dividing this final number by total hotel revenue (including room revenue and other income streams) and multiplying by 100 reveals the net profit margin as a percentage.

For example, using random sample numbers, if in a given time period your:

• Total revenue equals $120,000
• Cost of goods sold equals $10,000
• Operating expenses equals $55,000
• GOP equals 120,000 – $10,000 = $110,000
• GOP Profit Margin equals (GOP / Total Room Revenue) * 100 = 110%
• Net Profit equals GOP – operating expenses. $120,000 – $55,000 = $65,000.
• Net Profit Margin equals (Net Profit / Total Revenue) * 100 = 54%

Are hotels profitable?

Is owning a hotel profitable? The answer is relative and depends on a range of variables. Some hotels are certainly profitable while others don’t survive long term.

Just like any B2C business, the profitability of a hotel relies heavily on:

• Having a solid business plan
• Implementing effective revenue management strategies
• Ensuring customer satisfaction and building a positive reputation

Of course, this just scrapes the surface and there are full guides on all the aspects of running a hotel business that you’ll need to master to achieve profitability at your hotel. The short answer is yes, hotels are profitable when they are managed successfully.

What is a good net profit margin for a hotel?

If we are talking about a good hotel net profit margin to aim for, most hotels would be happy with a margin of 15-20%.

Very healthy margins lie between 25-35% while the average might be closer to 5-10%.

Generally, luxury hotels and bigger brands can drive a higher margin while smaller properties and independent brands can expect slightly lower margins. 

Typically though, hotels have a lot of fixed costs which can cause profit margins to be lower than a lot of other industries.

What drives profit at a hotel?

How do hotels make money? Hotels can drive revenue and profit through primary and secondary sources.

The primary source of income for a hotel is room sales and the associated packages connected with these reservations. Generally a guest’s biggest expense when staying at a hotel is paying for the room itself.

Secondary sources of income might include food and beverage sales, amenity fees, health and wellbeing services, social classes, event and meeting spaces hires, or ticket sales to local attractions.

Profit comes from being able to sell these services at a high value while keeping costs low, and balancing the expectations and experiences of customers.

How to improve hotel profitability

The first step you can take in your journey towards profit is to perform a hotel profitability analysis. This means taking a deep look into the current state of your business to identify current revenue, costs, and margins. Looking into where money is coming in and going out will help you understand the most important areas to make improvements.

For example, you might find that your room revenue is very high but is being offset by equally high operating expenses. Or perhaps you aren’t generating enough revenue from secondary sources.

But if you’re looking for a general plan, here are the five best ways to boost profit at your hotel.

1. Boost hotel room income

It goes without saying that if you can drive more revenue from your most valuable asset – your rooms – you’ll be on the right track to boosting profit.

There is more to it than simply raising your rates however. Optimising room revenue requires a dynamic pricing strategy which takes into account real-time data, seasonality, competitors, guest trends, and more.

You can also increase your room revenue by adding value via packages, running promotions, and offering extras and upsells. Sometimes guests just need a small incentive to turn them from a looker to a booker and put money in your pocket.

Additionally, if you do some research and guest segmentation, you might be able to target guests who are willing to spend more on premium reservations and be more inclined to purchase more expensive packages.

2. Increase ancillary revenue

Ancillary revenue can be a huge bonus on top of your room revenue. Whether it’s a massage, the gym, transport services, dinner at your in-house restaurant, anything that is not connected to the room revenue can be considered ancillary revenue.

You could even go so far as to produce and sell some of your own products, such as acquiring soaps or linens made locally and taking a commission from their sale.

3. Reduce expenses

Besides pumping up your room revenue, perhaps the biggest impact you can have on your profit is by reducing your hotel’s costs. Since a hotel can incur so many costs, this also means there’s plenty of opportunities to make improvements.

Consider how you spend less on energy, limit your waste, reduce cleaning and maintenance expenses, lower your cost of guest acquisition, boost staff efficiency, and more. 

4. Track important metrics

To measure your progress and keep track of your profitability it’s vital that you’re aware of important performance metrics. 

Make sure you’re regularly keeping tabs on your total revenue per available room (TrevPAR), Gross Operating Profit per Available Room (GOPPAR), cost per occupied room (CPOR), and cost per acquisition (CPA) among others. 

This will help you decide if you need to generate more revenue or reduce the amount you’re spending.

5. Leverage technology

In your endeavours to achieve all of the above, nothing makes it easier than investing in the right technology.

There are tools and solutions that help in all aspects of revenue management, hotel management, and guest satisfaction.

Using technology will allow you to be more efficient, make more informed decisions, gain access to more powerful insights, and implement more effective processes and strategies.

“At first I thought it was just a myth that using SiteMinder could boost revenue. But it turned out to be true. Revenue did increase, we are also more efficient in terms of time; we can get more work done.”

Shadi Wijaya,

Corporate Director of Revenue

The Phala Group

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What tools and solutions can boost hotel margins and increase hotel profit?

So what technology is the best to use to boost profit margins at your hotel?

Some of the most effective solutions that will help you sell more rooms, maximise the value of your rooms, increase guest spend, and access smart data include:

• Channel managers: A channel manager automates and optimises your inventory management. It allows you to sell your rooms on as many channels as you wan at the same time, without the risk of double bookings or the need to perform manual or individual updates.
• Booking engines: Booking engines can boost your profit by delivering direct reservations rather than you paying commission fees to third-party channels. You can also use a booking engine to create valuable packages, offer upsells, and entice guests to purchase extras. 
• Payment systems: Payment tools can make it easier and more convenient for guests to pay, and for you to receive your money. This will improve cash flow and reduce abandoned bookings, resulting in greater revenue.
• Pricing intelligence: Pricing intelligence tools provide you with accurate, real-time, market data so that you can be aware of pricing fluctuations and opportunities to maximise your rates.
• Revenue management systems: Revenue management systems are basically like your expert personal assistant, offering optimised recommendations, sending out alerts and notifications, and producing detailed reports.

Revenue optimization in hotels is a comprehensive strategy that accounts for all revenue streams and uses data to enhance the overall revenue performance of the business. It’s a holistic process that hotels can use to effectively manage pricing, inventory, distribution, customer demand, and more to promote revenue growth.

Revenue optimization recognizes and responds to opportunities to not only sell more, but sell more profitably too by using data, analytics, reports to make strategic decisions. Included in this will be key metrics, forecasting models, and trending insights.

Revenue optimization vs revenue management

In terms of definition and practice, there is a difference between revenue optimization and revenue management.

While revenue management is more focused on a hotel’s pricing and availability to maximize revenue, revenue optimization takes a broader approach to include a full range of revenue sources that includes food and beverage, spa services, events, classes, and other ancillary revenues.

Revenue management can be viewed as focusing on short-term tactics such as dynamic pricing and optimized inventory management to maximize room revenue, with revenue optimization taking a longer-term and more comprehensive approach.

In this blog, we’ll give you a full overview of revenue optimization and some ideas on how you can improve it at your hotel.

Why is hotel revenue optimization important?

Hotel revenue optimization is crucial for a hotel if it wants to sustain long-term success. Because hotel revenue optimization prioritizes holistic revenue management with long-term goals, using smart data and analytics, it can be incredibly effective in helping you to achieve profitability.

Hotel revenue optimization ensures that a property or brand is maximizing its profits from all available resources and opportunities. In addition to this, it can also help identify ways to create more efficient processes and improve the guest experience.

By prioritizing revenue optimization, your hotel will be in a stronger position to take advantage of data, trends, and market insights.

Optimized revenue, more profit

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Benefits of pricing and revenue optimization

One of the major benefits of pricing and revenue optimization is that it is based on accurate, up-to-date, data. This is thanks to the advanced technology solutions that exist today such as revenue management systems, central reservation systems, real-time business intelligence tools, channel managers, and more.

There’s a full range of advantages for hotels and hospitality businesses. Here are some of the key benefits:

• Increased profitability: By setting the right room rates and managing inventory effectively, hotels can maximize their revenue without necessarily sacrificing occupancy rates.
• Improved forecasting: Revenue optimization involves analyzing data on past booking trends, competitor pricing, and market conditions. This allows hotels to forecast future demand and adjust their pricing strategies accordingly.
• Competitive advantage: In a dynamic industry like travel, being able to adapt pricing quickly can give hotels a significant edge over competitors.
• Better resource allocation: Revenue management helps hotels predict staffing needs based on anticipated occupancy levels. This ensures they have enough staff on hand during peak periods and avoids unnecessary costs during slower times.
• Data-driven decision making: Revenue optimization relies on data analysis to inform pricing and distribution strategies. This takes the guesswork out of decision-making and allows hotels to make choices based on concrete information.
• Guest segmentation: Revenue optimization tools can help hotels identify different guest segments (e.g., business travelers, families) and tailor their pricing and promotions accordingly.
• Frees up staff time: By automating many aspects of revenue optimization, hotels can free up staff time to focus on other important areas, such as guest service and marketing.

Developing revenue optimization strategies at your hotel

Before you start brainstorming ideas and tactics for revenue optimization, you have to know exactly what you want to impact and how to approach it.

The great thing about revenue optimization strategies is that they can be used across every facet of your hotel which generates revenue. This can be divided into three categories:

1. Primary revenue streams

• Room reservations
• Online Travel Agencies
• Global Distribution System (GDS)
• Corporate/Group Booking’
• Channel Management

2. Secondary revenue streams

• Food and Beverage
• Events and meetings spaces
• Spa and wellness services
• Parking and transportation
• Retail and gift shops
• Recreational activities

3. Upselling

• Room upgrades
• Packages and promotions
• Loyalty programs
• In-Room amenities
• Tours and experiences

In terms of what you need to effectively move the needle in these areas, there are also three major things you can invest in to get the ball rolling:

• Marketing and operational automation
• Sales efficiency
• Proper data collection

Using the right technology, such as a platform like SiteMinder, can make it much easier to get your ducks in a row and understand what strategic decisions will be the right ones for you.

10 revenue optimization ideas for your hotel

When it comes to putting ideas into action and creating strategies, there’s dozens that might prove effective for your particular business. Here’s 10 to get you started:

1. Use dynamic pricing: Dynamic pricing involves adjusting room rates based on real-time demand. During peak seasons or high-demand events, you can raise prices to maximize revenue per room. Conversely, lower prices can attract bookings during slower periods.
2. Perform demand forecasting: Hotel forecasting involves using data and analytics to predict future occupancy rates. This allows you to plan pricing strategies, staffing levels, and inventory management more effectively.
3. Market segmentation: Target different guest segments with specific marketing campaigns and offerings. This caters to their unique needs and preferences, increasing the likelihood of conversions.
4. Package deals: Create bundled packages that combine your room rate with other services like spa treatments, meals, or activities. This incentivizes guests to spend more and increase your overall revenue.
5. Upselling and cross-selling: Upselling encourages guests to upgrade their room or add amenities like breakfast or parking. Cross-selling involves suggesting additional services that complement their stay, such as airport transfers or restaurant reservations.
6. Length of stay restrictions: Implement minimum or maximum stay requirements to optimize occupancy during peak and off-peak periods. For example, you might require a 3-night minimum stay during winter when you’re less likely to get a large volume of bookings if you’re normally a summer destination.
7. Channel management: Utilize a channel manager to streamline your distribution process across various online booking channels. This ensures rate consistency and prevents overbooking.
8. Mobile optimization: Ensure your hotel website and booking engine are mobile-friendly. A significant portion of travelers use smartphones to research and book hotels, so a seamless mobile experience is crucial.
9. Guest reviews and reputation management: Actively solicit guest reviews and address any negative feedback promptly. Positive online reviews significantly influence booking decisions.
10. Referral Programs: Reward loyal guests and encourage them to recommend your hotel to others through referral programs. This is a cost-effective way to attract new customers.

“At first I thought it was just a myth that using SiteMinder could boost revenue. But it turned out to be true. Revenue did increase, we are also more efficient in terms of time; we can get more work done.”

Shadi Wijaya,

Corporate Director of Revenue

The Phala Group

Read more

Taking advantage of hotel revenue optimization software and solutions

Just like there are a huge number of strategies you can adopt to optimize revenue at your hotel, there’s a long list of hotel revenue optimization solutions that will make your job easier.

Understanding the best tools to use and implementing the ones that suit your hotel’s unique needs will give you a headstart towards profitability.

Here’s a few to take note of:

• Channel managers: Channel managers make inventory management and distribution simple, while also providing key performance reports.
• Revenue management systems (RMS): RMS’ provide sophisticated, data-led, revenue management analytics and recommendations.
• Booking engines: Booking engines enable a direct relationship with guests and turn your website into a revenue generator.
• Customer relationship management systems (CMS): Specifically manage interactions and communications with guests and potential customers.
• Global distribution systems (GDS): A GDS will give you the best access to thousands of travel agents and wholesalers to help diversify your reach and potential revenue.
• Business intelligence tools: Business intelligence tools will provide accurate, real-time, market data so you can keep a keen eye on your own price as well as that of your closest competitors.
• Upsell and other guest-focused apps: Hotel apps can streamline upselling, communication, check-in, room service, and more to ensure guests are happy and also aware of their value-added purchase options.

Yet, it’s important to consider that the demands of revenue management have drastically changed. With rising costs, evolving guest behaviours and the varying types of accommodation businesses that have emerged, revenue management now means different things to different properties.

For instance, Diego De Ponga, former Corporate Director of Revenue Management at Palladium Hotel Group and now CEO at Port Hotels, believes the classic definition of revenue management is unrealistic in today’s market, where selling inventory demands more flexibility.

“I define revenue management as a way for accommodation properties to earn more,” says De Ponga. “These days, it would be impractical to use the classic definition, as I will sometimes sell at a less ideal time, at the right price. If you’re a revenue manager for a property with 100 rooms, your task is to maximise profits from all those rooms, regardless of market conditions.”

De Ponga’s nuanced perspective on how revenue management works in today’s landscape is a result of years of experience in the field. But for many of the world’s independent accommodation providers, revenue management remains unfamiliar territory, often marked by misconceptions and misguided practices.

Overwhelming demands

The lack of revenue management know-how among many accommodation providers is partly due to some only beginning to grasp the basics of managing a property – a complex undertaking in itself.

“Some owners of accommodation properties are experienced business people, but new to the day-to-day operations of a hospitality business,” says Tamie Matthews, CEO and Founder of RevenYou, a consultancy for independent hotels. “While they may be excited to be in charge of the business, everything is new. They are having to learn everything all at once.”

Revenue management is therefore considered a tedious, if not optional, exercise for these time-poor owners preoccupied with other aspects of running a hotel. In fact, many owners of small independent properties we spoke with confirmed that they were ‘too busy’ to pursue learning about revenue management, given the overwhelming demands of their businesses.

It goes without saying, however, that many thousands of properties around the world, particularly smaller independents, are already implementing measures to drive revenue – without even knowing it.

According to De Ponga, hotel software solutions such as channel managers and revenue management systems (RMSs) have democratised the practice, owing to the rise of online travel agencies (OTAs).

“I can’t imagine our job without a channel manager given all the OTAs out there. This tool gave revenue managers the opportunity to develop distribution strategies. RMSs allowed us to go deeper in analysis,” De Ponga shares.

The shift to a profit-oriented paradigm

Despite the availability of technology, the lack of a deeper, more strategic understanding of revenue management among property owners has often led to counterproductive practices that leave money on the table and hamper the growth of their businesses.

Speaking from her experience, Matthews notes the outdated approaches that some owners would take when it comes to their commercial strategies. “Prior to working with RevenYou, we found that many owners used one price for 365 days. They would sell the same price to everyone and assume that 100% occupancy was the ultimate goal. They didn’t know who they were competing against nor did they have a list of events that could drive demand and ultimately increase profit. They were selling their own accommodation within the silo of their own making.”

This perilous, misguided approach comes at a time when revenue management is moving towards a focus on profitability. With rising prices, accommodation providers across all segments are compelled more than ever to consider all costs and opportunities associated with their services and amenities.

“Revenue management is about optimising all available spaces,” says Annemarie Gubanski, CEO and Founder of Taktikon, a revenue and distribution consultancy. “It can be rooms, it can be chairs, it can be treatment rooms or meeting rooms … Not only do we need to optimise every square metre, but we also need to make sure that the whole property remains profitable. That, for me, is the optimum goal of revenue management.”

As revenue management transcends room occupancy and pivots to a profit-oriented paradigm, it’s clear that accommodation owners can no longer afford to ignore the critical role of the practice in the current landscape.

“The primary objective of revenue management should be profits, not just income, especially now that you have to factor the costs of distribution. Profit is the DNA of the business and needs to be led by both the general manager and the revenue manager,” says De Ponga.

‘

A change in mindset

The road to adopting revenue management may seem long and winding for accommodation owners and their teams, already encumbered by the day-to-day tasks of hotel operations. There are, however, practical ways to gradually embrace this practice as it moves towards a profit-oriented paradigm, apart from relying on technology.

It all starts with a change in perspective. For Gubanski, accommodation providers need to leave behind the old mindset that revenue management is an exclusive club for large brands if they are to fully realise the profitability of their businesses.

“One of the misconceptions surrounding revenue management is that it’s not for small properties, that they don’t really need revenue management, more so if their property is not in a dynamic market, but that certainly doesn’t matter. You can apply revenue management to any type of property. And, it’s the smaller properties that actually do need it more because they have to make sure that every space is optimised.”

Other teams at a property would also do well to understand the fundamentals of revenue management. If the practice now entails maximising all available spaces and services that hotels can offer, a concerted effort among departments to understand the ‘whys’ and ‘hows’ of revenue management is increasingly vital.

For property owners and revenue managers, this means reaching out and engaging with teams such as the front desk and F&B, who are pivotal in bringing more revenue and boosting the hotel’s profitability.

De Ponga says, “We need to open ourselves up to the hotel and explain revenue management in an easy way. Speak with other departments, including the front office, because they manage the upselling and cross-selling strategies that can give you two to three percent of your RevPAR. You need to teach them how to control pricing when upselling or cross-selling, or even ask them: ‘Why does our spa have the same price during the whole season?’”

Particularly in recent years, when hotels have at times been forced to confront a reality without cash flow, revenue management has been thrust to the forefront of every hotelier’s mind. Revenue managers, as a result, have been tasked with the critical role of delivering effective pricing and distribution strategies amid evolving trends and market demands, no matter the economic climate.

But while revenue management as a discipline has transformed since it found its way into hotels, there appears to be a widening gap between the heightened demands of the practice and the shrunken pool of talent within the industry. Below is a chart that illustrates this trend.

The gap, observed and experienced by many, suggests that the industry has far from realised the full potential that the practice holds for today’s accommodation businesses.

For us to understand the current state of hotel revenue management, we spoke with three prominent hotel industry professionals to share how the practice has transformed over time, as well as the challenges and opportunities that have emerged from this transformation.

A brief history of hotel revenue management

Trevor Stuart-Hill, the co-author of the first college textbook on revenue management for hotels, and founder and president of global revenue strategy firm Revenue Matters, explains that the hotel industry’s adoption of revenue management began with the introduction of computer systems for demand forecasting, following the airline industry’s successful implementation of the practice.

“The exact genesis of yield management (now revenue management) in the hospitality sector is hotly debated,” says Stuart-Hill. “However, Marriott was one of the pioneers in the hospitality industry to develop computer models designed to support revenue decision-making, so it is primarily cited as the first.”

Stuart-Hill points out that revenue management initially fell into the hands of the reservation manager, particularly in the early 1990s, when reservation managers took on the special task of explaining the emerging idea of dynamic pricing to consumers.

It was then that reservation-turned-revenue managers began assuming the responsibility of distribution, as the arrival of online travel agencies (OTAs like Booking.com) ushered in a transformative approach to hotel distribution. Eventually, revenue management transformed into a more proactive discipline in the 2000s, prompted by the global economic crises that defined the decade.

“The dot.com bubble burst in 2000, the housing bubble burst in 2007 and companies like Lehman Brothers collapsed. These events are important to the evolutionary history of revenue management, as revenue managers were tasked with helping find additional revenue sources for their properties,” explains Stuart-Hill.

Yet, despite the importance of their role, it wasn’t until the mid-2010s that revenue managers began stepping into executive leadership positions at hotels. In 2016, a study by Dr. Laila Rach titled Portrait of Revenue Management Leadership found 65% of revenue practitioners had titles such as ‘vice president’ or ‘senior vice president’.

Fast forward to 2020, the “Great Reset” prompted by the pandemic rapidly changed how consumers and businesses embraced technology. As the pandemic brought travel to a standstill and gave rise to “quarantine hotels”, revenue managers had to rethink their strategies, starting with technology, in order to sustain their businesses.

Holistic revenue management

Today, hotel revenue management has transformed into a holistic discipline, no longer confined to achieving rate parity or adjusting room rates. Derek Martin, CEO and Founder of data analytics company TrevPAR World Group, considers revenue management as integral to a hotel’s commercial success today.

“Revenue management has actually become the lifeline and the heartbeat of a hotel,” says Martin. “When you look at revenue management holistically, it’s no longer just about the rooms. It is about the entire business; its costs, performance and profitability. It’s become much more of a commercial function than just a revenue management function.”

Martin attributes this change not only to the widespread adoption of the Internet, which has turned hotel commerce into a 24/7 operation, but also to the rise of big data. He adds that with advancements in hotel technology, revenue managers now have the opportunity to be even more strategic with their practice.

“We’ve got so many data touchpoints when it comes to hotel technology and systems that a single reservation can be accessed, processed and leveraged on up to ten occasions before the guest even checks in. But we also need to remember that while technology is great, we must make sure the right technologies align for the right property. The alignment of the operational and the strategic elements is what I call modern-day revenue management.”

The struggle for talent

Despite the abundant need and desire for revenue management expertise, the hotel industry currently faces several challenges when it comes to building the talent required for today’s practice.

“I am rather concerned about the standard of experience currently on display in the industry,” says Tamie Matthews, CEO and Founder of RevenYou, a consultancy for independent hotels. She points to the scarcity in holistic experience among revenue managers at a time when the practice has taken an equally holistic approach.

“While we now have people who can move a price up or down, use a revenue management system and analyse data, they lack the experience in driving production, creating a profitable distribution strategy and operating the multitude of systems we use daily to create revenue,” Matthews explains.

The ongoing shortage of revenue managers in hotels, exacerbated by the recent pandemic which prompted a brain drain of revenue practitioners, also remains a pressing concern. With their transferable skills in data analytics, hotel revenue managers have been drawn to pursue opportunities outside the accommodation industry where they feel more fairly compensated for their high-in-demand skills.

Furthermore, a lack of executive support has often led to innovative revenue ideas being overlooked, particularly those from the younger revenue managers. Martin attributes this dynamic to the disparities existing between senior hotel leadership and the nature of today’s practice.

“Old-school leaders may not fully understand revenue management, but it’s not their fault. Many have been general managers for decades, while today’s approach to revenue management is relatively new,” Martin explains. “As revenue management gets explored more, the talent shortfall will get worse. We will not be able to generate talent quick enough.”

Bridging the gap towards a true revenue culture

Amid these challenges that hamper revenue management’s potential, both revenue managers and the hotel industry at large must be proactive in order to drive the practice forward.

For Matthews, a revenue manager’s openness and inquisitive mindset are necessary to raise the level of revenue experience in the industry.

“A revenue manager who thinks they are indispensable because they can change pricing daily is a revenue manager living in the past. To ensure revenue management continues to grow and evolve, revenue managers need to expand their knowledge base. They must adopt a growth mindset and a desire to learn,” she explains.

This need to broaden a revenue manager’s role beyond pricing is echoed by Martin, who sees distribution as an important skill for any revenue practitioner.

“We’re looking for a revenue manager that has a full understanding of operations, cost control and, more importantly, the distribution landscape. Distribution is 80% of revenue management right now. We can come up with brilliant ideas, but if we don’t know how to distribute those ideas to the greater world or the Internet, no one’s going to book and find us,” he explains.

In addition to the technical skills required to keep pace with today’s revenue management, soft skills are equally important. Stuart-Hill emphasises that communication and collaboration are essential for revenue managers to achieve their revenue goals.

“Those with a strong foundation in revenue management, who also excel in active listening, communication and persuasion, find themselves defining and driving commercial strategy within their organisations,” he shares.

From a broader lens, structural and cultural changes within the industry are also vital in driving revenue management forward. For one, Martin suggests establishing a dedicated role for a revenue manager rather than diluting their responsibilities across different functions.

“A data geek that can speak is the ultimate revenue manager because they can tell the story about your data. If you’re crossing over their responsibilities with sales, marketing or front office reservations, where 20% goes to revenue and 80% goes to the operational side of the business, the hotel falls over. You need to have specialists. Revenue management is not a ‘ten-minutes-a-day’ job,” he explains.

He also advocates for fair compensation, highlighting the current discrepancy between the valuable contribution of revenue managers and their relatively low salaries.

“Revenue managers have one of the lowest payrolls in the hospitality space. The way that we think about the salaries of revenue managers is actually an insult to smart people. We need intelligent geeks that can speak and know their worth,” he adds.

In the end, Martin believes that fostering a culture that rallies behind revenue managers and their ideas is key to further advancing the current practice of revenue management.

“A true revenue culture is achieved when you have buy-in from the top to the bottom, with everyone sharing a common goal to achieve targets and meet stakeholder expectations. So, if we truly want to make revenue management the forefront of our industry, we need to give our revenue managers an opportunity. Let them speak, listen to them and buy into their ideas. Just because we’ve been doing things the same way doesn’t mean we have to continue doing so. Why can’t we adopt another ‘Great Reset’ mentality?”

Hotel rate management is the process of strategically pricing rooms to attract guests while also maximising revenue. This process requires continuous analysis of market trends, booking patterns, and competitor strategies. It’s not just about setting the right price, but also about adjusting it in response to market changes.

This strategy is crucial for enhancing both occupancy rates and the average daily rate (ADR), directly influencing the hotel’s financial performance. 

Why does hotel rate management matter?

Mastering the art of rate management is crucial for thriving (not just surviving) in an ever-competitive hotel landscape. But why does it matter so much? Here’s what hotels who keep a tight rein on their rate management can expect:

• Maximised revenue: The most direct impact of effective rate management is on your bottom line. By dynamically adjusting room prices based on demand, seasonality, and market trends, you ensure you’re not leaving money on the table during peak times, and equally, not pricing yourself out of the market when demand wanes.
• Higher occupancy rates: Pricing rooms correctly plays a pivotal role in driving occupancy. Overpriced rooms deter potential guests, while underpricing leads to revenue loss. Finding that pricing sweet spot is key to keeping rooms filled throughout the year.
• Adaptability to market conditions: The hospitality market is fluid, influenced by various external factors like local events, economic shifts, and even weather patterns. Effective rate management means being agile – quickly adjusting prices in response to these changing conditions.
• Guest perception and value: The price of a hotel room isn’t just dollar signs. It’s a signal of value to guests. Smart rate management helps in positioning your hotel appropriately in the market, ensuring guests feel they’re getting the right value for their money.
• Better data for strategic decisions: With advancements in hotel management software, rate management is no longer a guessing game. Utilising data analytics, you can make informed decisions that align with your hotel’s strategic goals.
• Staying ahead of the competition: In a market where guests have countless options at their fingertips, staying competitive is key. Effective rate management ensures your pricing is always aligned with or ahead of your competitors, helping you stand out in a crowded market.

Basically, hotel rate management is about understanding the market, knowing your guests, and using this knowledge to drive profitability while maintaining guest satisfaction.

Hotel rate management strategy

As we’ve seen so far, there are countless factors that will influence and help you determine your rates.

• Internal factors such as expenses like taxes, wages, supplies, cleaning, and refurbishment mean there’ll be a minimum rate you have to set to break even on your business each month, quarter, or year.
• External factors such as the season, competitors, and events mean you’ll have constant work to do adjusting your rates.

However, even larger industry trends may supersede any of these factors. Google produces 500 million results when asked ‘Is travel getting more expensive?’

Unsurprisingly, the first 10 results are solely dedicated to the price of flights. Panicked headlines from global news organisations warn travellers about the rising costs associated with travelling by plane, thanks to increased fuel costs and the subsequent pressure on airline profits.

One of the difficulties for airlines is knowing how to factor in the increasing fuel costs. Passing the increases onto travellers by raising ticket prices is one of the few options available to them.

What causes hotel rates to fluctuate?

Although hotel rate management has less to do with barrels of crude oil, airline prices could still impact supply and demand for hotels, the most common reasons for the fluctuation of hotel rates. 

As we all know, supply is how much of a service the market provides and demand is how much of the market wants to pay for it.

While it would be too simplistic to say fluctuations in hotel room rates can be solely down to this theory, it’s a great place for hoteliers to start because economists have long believed the best way to allocate resources – in this case hotel room rates – is to let supply and demand decide.

Beyond your location and online reputation, your hotel rates will mostly be affected by these 3 factors:

1. The time of year

Is it peak or off-peak season? If it’s a quiet time you can lower your rates to coax more guests in. If it’s the height of your busy season and hotels locally are becoming booked up, you can afford to charge your guests more. It pays to obsess over long-range weather forecasts too.

2. Your types of available rooms

Different rooms will require different rates and this is where you can get creative with your packages and offers.

A good channel manager will allow you to sell the same room in different ways across all your connected online channels – for example, a ‘deluxe suite including breakfast & local walking tour’ vs. ‘deluxe suite room only’. The possibilities are endless – almost.

3. Any major events in the local vicinity

Knowing what’s happening in and around your hotel is crucial to setting room rates accurately. If you’re a hotel in Melbourne and you know the Australian Open tennis tournament comes to town every January, start looking at your competitors’ rates early.

Track the hotel rate management trends and be strategic – you could be winning the business of the world’s biggest sports fans or leaving valuable revenue on the table.

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Hotel rate management best practices

Every hotel is unique, with unique selling points and a unique audience. The perfect rate management strategy for one hotel won’t necessarily be the right fit for yours. However, there are some best practices that can help you along your own unique rate management journey.

What is the hotel industry standard for measuring the effective management of room rates?

There’s no single KPI that perfectly describes how effective your rate management is. Rather, there are a handful of metrics that describe different facets of the success of your strategy:

• Average daily rate (ADR): This metric measures the average rental income per occupied room in a given period. It’s calculated by dividing the total room revenue by the number of rooms sold. ADR is a crucial indicator of how effectively a hotel is pricing its rooms.
• Occupancy rate: This is the percentage of available rooms that are occupied over a specific period. It’s calculated by dividing the number of occupied rooms by the total number of available rooms. While not a direct measure of rate management, occupancy rates can indicate the effectiveness of pricing strategies in attracting guests.
• Revenue per available room (RevPAR): RevPAR combines elements of both occupancy and ADR to provide a comprehensive picture of a hotel’s performance. It’s calculated by multiplying the ADR by the occupancy rate, or dividing total room revenue by the total number of available rooms. RevPAR helps hoteliers understand how well they are filling their rooms and how much they are earning from each room.
• Length of stay (LOS): This metric measures the average number of nights that guests stay at the hotel. A longer LOS can be an indicator of effective rate management strategies, such as offering discounts for extended stays.
• Market penetration index (MPI), average rate index (ARI), and revenue generation index (RGI): These are comparative metrics used to assess a hotel’s performance against its competitive set or the broader market. MPI compares a hotel’s occupancy rate to the market average, ARI compares the ADR, and RGI compares the RevPAR.
• Distribution channel analysis: Understanding which distribution channels (like OTAs, direct bookings, travel agents) are bringing in the most revenue and at what cost is essential for rate management. This analysis helps in optimising channel mix for better profitability.

What are rate fences in the hotel industry?

Fences are rules that apply to room rates. It means that to secure a certain rate the guest will have specific conditions applied to them.

One such example might be a minimum stay length. If the guest wants a discounted rate they might be required to stay at least two nights. By that example, the cheaper rate is ‘fenced’ off from those guests who only want to stay one night.

Potential guests need to feel that they are buying different products when they pay different rates. Rate fences are the elements that can help create this differentiation. Rate fences are commonly used to prevent customers who are willing to pay a higher amount, to have access to a discount.

The most common types of fences include:

• Physical fences – These include features such as the location of the room, the view, furniture, amenities, size, etc. Some segments will be willing and able to pay more for rooms with a great view, while other segments will prefer to forgo that view in return for a lower rate
• Transactional fences – These involve time, place, quantity of purchase and flexibility of use. An example can be non-refundable rates. It’s likely that non-refundable rates will not be attractive to a corporate guest but a more rate-sensitive leisure guest might prefer a non-refundable product if the rate is lower.
• Buyer characteristics – These regard attributes such as age, affiliation to an institution or group and frequency or volume of consumption. 
• Controlled availability fences – In this case, availability and rates are assigned based on geographical criteria or distribution channels. For example, charging different rates according to the customer’s place of residence. 

Applying fences the right way can make your business more successful and give you a competitive edge.

Why use refundable rates?

A refundable rate gives travellers who are interested in your hotel more confidence to make a booking. Given that over a half of travellers who responded to a recent Expedia Group survey said they would not book non-refundable accommodation, even if it was discounted, a refundable rate can go a long way to boosting your occupancy. It will also help you stand out on sites like Expedia where a large volume of travellers are researching accommodation. It’s easy to set up a refundable rate on a channel like Expedia with SiteMinder’s channel manager and once you do so, your property will show ‘Fully refundable’ or ‘Free cancellation’ in traveller search results.

How software helps improve hotel rate management

Set up base rates

Software assists in setting initial rates based on a comprehensive analysis of factors like historical data, room types, and standard market rates. This foundational pricing provides a consistent benchmark, ensuring that all subsequent dynamic pricing adjustments are rooted in a sound, data-driven starting point. It lays the groundwork for effective rate management, allowing for strategic adjustments while maintaining a level of predictability and stability in pricing.

Create flexible restrictions

Implementing flexible restrictions on bookings, such as minimum stay requirements, advance booking limitations, or closed-to-arrival (CTA) days, is simplified through software. These restrictions help in managing room availability more effectively, especially during peak periods or special events. 

For instance, requiring longer stays during high-demand periods ensures maximum revenue generation from each booking, while advance booking limitations can be used to encourage early reservations, aiding in better inventory management.

Use dynamic pricing algorithms

Dynamic pricing algorithms in software automatically adjust room rates in real-time based on market demand, competition, and other external factors. This responsive approach ensures that rates are always optimised for current market conditions, enhancing revenue opportunities during peak demand and maintaining occupancy during slower periods.

Analyse market trends and data

Software tools offer in-depth analysis of market trends, booking patterns, and guest behaviour. This analysis helps in understanding the best times to adjust rates, either upwards or downwards. Using this data-driven insight aids in making informed pricing decisions, aligning rates with market expectations and maximising revenue potential.

Unify distribution channels

Integration with various distribution channels ensures consistent and updated room rates across all platforms. Software automates the distribution of rate changes to OTAs, GDS, and direct booking channels. This consistent rate presence helps in avoiding disparities, ensuring a unified booking experience for guests and reducing the risk of overbookings or rate conflicts.

Competitor-based pricing or competition-based pricing is a data-driven approach where businesses use advanced analytics to set their prices based on competitors’ rates. In the hotel industry, this involves leveraging sophisticated pricing algorithms and software to monitor, in real-time, the room rates of comparable hotels.

But it’s not just about matching or undercutting competitors’ prices. This strategy uses statistical models to predict optimal price points that maximise revenue and occupancy. These models factor in variables such as historical booking patterns, seasonality, local events, and even guest reviews.

The goal is to provide hoteliers with a dynamic pricing strategy that responds to both market and property-specific conditions.

Why use competitor based pricing for hotels?

With the modern popularity of online booking platforms and how easy it is to compare hotel costs for guests, providing competitive pricing no matter where you’re listing is crucial for success. Competitor-based pricing provides that at a foundational level by ensuring that your hotel never loses sight of the competition. Competitor based pricing gives you access to:

Algorithmic pricing

Modern pricing tools use algorithms that factor in a multitude of variables. These algorithms aren’t just about tracking competitors but understanding the entire market ecosystem.

Real-time data analysis

Competitor price intelligence tools fetch real-time competitor pricing data. This means that hotels can make better pricing decisions, faster, responding to market trends and changes quickly and expertly to maintain their competitive edge.

Multichannel insights

Advanced pricing tools incorporate multichannel insights on guest booking trends, giving you insight into the performance of each of your online distribution channels—by revenue and room nights generated—along with the impact of your online marketing campaigns to understand exactly where your website visitors are coming from and what calls-to-action are driving conversions.

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Advantages of a competitor based pricing strategy

Why should revenue managers monitor their competitors’ prices? And why use competitor based pricing? Competitor-based pricing offers several technical and strategic advantages:

Predictive analysis

This isn’t just about understanding the past but predicting the future. By analysing historical data, hotels can forecast demand, ensuring they’re always ahead of the curve.

Dynamic pricing

The ability to adjust prices multiple times a day based on real-time market conditions ensures the hotel remains competitive at all times.

Data visualisation

Modern tools provide intuitive dashboards that visually represent pricing data. SiteMinder, for example, provides a single dashboard for you to stay on top of your local competitors’ pricing without having to manually monitor each throughout the day. This visual representation makes spotting trends and making informed decisions easier for hoteliers.

While there are many other types of pricing models, ultimately competitor-based pricing does what it says on the packet: beats your competition on price.

How to implement a competitor based pricing strategy

Implementing a competitor-based pricing strategy involves a blend of technology and strategy:

1. Data integration

Ensure your Property Management System (PMS) is integrated with pricing tools for seamless data flow.

2. Competitor benchmarking

It’s not just about knowing their prices. Understand their promotional strategies, guest reviews, and overall brand positioning.

3. Algorithm configuration

Tailor the pricing algorithm to your hotel’s specific goals. Whether you’re looking to maximise occupancy, revenue, or both, the algorithm should reflect that.

4. Automated price adjustments

Set up triggers for automatic price adjustments. For instance, if a competitor drops their price by 10%, your rates could automatically adjust to remain competitive.

5. Continuous monitoring

The market is dynamic. Regularly review your pricing decisions, understand their impact, and refine your strategy accordingly.

Modern hotel management isn’t just about hospitality; it’s about harnessing technology to stay ahead. Integrating advanced pricing tools with your existing PMS is crucial. These tools, often cloud-based, offer real-time insights, predictive analytics, and automated adjustments. 

For hotel groups and chains, solutions like SiteMinder’s pricing analytics can be a game-changer. Our software not only provides competitor data but also provides an integrated booking platform, ensuring you have a holistic view of the market.

Competitor based pricing example

Consider two luxury hotels in London. 

1. Hotel A uses a basic pricing strategy, adjusting rates seasonally. 
2. Hotel B employs a sophisticated competitor-based pricing tool. 

Hotel B’s tool, integrated with a cloud-based PMS, fetches real-time data on competitor rates, local events, and even weather forecasts. When a major event is announced in London, the tool predicts a surge in demand and automatically adjusts Hotel B’s rates. As a result, Hotel B sees a significant increase in bookings and revenue, showcasing the power of a dynamic, data-driven pricing strategy.

By embracing the technical intricacies of competitor-based pricing and leveraging advanced tools, hotels can navigate the complex pricing landscape with precision and agility. This approach ensures they remain competitive, maximise revenue, and cater effectively to their target audience.

Value-added pricing, also known as value-based pricing, is a pricing strategy in which a hotel sets its prices based on what a customer believes the value of a room or service to be. 

It’s different from most other strategies, in that the price isn’t based on a tangible metric like supply and demand or cost (though cost must still be considered to ensure you’re generating profit, not just revenue).

Luxury goods such as designer handbags, fine wines and Swiss watches are prime value added pricing examples. The material and labour costs to produce these goods aren’t that high, but the reputation of the brand or the region in which the item is made means that customers are willing to pay more.

But what is value based pricing in hotels specifically? Read on to find out.

Why should hotels implement a value added pricing strategy?

Your hotel can potentially make more money from value-added pricing than from any other strategy. When you work hard to build a great guest experience, people will be willing to pay more to experience it.

This does mean that the successful implementation of a value added pricing strategy begins by crafting a truly alluring and unique guest experience that will get people talking. But if you manage to do it, the increased demand will allow you to set your prices far higher across your distribution channels, even if your costs remain relatively low. 

This can greatly improve your revenue management efforts, helping to optimise both room occupancy and the average rate paid for each room.

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How does value added pricing work in hotels?

Value-added pricing is all about how a guest perceives the value of the experience you offer. You can positively alter this perception, and therefore charge more for your rooms and services, by enhancing your hotel’s reputation. This can be achieved in two main ways:

• Through marketing and branding efforts: Focus your marketing on the quality of your guest experience, specifically on any market-leading aspects of your offering. Capture and create high quality content that puts your hotel and services in the very best light.
• Through ratings and reviews: Reviews are critical to your value-added pricing efforts, as potential guests see feedback from previous guests as objective evidence of the quality of your offering. Do all that you can to get happy guests to leave a review: remind them at check-out, send follow-up emails and consider offering an incentive.

How to create a value-added pricing strategy

Here are eight important steps to keep in mind when creating a value-based pricing strategy at your hotel:

1. Identify your market

To understand how a guest values your rooms and services, you first need to understand who that guest is. Consider who you want to target, and check Google Analytics and the demographics of your social media followers to understand what your ‘average’ guest currently looks like.

2. Determine what guests value

Why do your guests choose you? What does your hotel do better than anyone else? Identify your most popular rooms and services. Check reviews to see what guests are raving about. Consider focusing more on these popular offerings moving forward.

3. Set pricing

Because value-added pricing is based on customer perception, there isn’t a simple formula to work out what you should be charging. It’s instead a matter of taking your break-even point or average daily room rate (ADR) as a baseline, then increasing the price based on what you think a guest may be willing to pay.

One way to work out that increase is to survey your customers on what they believe your big ticket items are worth. They might see an ocean view as worth $50 a night, a hot tub as $80, a one hour massage as $100. 

You can then use these figures to calculate a price for each room and service. You can also see what competitors are charging for similar items.

4. Highlight value-added services

It might be that you only use a value-added pricing strategy for certain rooms or services – in which case you should work hard to promote these offerings, as they will be the most profitable. Post about them on socials, advertise them online, and place printed materials in every room.

5. Pricing tools 

A tool like SiteMinder Insights can prove invaluable in crafting value-added pricing, as it gives you a clear picture of customer demand and how your pricing compares to the wider market. You might also consider offering a mobile-only price through booking channels that allow it, to further add to the perceived exclusivity, and therefore perceived value, of your offering.

6. Track revenue

Track your revenue performance to identify trends that can further inform your value-added pricing strategy, such as peak periods when you can charge far more.

7. Competitive analysis

Remember that your pricing is inextricably linked to that of your competitors. Compare your rates to direct competitors, and consider whether price differences are a true reflection of the differences in your offerings and reputation.

8. Feedback

After they check out, ask guests how they would rate the value of their stay. Use these insights to inform your value-added pricing strategy moving forward.

“If I had to describe SiteMinder in one word it would be reliability. The team loves SiteMinder because it is a tool that we can always count on as it never fails, it is very easy to use and it is a key part of our revenue management strategy.”

Raúl Amestoy,

Assitant Manager

Hotel Gran Bilbao

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Value added pricing example

Hotel A and Hotel B are next door neighbours. They are terraced properties with more or less the same layout. Hotel A has been doing the same thing for decades. Hotel B is new and looking to earn more with a value-based pricing strategy.

Hotel B paints itself as a more exclusive, luxurious option. It targets a specific market, designs a range of value-added services, and carefully manages its online reputation. Over time, it becomes a more alluring option than Hotel A, and eventually charges $100 more per room due to the quality that its guests perceive.

Dynamic pricing is a pricing strategy for hotels that involves changing room rates daily, or even within the day based on real-time market conditions.

Taking supply and demand into account, dynamic pricing allows for prices to fluctuate regularly so the hotel can maximise revenue. This pricing option is well suited in today’s market and is one many hoteliers opt to use.

For example, in the morning you may have lower rates because your occupancy is low and demand is not strong. However, by evening your supply may have reduced and demand could be growing. Naturally, you want to increase rates at this point.

This blog will give you a full guide to hotel dynamic pricing, how it works, and the best ways to implement it at your business.

What is the difference between static and dynamic rates for hotels?

The difference between static and dynamic rates for hotels is that one is relatively rigid and the other is based on real-time market data.

Static rates are a traditional way of pricing hotel rooms which usually includes a standard weekday rate, elevated weekend rate, and increases during peak seasons. A static rate would be unaffected by external factors such as fluctuations in traveller demand or changes in competitor behaviour.

Dynamic rates, on the other hand, take all that information into account to give hoteliers the information they need to maximise revenue at all times. A dynamic rate is one that could change by the day, or even the hour, depending on current market conditions.

Today, dynamic rates are much more useful for running a profitable hotel business than static rates.

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Why is dynamic pricing important for a hotel?

Dynamic pricing can be an important strategy for a hotel that’s looking to optimise occupancy and maximise profit.

By tracking market conditions in real-time, hotels can both prevent too many rooms staying unoccupied and rooms being sold for less than their maximum potential value.

Here are some of the advantages of using dynamic pricing at your hotel:

• Boost occupancy – When demand drops, you can drop your rate to increase the chances of a booking.
• Maximise profit – When demand is high and supply is low, you can sell remaining inventory at higher rates.
• Improve forecasting – Compare historical data with current market conditions to get an idea of what you can set your rates at in the future.
• Beat your competition – Acting on market fluctuations will allow you to get ahead of your competitors, who may not be as switched on.
• Understand traveller booking behaviour – See how customers respond to changing market conditions and prices to get insight into how to better target them in the future.

However, dynamic pricing isn’t always perfect. As with any strategy, there are potential drawbacks that hoteliers need to be aware of.

Some of the risks associated with dynamic pricing include:

• Customer confusion – If prices are changing from morning to night, some travellers may start to question the price integrity of a hotel.
• Stakeholder management – While revenue managers will certainly be looking for any chance to maximise revenue, marketers and those in charge of brand may not be as comfortable with regular fluctuations.
• Technology barriers – To get dynamic pricing right, multiple systems usually have to be used and integrate seamlessly to ensure data is accurate and up-to-date.
• Brand perception – Does dropping your prices too low devalue your brand, and does pushing them too high alienate some of your loyal guests?
• Long-term success – If travel agents or travel companies find it hard to budget and book with you because of variable prices, will they take you out of consideration in the future?

“SiteMinder has also improved their solutions by providing business analytic tools. It works effectively and efficiently, and when market demand fluctuates we are able to change our pricing strategy in a timely manner, to optimise the business opportunity.”

Annie Hong,

Revenue and Reservations Manager

The RuMa Hotel and Residences

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How does dynamic pricing work in the hotel industry?

Dynamic pricing in the hotel industry works by adjusting room rates based directly on real-time market conditions such as special events, competitor behaviour, weather, customer behaviour, and general supply and demand.

The hotel revenue manager will track what’s happening in the market throughout the day and week to pick up on any noticeable changes. This will allow them to capitalise on opportunities to boost occupancy and/or maximise revenue.

Let’s see how this might work in real life…

Dynamic pricing example for a hotel

A good dynamic pricing example for a hotel is when something out of the ordinary happens that enables hoteliers to respond and adjust their rates.

For instance, let’s say your hotel’s standard room rate is $210 per night when not in peak season. On weekends, it’s $220 and in peak season it’s $250.

Then, Taylor Swift announces a tour and your city is on the list of destinations she’ll be playing in. The dates for her shows fall on what would normally be a ‘standard’ Friday and Saturday night.

Tickets go on sale and excited fans snap up their tickets, with their attention quickly turning to accommodation for a night or even the whole weekend.

If you kept your rates static, your hotel would likely be the best deal around and you’d sell out your entire inventory for that weekend – potentially missing out on a lot of revenue.

However, if you react to the breaking news of the tour announcement by increasing your rates and even creating new packages, you’ll earn more from every booking than you normally would have.

Then, when supply dips lower as the date draws nearer and more hotels are selling out, you can raise your rates again because demand is still high for those who are booking with a smaller lead time.

Depending on your strategy, you might also try to entice some guests to increase their length of stay to take in more nights than just the dates of the show.

For instance, you could lower your rates back down for Sunday or Monday when most people might be flying out and airports would be busy and expensive. This could help maintain some of your occupancy and keep the revenue flowing in for a little longer.

This is an example of how dynamic pricing can work for a hotel.

Hotel dynamic pricing algorithm

A hotel dynamic pricing algorithm can be used to focus on particular areas of the market and what responses should be made.

It’s a set of rules to follow to achieve a set desired outcome. For example, an algorithm might be created to watch competitor occupancy and room rates to price match, undersell to win occupancy, or oversell to maximise revenue when they are sold out.

Often, algorithms are run by machines and there are dynamic pricing systems available to hotels. But algorithms can also be done manually. For instance, a recipe is also an algorithm.

Most hotels will have some kind of software to help them track real-time market conditions, before they decide how and when to adjust rates. Others ways use a completely automated approach, whereby the system will adjust the rates for them based on preset parameters and rules.

5 best ways to use dynamic hotel pricing

There are a few ways to put dynamic pricing into action and also some different ways to analyse performance and make adjustments.

Here the five best ways to apply dynamic pricing at your hotel:

1.Tracking occupancy

Keeping an eye on your own occupancy and comparing it alongside your competitors is a great way to price your hotel to advantage. If you notice your closest competitor sell out, it means you then have a monopoly on supply. This allows you to sell your remaining inventory at a higher rate.

Similarly if your occupancy is low and you could lower your rate to ensure it is less than what your competitor is charging. This will help your hotel drive more demand than other properties in the area.

2. Responding to abnormal market conditions

On some days, there might be a high number of flight cancellations due to weather or other factors. It pays to take notice of what’s happening around you in real-time so you can quickly capitalise on opportunities to capture extra bookings or maximise profit.

3. Creating ‘peaks’ outside of peak season

Events like the Taylor Swift example allow you to forecast stronger periods of performance and plan ahead throughout the year, instead of relying solely on your traditional peak season to cash in.

4. Learn guest segment patterns

If you notice particular booking patterns such as more last-minute reservations at a certain time of year, or a particular audience segment opting for packages, you can start to forecast more accurately and strategise for greater success.

5. Experiment with room type preferences

In summer, people might be more concerned about getting a room with a view than they are in winter, for instance. Or, you might notice the rooms close to the bar and restaurant are much more popular on weekends, while rooms closer to the gym or work spaces are more popular during weekdays.

Dynamic pricing best practices for hotel groups and chains

Hotel groups and chains often struggle with efficiency – with multiple properties and a lot of rooms and room types to sell, getting new offers created and out to market quickly is important.

But it’s hard to take a dynamic approach to this, because by the time everything has been done the market has changed again.

Here’s a few best practices that will help:

• Know the market intimately – Understanding peak season, shoulder season, and low season in detail will enable you to identify fluctuations and opportunities much easier.
• Understand the customer fully – By knowing what your guests are looking for, when they look, and how they book will allow you to anticipate market changes and react appropriately.
• Monitor trends constantly – By monitoring market trends and competitors all the time, you won’t be caught napping and will always be in a position to boost occupancy, ADR, and RevPAR.
• Be aware of the pitfalls – Some of the risks we mentioned in this article can have detrimental effects if not managed properly. Always try to make sure your loyal guests are kept happy because they represent lifetime value.
• Use the right software – Using technology that can accommodate large scale operations and accelerate backend processes will help significantly. Look for a leading hotel platform that has specific offerings for hotels in the enterprise space.

Hotel metrics, often referred to as key performance indicators (KPIs), are essential data points that hoteliers use to measure the performance and success of their establishment. 

These metrics encompass a wide range of areas, from financial figures like revenue per available room (RevPAR) and average daily rate (ADR) to operational aspects such as occupancy rates and guest satisfaction scores. 

By closely monitoring these metrics, hotel managers can gain valuable insights into their hotel’s strengths and areas for improvement. 

For instance, a consistently high occupancy rate might indicate effective marketing strategies, while low guest satisfaction scores could point to potential issues in service quality or amenities. 

In today’s competitive hospitality industry, understanding and optimising these metrics is crucial. They not only provide a snapshot of the hotel’s current performance but also guide strategic decision-making, ensuring that the establishment remains profitable and continues to meet the ever-evolving needs of its guests.

What should be included in hotel metrics?

Hotel operations are incredibly varied, with many moving parts that interact with and support one another. As you can imagine, this translates into a significant number of interrelated metrics; all of which must be monitored to ensure a complete view of performance. 

This said, not every hotel will place the same level of importance on every metric, or the same metrics, at the same time. Revenue and profit are always important, but more specific KPIs around average length of stays may not always be as integral to highlight in hotel metrics reports.

Regardless of emphasis, together these metrics form the backbone of a hotel’s analytical approach, ensuring profitability and enhanced guest experiences.

Hotel industry standard metrics

Here are a few of the most common hotel metrics that hoteliers track:

• Occupancy rate is crucial, indicating the percentage of occupied rooms over a specific period. It offers insights into room demand and helps in forecasting. 
• Average daily rate (ADR) measures the average revenue earned from each occupied room per day, shedding light on pricing strategies. 
• Revenue per available room (RevPAR) combines the occupancy rate and ADR to give a comprehensive view of both room sales and revenue. 
• Guest satisfaction metrics, such as Net Promoter Score (NPS) and online reviews, gauge guest experiences and areas of improvement. 
• Cost per acquisition (CPA) helps in understanding the cost involved in acquiring a customer, essential for budgeting and marketing strategies. 
• Distribution channel performance is vital to know which channels (like OTAs, direct bookings) are most profitable.

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Types of hotel metrics

Generally, hotel metrics will fall into one of three main categories: revenue, profit, and operations, each with its own unique insights into performance.

1. Revenue hotel metrics

Revenue is what keeps your hotel open so having a goal aligned with your income is obviously important.

How you measure your success is dependent on what targets you set. For example, you might set out to achieve a revenue lift of 10% year-on-year. Or you might have the goal of boosting RevPAR by 5%.

Here are some revenue hotel metrics to consider:

• RevPAR – Revenue per available room gives you an idea of your ability to fill your rooms at an average rate. It can be calculated by multiplying your average daily rate by your occupancy rate.
• TrevPAR – Total revenue per available room takes into account all the revenue from your property, not just your room sales. It can be calculated by dividing your total revenue by your available rooms in a set period.
• TrevPEC – Total revenue per client can be used to look at individual guest expenditure and how this applies to your hotel’s overall revenue performance. Simply divide your total revenue with the number of guests staying at your property for any given period.
• NRevPAR – Net revenue per available room takes into account the expenses incurred by you in order to fill your rooms and can be calculated by dividing your room revenue, minus costs, by available rooms.
• RevPOR – Revenue per occupied room only considers filled rooms so gives you a better understanding of the profit you make from guests who are actually staying with you. It can help you track revenue from other departments such as food and beverage. Calculate it by dividing your total revenue by occupied rooms.
• ReRTI – RevPAR Room Type Index is quite a newly developed metric that helps hoteliers see which room types are the most profitable, and how promotions might affect overall performance.
• RevPAM – Revenue per available metre is a metric that takes the entire space of the property into the equation; total revenue / divided by the total available square metre(s) of the space (m2). It lets you get ever more granular with how you drive revenue.

2. Profit hotel metrics

You certainly don’t want to run a business that puts you into bankruptcy so driving and measuring profit is incredibly important for the longevity of your hotel.

You might set a goaI that addresses monthly profit, knowing if you hit your target each month your annual figure will take care of itself.
Here are some profit hotel metrics to know:

• GOP – Gross operating profit is simply a calculation of your profits after acquisition costs have been deducted.
• GOPPAR – Gross operating profit per available room measures the distinction between your profit and available rooms. GOPPAR equals GOP / total available rooms
• NOI – Slightly different to GOP, Net operating income calculates your income after operating expenses have been deducted but before interest and taxes have been applied.
• CPOR – Cost per occupied room lets you identify the average cost per occupied room to give you an idea of how healthy your cost of acquisition is. How much are you spending to secure a booking?
• ALOS – Average length of stay tells you how long your guests stay with you on average. The higher the better since, the less turnover there is the less labour costs you incur. Divide your total occupied rooms nights by the number of bookings to get your ALOS.

3. Operations hotel metrics

• Occupancy rate – As business as usual as metrics get, your occupancy rate is determined by dividing your occupied rooms by your total available rooms. A healthy occupancy rate is certainly an indicator of success but is much too general to rely on.
• MPI – Market penetration index is a way to directly compare yourself with your competitors. This is calculated by: your occupancy rate / market occupancy rate x 100. Essentially a score below 100 means you are being outdone by your competitors and a score above 100 means you’re performing better.
• ARI – Average rate index is similar to MPI, but for your rates instead of your occupancy. Divide your ADR by the competitive market’s ADR to get your ARI. A result higher than 1 shows that you are priced above your competitors.

Improving hotel KPIs

Hotel KPIs help you evaluate whether your strategy is working and also give your whole team something to focus on and drive towards on a day-to-day basis. 

Quick tips to develop KPIs for the hotel industry:

• Limit the amount of KPIs you have; keep it to big priorities
• Clearly define how you will measure each KPI
• Set a specific target for your KPI
• Ensure you have accurate data sources and tools
• Run reports that detail data analysis and operational activities
• Looking at online review scores
• Analysing customer feedback forms/surveys
• Tracking social media follower numbers
• Reporting on social media engagement
• Measuring uptake of loyalty or rewards programs
• Measuring share of voice

Other KPIs your hotel can utilise

Sometimes the things that happen in the background are the most crucial. We’re talking about operational KPIs that have nothing to do with occupancy or room rates, but can have significant impacts on your bottom line.

When developing KPIs for your hotel make sure you include:

• Energy management – Electricity is a huge expense, particularly for larger hotels. Anything you can do to lower this cost will be an automatic win for your bank account. You should also consider the rising trend of guests wanting to book with environmentally responsible and sustainable brands. Think about long term investments in smart technology and sensors that will help you save on energy when lighting or other services aren’t being used.
• Labour – Naturally you have staff and you have to pay them. Increasing efficiency at your hotel will allow you to lower labour costs without having to let any staff go. Using software to manage your hotel doesn’t replace staff, but rather it allows them to do their job more effectively. For example, using hotel tech to manage housekeeping schedules can save hours of time every week, allowing you to check guests in and out faster and more often.
• Water – Just like power, water can be a hefty expense for a hotel which runs 24/7. You can’t necessarily control this as much as electricity but tightening the screws as much as you can goes a long way over the course of a year.
• Health and safety – Guests and staff alike want to enjoy a clean, safe, environment at your hotel. Any indication that this is slipping should be addressed because word of mouth spreads quickly and your reputation can free-fall if people think your property’s safety or cleanliness is compromised.

RevPAM is a key performance indicator hotels use within their revenue management. RevPAM means revenue per available metre.

RevPAM is a metric that takes the entire space of the property into the equation, as opposed to simply looking at RevPAR or TrevPAR. This means hoteliers can get even more granular with their revenue management strategies.

Other metrics that take into account revenue outside of room charges include RevPOM (revenue per occupied metre) and RevPEC (revenue per event customer).

The hotel industry never rests for long, particularly when it comes to revenue management. There is always a new metric to consider, new ways to increase efficiency, and new strategies to boost profit. RevPAM is one of those metrics that are growing in prominence, changing the way hoteliers look at the earning potential of their property.

This blog will tell you everything you need to know about RevPAM, formula to calculate it, and tips on optimising your revenue management plans.

How to calculate RevPAM

RevPAM, as the name states, is calculated by measuring the revenue of the hotel per available metre.

Total revenue / divided by the total available square metre(s) of the space (m2).

For example:

$60,000 / 2000m2 = $30 per square metre.

While you can calculate the RevPAM of the entire hotel, it’s generally more useful to calculate and compare the RevPAM of individual spaces. Here are some examples:

1. Hotel Restaurant

Let’s say a hotel has a restaurant that is 200 square metres in size. Over a month, the restaurant generates $20,000 in revenue.

RevPAM = Total Revenue / Total Square Metres

RevPAM = $20,000 / 200

RevPAM = $100 per square metre

2. Conference Room

A hotel’s conference room is 150 square metres. In a week, it’s rented out for three events, generating a total of $3,000.

RevPAM = $3,000 / 150

RevPAM = $20 per square metre

3. Hotel Spa

In isolation, you might usually measure the effectiveness of your spa area by RevPATH – that’s revenue per available treatment hour. However, you can still use RevPAM to compare it to other amenities and spaces in your property.

The spa area of a hotel covers 100 square metres. Over a month, it provides services that amount to $15,000 in revenue.

RevPAM = $15,000 / 100

RevPAM = $150 per square metre

4. Outdoor Event Space

A hotel has an outdoor event space of 500 square metres. In a year, it’s used for 10 events, generating a total of $50,000.

RevPAM = $50,000 / 500

RevPAM = $100 per square metre

5. Boutique Store within Hotel

A hotel has a boutique store that occupies 50 square metres. Over a quarter, it sells products worth $25,000.

RevPAM = $25,000 / 50

RevPAM = $500 per square metre

In these examples, you can see that the boutique store has the best RevPAM, and is thus the most effective use of available space. Meanwhile, the conference room is generating the lowest amount of revenue per square metre and is thus the least efficient space. 

This could suggest that the conference rooms need additional marketing budget, operational changes, or other adjustments to make better use of the space. It could even suggest that it’d be better to convert the conference room into another boutique store – these are the kinds of insights that calculating RevPAM provides.

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How to use the RevPAM formula to boost hotel revenue

Looking at RevPAM formula will allow you to recognise where you can start to improve the use of spaces in your hotel. For many hotels, meetings and events can make up 50% of total revenue.

Hotels which have spaces beyond accommodation rooms can optimise revenue and profits by creating and promoting a product offering that utilises those spaces.

Think about the following scenarios to get your creative juices flowing:

• If you have a large lobby space but aren’t driving any revenue in this area, it’s a wasted opportunity. If your hotel doesn’t have a bar or restaurant, you could use this lobby space on weekends for a pop-up bar or kitchen, inviting guests and the general public to enjoy the space. This will also spread the word about your hotel and attract more locals to stay with you.
• If you have meeting rooms that aren’t being utilised to their full potential, think about how you could still make money when they aren’t booked. Could you offer other services, such as massage, yoga, or various instructor-led classes?
• If your restaurant is consistently only half full, could you repurpose some of the space to add an additional amenity to your hotel, such as a games room for kids or a serviced mini-cinema experience that guests could book.

When you really start to brainstorm with RevPAM as a front-of-mind metric, it’s amazing how many opportunities you can find. Not just in terms of increasing income, but cutting costs too to maximise revenue.

Think about more than just your guest rooms, such as:

• Restaurants and bars
• Conference or meeting rooms
• Car parks and entrances,
• Lobby and front desk
• Common areas such as stairwells, elevators, hallways
• Amenities such as gyms, spas, or pools

RevPAM is an important KPI because it allows you to measure the full impact of your revenue management strategies. Often you’ll discover ways you can become more efficient and increase revenue across the entire space of your hotel.

Other important revenue management formulas like RevPAM

RevPAM is just one of many useful metrics you can use at your hotel to effectively measure success. Others include:

• RevPAR
• GOPPAR
• TrevPAR
• RevPASH
• EBITDAR
• ADR
• LOS
• ALOS
• OCCUPANCY

Measuring the impact of RevPAM

The reason key performance metrics like RevPAM or RevPAR are so important is so that you can accurately track the impact of your revenue management decisions.

Understanding which metrics to look at and how to calculate them is a good start and in most cases, using hotel software with revenue management capabilities will be super helpful.

Without tracking the strategies you put in place and measuring them against key indicators, it will be impossible to know where increased profit or losses might be spawning from. Data analysis is important to undertake regularly so you know which lever to pull (and when) in order to make a difference to your revenue.

Did adding that honeymoon package increase RevPAR or is it simply adding expenses? Are the morning yoga classes increasing RevPAM or is there another activity that would work better? Was that summer promotion optimal?

Only once you measure results accurately can you take actions that improve your results in the future. After all, some tactics are better than others, while some will be effective at particular times or when targeting particular guests.

It’s crucial to know not only if something worked or didn’t work, but why. Factor this question into all your analysis. Why didn’t guests buy this package? Was it a case of the price leading to a lack of perceived value or was it the contents of the package itself? Or was it not applicable to your typical guest demographic?

“At first I thought it was just a myth that using SiteMinder could boost revenue. But it turned out to be true. Revenue did increase, we are also more efficient in terms of time; we can get more work done.”

Shadi Wijaya,

Corporate Director of Revenue

The Phala Group

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How to create an effective revenue plan with RevPAM

Today, an effective revenue plan means thinking about much more than the rooms and offers you sell. Your plan must revolve around your entire property, which is of course why RevPAM has risen to prominence.

Traditional revenue management focuses on selling the right service to the right guest at the right time, for the right price. This still holds true of course but it is about more than your inventory now.

Your whole property experience needs to fall into place. If you can base your plan around a concept that uses the hotel’s full spacial potential and brings guests together as a community, you’ll be on the right track. For example, SACO is just one brand leading the way in this respect, creating an ‘urban sanctuary’ for guests.

Some tips for hotels:

• Identify the spaces and opportunities available to them, looking boldly at where unexpected results may be gained
• Be clear on the customer segment they want to attract. Find help on attracting the right guest segments here.
• Understand your competition and what your advantage is
• Don’t get overwhelmed and seek the right tools and partners to achieve your goals

Once your plan is in place don’t forget assessment and feedback. You need to be constantly evaluating performance and improving your plan on the run. You need to be agile and dynamic with every revenue decision you make, so you can take advantage of market changes if necessary.

Perhaps one of the most important factors to remember is the impact of different departments in your hotel. Your plan should involve an overall objective for your business, and not create a conflict of interest between departments. In other words, don’t solve one problem by creating another.

Check out our full blog on in-depth revenue management strategy advice.

A hotel budget is a financial plan that outlines the projected income and expenditures for a specific period, usually one fiscal year. It serves as a financial blueprint, detailing various revenue streams such as room bookings, food and beverage sales, and ancillary services. The budget also accounts for all types of expenses, including operational costs, capital expenditures, and marketing budgets.

It’s a comprehensive document that aligns with the hotel’s strategic objectives, guiding managerial decisions and resource allocation.

When is the hotel budgeting season?

The hotel budgeting season usually kicks off in October and runs through December. This three-month window is a critical phase for hoteliers, as it sets the financial and operational blueprint for the entire upcoming year. Decisions made during this period have long-lasting implications, affecting everything from staffing levels to capital investments to where you can invest to increase hotel room sales.

Why is a hotel budget important?

A budget is far more than a ledger of income and expenses; it’s a strategic instrument that serves multiple functions. It enables you to establish revenue benchmarks, control operational expenditures, allocate resources judiciously, and prepare for contingencies such as economic downturns or unexpected maintenance issues. 

Without a well-thought-out budget, achieving long-term objectives becomes a challenge, and the risk of financial instability increases.

Steps in the hotel budgeting process

The budgeting process is a systematic approach that requires careful planning and execution. Here are the steps involved:

1. Collect data

Begin by collecting granular data from the previous years. This should include room occupancy rates, average daily rates (ADR), revenue per available room (RevPAR), and customer acquisition costs. Also, gather data on customer satisfaction scores, online reviews, and feedback to understand areas that may require investment.

2. Establish goals

Set specific, measurable, achievable, relevant, and time-bound (SMART) goals for the upcoming year. These could range from increasing RevPAR by 10% to reducing energy consumption by 15%. Each goal should align with your hotel’s long-term strategy.

3. Revenue forecasting

Create a detailed revenue forecast that includes a month-by-month and quarter-by-quarter breakdown. This should be based on your historical data, market trends, and any planned marketing or sales initiatives. While it can be difficult to precisely predict revenue, effective revenue management is a key part of creating a hotel budget.

4. Allocate resources

Identify the key operational areas that require investment. Break down the allocation into sub-categories like marketing (SEO, PPC, Social Media), property improvements (renovations, new amenities), and technology upgrades (new PMS, CRM software).

5. Monitor and adjust

Budgets are not static documents; they require ongoing monitoring and adjustments. Conduct monthly or quarterly reviews to assess performance against the set goals. If certain strategies are not yielding the expected results, reallocate resources as needed.

6. Finalise and implement

Once you’ve made all necessary adjustments, finalise the budget and distribute it to department heads for implementation. Ensure that everyone understands their budgetary responsibilities and performance metrics.

How to prepare a hotel budget

To prepare a comprehensive hotel budget, you need to delve deep into both your revenue streams and expenditures to create a complete hotel budget format.

On the revenue side, categorise income into room bookings, food and beverage sales, spa services, conference facilities, and any other ancillary services. For each category, project the expected revenue based on past performance, market trends, and any upcoming marketing campaigns.

On the expenditure side, list all fixed and variable costs. Fixed costs include salaries, rent, utilities, and insurance, while variable costs encompass marketing expenses, seasonal staffing, maintenance, and cost of goods sold (COGS). Once you have a complete overview, allocate funds to different departments based on strategic priorities and expected ROI.

A note for seasonal hotels. What’s true about annual budgets for seasonal hotels may not be true for hotels that are active year-round. Ensure that you consider the unique opening environment of your hotel e.g. which quarter will require the majority of the budget expenditure.

Hotel budget sample checklist

For a structured budgeting approach, consider the following as a comprehensive checklist of budgeting tips:

• Room revenue: Include detailed projections for occupancy rates, ADR, and RevPAR. Factor in any planned rate adjustments, special promotions, or loyalty programmes.
• Food and beverage revenue: Calculate expected earnings based on average spend per guest, expected footfall, and any seasonal promotions or events.
• Operational expenses: Break down operational costs into granular categories like utilities, maintenance, housekeeping, front desk operations, and security.
• Capital expenditures: Allocate budget for major capital projects like property renovations, new furniture, or technology upgrades. Include timelines and expected ROI for each project.
• Sales and marketing: Specify the budget allocation for each marketing channel, such as PPC advertising, social media campaigns, email marketing, and influencer partnerships. Don’t forget to include expenditure on building or updating the hotel website.
• Guest services: Include costs for guest amenities like complimentary breakfast, in-room entertainment, loyalty programmes, and any planned upgrades or new services.
• Loan payments: Account for monthly or quarterly loan repayments, including principal and interest, and any other financial obligations like leases or vendor contracts.
• Technological investments: Allocate budget for essential technology like PMS, CRM, and revenue management systems to automate tasks and improve efficiency.
• Staff training and development: Set aside funds for staff training programs that focus on customer service, technology adoption, and industry compliance.
• Sustainability initiatives: Incorporate budget allocations for eco-friendly practices, such as energy-efficient appliances and waste management systems.
• Contingency planning: Include a contingency fund to address unexpected situations like maintenance emergencies or economic downturns.

Where to effectively spend your hotel’s budget (according to hoteliers)

When SiteMinder surveyed hoteliers, many spoke about improving their digital marketing and online presence and the need to put money behind these efforts to make headway in financing their hotel.

The findings showed that boosting revenue by spending on strategy management came out on top with a ranking of 50% – closely followed by digital marketing activity.

Hoteliers said they would be allocating less budget to staff training and recruitment – ranked at 28% in comparison – indicating the need to spend more money on newer skills such as SEO.

Maximise your hotel revenue with SiteMinder

SiteMinder offers an integrated solution for hotel budget planning, covering all aspects from revenue management to distribution channels and guest engagement.

• Budget-friendly revenue management: SiteMinder’s platform enables you to make dynamic pricing decisions that align with your budget goals. Real-time market data ensures you’re pricing rooms optimally to meet revenue targets without overshooting your budget.
• Cost control through automation: Automated workflows for reservations, billing, and guest management eliminate manual errors and reduce administrative costs. This helps you stay within budget while improving operational efficiency.
• Financial analytics for smarter budgeting: SiteMinder provides in-depth analytics that break down your revenue streams and expenditures. This data-driven approach aids in creating more accurate and effective budgets, allowing for better allocation of resources.

SiteMinder is the ultimate platform for unlocking your hotel’s full revenue potential, offering robust performance and an unparalleled user experience.

Get started with SiteMinder for free or watch a demo to learn more.

Hotel fees encompass a range of extra charges guests may pay for amenities and services. However, they are more than just additional charges on a guest’s bill. They can also be strategic revenue boosters that can significantly elevate your hotel’s profitability. 

Examples might include resort fees that cover property maintenance, parking fees, or additional cleaning fees if guests bring pets.

While hotel fees can be powerful secondary revenue generators or a useful tool to mitigate additional operational costs, there is an art to applying them effectively. Too many additional fees will put guests off and have them question the value of their stay.

In this blog you’ll learn how your hotel can effectively, transparently and considerately apply fees to boost your revenue, reduce your overall costs, and keep guests happy.

Common hotel fees and surcharges

While every hotel is unique and thus has unique opportunities for charging fees, there are some areas where it’s more common (and expected) to see an additional fee. These include:

Resort and amenity fees

These fees cover the use and maintenance of on-site facilities like swimming pools, gyms, and spas. They offer guests access to a range of amenities that elevate their stay, while also contributing to the upkeep of these facilities. 

Parking fees

Whether it’s self-parking or valet service, parking fees provide secure and convenient options for guests who arrive with their own vehicles. These fees can be tiered based on the level of service offered. This can also include charges for unattended or long-term parking.

Late check out and early departure fees

These fees give guests the flexibility to extend their stay beyond standard check-out times or leave before their scheduled departure, while compensating the hotel for the inconvenience caused in room turnover.

Reservation cancellation fees

These are charged when guests cancel their bookings, especially if done at the last minute. They help mitigate the revenue loss from unsold rooms and encourage responsible booking behaviour.

Extra person fees

For rooms exceeding the standard occupancy, an extra person fee is charged to cover the additional costs of amenities and services.

Minibar or room service surcharges

These surcharges are applied to in-room dining or minibar usage, offering guests the luxury of convenience at a premium. This can also include room service delivery surcharges.

Internet fees and telephone call surcharges

While basic Wi-Fi might be complimentary, premium internet services or international calls can incur additional fees, catering to the needs of business travellers.

Business centre fees

For guests requiring access to computers, printers, or meeting rooms, a business centre fee may be applicable.

Charges for in-room safes

Some hotels offer in-room safes for an additional charge, providing guests with secure storage for valuables.

Baggage holding fees

For guests who need to store their luggage before check-in or after check-out, a nominal baggage holding fee can be charged.

Taxes and similar fees

While not traditionally considered a hotel fee, taxes can be considered in the same way in terms of it being an additional cost to your guest. Depending on where you’re operating, taxes may be included in the room price (e.g. GST), but there may be additional taxes that you charge a separate fee to cover, such as hotel bed tax, in some countries.

Hotel fees and surcharges transparency

For hotel guests, fees and surcharges are often considered an unnecessary nuisance. But for hotels and accommodation providers across the globe, they are becoming an increasingly vital revenue stream.

Research from Bjorn Hanson, a clinical professor at New York University’s School of Professional Studies Tisch Center for Hospitality and Tourism, revealed that hotels in the US have been collecting record amounts of fees, with the upward trend showing no signs of slowing down. This is no great surprise given that fees and surcharges can result in up to 90% profitability for savvy hoteliers. The figures also suggested that the growth in numbers is a reflection of the rise in occupancy rates, as well as the increase in the amount charged for fees and surcharges.

Furthermore, some new fees are becoming increasingly-common too. They include:

• Special charges for set-up and breakdown of meeting rooms
• Early check-in fees
• Fees to guarantee a specific room
• Charges for unattended surface parking in suburban locations
• Fees for holding checked luggage

Importantly, the research uncovered a rise in the disclosure of fees and surcharges among hotels in the US.

While fees and surcharges are sometimes labelled as ‘hidden’ or ‘surprise’ charges, there’s a clear trend towards greater transparency. Hotels are using websites, confirmation emails, tent cards in guest rooms, room service menus, and guest service binders to disclose about fees. However, guests can still be surprised by these fees, likely due to a lack of industry-wide consistency on what fees can, should, and will be charged. Unlike brand-guided or industry-standardised charges, some hotel fees are determined on a hotel-by-hotel basis and can fluctuate frequently. This individualised approach to setting fees contributes to the sense that they are ‘hidden’ or ‘surprise’ charges for guests.

Disclosure is key and being transparent with guests is necessary to avoid a backlash when it comes to fees and surcharges for extras.

Hotel fees and taxes strategy 

A great way to be honest with guests about fees and surcharges is to disclose them during the booking process, and offer as many as optional extras and add-ons.

For example, using a tool like SiteMinder’s hotel booking engine, you can add several options upfront that range from breakfast through to secure WiFi – something OTA Agoda.com identified as important to guests when they’re choosing a hotel.

Using SiteMinder’s booking engine as an example, you can enter extras and charges for many different scenarios. Here’s just a few of the ones we’ve seen our customers use:

• Per Booking – Late Checkout
• Per Person Per Night – Hot Breakfast
• Per Room – Champagne on arrival
• Per Room Per Night – Fresh Towels
• Per Person – Day Spa Package

You can even attribute certain extras to particular rooms, such as ‘King Suite 3-Night Special’. And our booking engine also allows you to set descriptions of the extra images to really sell its appeal, and applicable start and end dates to make seasonal offers throughout the year, such as Valentine’s Day and Easter.

It might seem like an easy option to simply package these extras into your rates but hoteliers should be warned against burying fees and surcharges away into room rates. Potential guests pay close attention to room rates, and focus less on extras, and fluctuations in the rates they’re keeping a close eye on can cause guests to look elsewhere.

While some argue that resort and other fees should be included in the room rates, there are compelling reasons for keeping them separate:

• Firstly, incorporating these fees into the room rate would make them subject to municipal occupancy taxes, thereby increasing the overall cost for guests. 
• Secondly, room rates are highly dynamic and closely watched by travellers, whereas fees and surcharges tend to be more stable. 
• Lastly, many travellers primarily focus on the room rate when making a booking decision, so keeping these fees separate allows for more transparent baseline pricing.

How being upfront with hotel charges can increase profit

By being upfront about all fees and surcharges, you eliminate the element of surprise, making guests more comfortable with spending on additional amenities. This straightforward approach also allows you to market these services more effectively, converting optional extras into must-have experiences that not only enhance the guest’s stay but also contribute to your revenue streams. Here’s how it helps:

Building trust

When you’re transparent about all the fees and charges, you’re essentially building a foundation of trust with your guests. This trust is invaluable; it not only encourages guests to make use of additional services but also fosters long-term relationships. A guest who trusts you is a guest who will return, and repeat business is often more profitable than acquiring new customers.

Effective marketing

Being upfront about charges allows you to market these services as value-added experiences rather than hidden costs. Whether it’s a spa package, a guided tour, or a special dining experience, clear pricing enables you to package these services in a way that makes them more appealing. This turns what could be seen as optional extras into integral parts of the guest experience, thereby increasing uptake and revenue.

Budget-friendly for guests

When guests know exactly what to expect in terms of charges, they can budget their trip more effectively and allow them to splurge on additional amenities, knowing that there won’t be any unexpected costs. Essentially, you’re empowering your guests to make informed choices that enhance their stay, and, by extension, empowering your business to create more meaningful value adds that are actually taken advantage of.

Positive reviews and recommendations

Transparency in pricing leads reduces the risk of negative reviews along the lines of “we got charged for every little extra thing! Stay away!”. In the age of online reviews and social media, de-risking around word-of-mouth marketing is incredibly valuable and contributes to increased bookings and, by extension, higher profits.

Unlock your full revenue potential with SiteMinder

Mastering your hotel fees can be your secret weapon for revenue growth. SiteMinder is here to help you unlock this untapped potential. Our platform is engineered to turn your hotel fees from simple add-ons into strategic revenue boosters, all while enhancing guest satisfaction.

• Simplified fee management: SiteMinder’s platform offers an intuitive system that allows you to easily categorise, track, and update various fees and surcharges.

• Transparent guest communication: Our platform enables automated, transparent communication about all fees and surcharges, sent directly to guests’ preferred communication channels. This not only builds trust but also encourages guests to utilise additional amenities, positively impacting your revenue.
• In-depth analytics: Monitor which aspects of your hotel are most profitable, how they compare to industry benchmarks, and what the uptake is among different guest segments. This data-driven approach allows you to make informed decisions, fine-tuning your fee structure for maximum profitability.

Get started with SiteMinder for free or watch a demo to learn more.

Ancillary revenue is when you earn income from additional services or products offered at your hotel. Maybe it’s a relaxing spa treatment after a long day, a convenient shuttle service to the local attractions, or a romantic dinner at your in-house restaurant; whatever makes the stay at your hotel special for guests. Think of it as the cherry on top. By offering these added touches, you’re not just boosting your revenue; you’re creating memorable experiences that make your hotel stand out. It’s a win-win for both your business and your guests.

Ancillary revenue is also a good way to win back some of the money you lose to OTA commission fees. In order to optimise this, you need to think of your hotel as more than rooms and rates, but in a more holistic way that leans towards complete revenue generation.

Although it should be a secondary consideration to making sure your guests receive quality service and value for money, it is still a clever and effective method to boost your revenue while also offering guests an even more enriching experience.

Why is ancillary revenue important for independent hotels?

Independent hotels often operate with a unique charm and personalised touch, setting them apart from larger chains. However, they also face challenges in competing with the extensive marketing and brand recognition of larger, international players. Ancillary revenue becomes a creative and strategic way to level the playing field by leveraging the uniqueness of an independent hotel while also generating additional revenue from a loyal audience.

This is why ancillary revenue is nearly always part of a successful revenue management strategy that produces consistent year-on-year results, avoiding stagnation. The more revenue you have streaming in, the more flexibility you have to make improvements to your hotel and offer guests new or additional exclusive services. It’s a virtuous cycle.

Ultimately, implementing ancillary revenue ideas will lead to a more fulfilling experience for the guests who accept them and flood your hotel with a whole new source of revenue.

Before you employ any ideas you need to ask three questions:

• What is unique about your hotel – the setting, the geographical location, the theme?

• What do guests praise the most – the amenities, the restaurant, the convenience?

• Why do they choose it over others – for luxury, for service, for other features?

Once you start to analyse these questions, you’ll start to see opportunities for extra revenue arising from the story of your hotel.

Hotel ancillary revenue examples

Ancillary revenue comes in many forms, with hotels of all types and descriptions finding new ways to generate revenue from services and add-ons. Large or small, hoteliers can take inspiration from the below examples to build their own strategy. 

• Food and beverage services: From elegant on-site restaurants to casual cafes and bars, food and beverage services offer guests the convenience and pleasure of dining without leaving the hotel. Room service adds an extra touch of luxury, allowing guests to enjoy meals in the comfort of their rooms.
• Activities and tours: Many hotels collaborate with local tour operators or even host their own activities, such as cooking classes, wine tastings, or guided hikes. These experiences allow guests to explore the local culture and attractions, adding value to their stay.
• Transportation: Offering shuttle services to airports, nearby attractions, or shopping districts can be a significant convenience for guests. Some hotels even provide luxury car rentals or chauffeur services for an elevated experience.
• Events or meetings: Hosting events, conferences, or meetings can be a lucrative revenue source. With well-equipped meeting rooms and banquet halls, hotels can cater to both business and social gatherings, providing catering, audio-visual equipment, and coordination services.
• Merchandise: Gift shops or boutiques within the hotel offer guests the opportunity to purchase souvenirs, local products, or even branded merchandise. It’s a way to extend the hotel’s brand and provide guests with tangible memories of their stay.
• Entertainment options: From live music in the lobby to movie nights by the pool, entertainment options add a fun and vibrant atmosphere to the hotel. Some hotels even host art exhibitions or cultural performances, enriching the guest experience.
• Pet friendly services: As more travellers choose to vacation with their pets, pet-friendly services such as pet-sitting, grooming, or special pet menus can set a hotel apart. It’s about extending hospitality to the furry family members as well.
• Parking and valet services: Offering parking facilities, especially in urban areas, is a practical necessity. Valet services add a touch of sophistication, making the arrival and departure process smooth and hassle-free.

While these are tried and true examples that have been successful for many hotel chains, creativity can be key to stand out in terms of ancillary revenue options. Don’t be afraid to go weird, wonderful, or wacky – ultimately, it’s the unique experiences that stand out the most in the market, even for guests who ultimately don’t indulge in that specific activity. At the very least, it captured initial attention.

5 best ancillary revenue ideas to increase hotel revenue streams

There’s a huge range of revenue-boosting ideas you can use. Here are five of the best ones…

1. Partner with local producers

The simplest form of this idea is to contact local artists and hang their paintings in your hotel. You may choose to turn the common areas into mini galleries or even put the paintings in guest rooms.

In exchange for the exposure, your hotel would receive a percentage of the selling price on any pieces that are purchased by guests.

You might even go so far as to offer the art for purchase online via your website or a separate website if you have a dedicated gallery space.

Depending on the location of your hotel, this could extend to other craftspeople and farmers.

Think surfboard builders, sculpture artists, potters, jewellery makers, fresh produce farmers etc. Your guests are predominantly tourists, so give them a gift shop.

2. Offer adventure and entertainment

Once again, take the local angle. Surrounding tours, attractions, and events need to sell tickets, so why not at your hotel?

Partnering with them makes your hotel an all-inclusive resource for guests and is an equally lucrative opportunity for your hotel and the other businesses.

Additionally, you might have your own events, such as live music on weekends or comedy once a month.

Whatever it may be, you could entice guests to stay by offering a package deal on these events, meaning you get revenue for a booking and the event instead of just through one revenue stream.

3. Let the guests take your hotel home

When you get feedback from guests during or after their stay you might notice them raving about the quality of your sheets or pillow cases, or they may adore the wallpaper, or love your china, or crave the shampoo you stock. The list is endless. A lot of this you have to buy anyway so why not also partner with your supplier to offer it for sale to guests?

Not only will your guests be reminded of your hotel even in their own home, but it’s a simple way for you to get a little extra revenue on top of your reservations. As with the artwork, this could also be sold online.

4. Install a cellar

Perhaps the most obvious idea. Stocking local wine or beer for sale is a surefire winner in generating revenue. As always, this could be combined into some sort of package or extra deal for the guest.

While discussing beverages, don’t forget food. If guests can’t get enough of your restaurant, make your own cookbook to sell for them to take home.

5. Become a meeting place

And finally, don’t ignore the corporate sector. Business travellers converge from all over the world for their meetings so having a space such as a conference room to hire out will make it easier for them to conduct their business and give you another steady stream of revenue.

Even better, they might add a couple of days to their stay as the ‘bleisure‘ trend continues.

Take advantage of ancillary revenue opportunities by using hotel technology

Unlock the potential of ancillary revenue and elevate your hotel’s profit with SiteMinder. Our cutting-edge hotel management software is more than a tool; it’s a partner in your success.

• Built-in upsell management. Use SiteMinder’s GuestJoy platform to offer an unlimited range of add-ons and offerings both before and during their stay. Get serious about ancillary revenue. 
• Personalise your offers. Provide the offers that guests really desire with easy personalisation options. Create deals and discounts that suit the unique interests and preferences of your audience.
• Know more, do more. Stay ahead of the curve with SiteMinder Insights. Monitor the performance of your ancillary services, identify trends, and make informed decisions that align with your guests’ needs and preferences.

For hoteliers, hotel costs encompass everything from the cost of construction, to the cost of insurance, to the everyday operational costs of establishing, running and ultimately growing a hotel business. 

For many hotel managers, hotel costs are a constant bugbear, requiring regular review and re-evaluation to avoid unnecessary and inefficient drain on the bottom line. As a result, understanding both the obvious – and more hidden – costs of running a hotel is crucial for success in an industry where competitiveness is defined by being able to do more with less.

This blog will investigate the myriad different hotel costs that all hoteliers should understand at a fundamental level, before delving into tips, tricks and techniques on how to cut those costs and stop them from sapping profits and stunting your hotel’s growth.

Types of hotel costs

From the initial stages of construction to the day-to-day operations, each phase of a hotel’s lifecycle incurs specific expenses. By breaking down these costs, hoteliers can make informed decisions, allocate resources efficiently, and ensure the long-term sustainability of their establishment.

1. Hotel construction costs

The foundation of any hotel begins with its construction. These costs encompass everything from acquiring the land, architectural designs, and building permits to the actual construction materials, labour, and interior design. It’s not just about erecting a structure; it’s about creating an environment that resonates with the intended brand image and guest expectations. Factors such as location, size, and the luxury level of the hotel can significantly influence these costs. Additionally, considerations for eco-friendly materials or sustainable building practices might add to the initial investment but can offer long-term savings.

2. Hotel insurance costs

Protecting the hotel’s assets, staff, and guests is paramount, and that’s where insurance comes into play. Hotel insurance costs cover a range of policies, including property insurance, liability insurance, workers’ compensation, and business interruption insurance. Each policy is designed to safeguard the hotel from potential risks, be it natural disasters, guest accidents, or unforeseen business disruptions. The size of the hotel, its location, and the range of amenities offered can influence the premiums.

3. Hotel operating costs

Hotel operating costs encompass a wide array of expenses, from staff salaries, utility bills, and maintenance to marketing, guest amenities, and food & beverage supplies. These recurring costs are vital for the smooth functioning of the hotel and ensuring guest satisfaction. Effective management of these costs, through energy-saving initiatives or strategic vendor partnerships, for instance, can significantly impact the hotel’s bottom line.

Understanding and controlling hotel operating costs

While revenue generation often takes the spotlight, equally crucial is the understanding and control of hotel operating costs. These costs play a pivotal role in determining a hotel’s profitability. A clear grasp of these expenses not only ensures financial stability but also provides insights into areas of potential savings and efficiency.

Controlling operating costs doesn’t necessarily mean cutting corners or compromising on guest experience. Instead, it’s about smart management: allocating resources effectively, leveraging technology for automation, and continuously monitoring and adjusting in response to both internal and external factors. 

By keeping a vigilant eye on these costs and understanding their nuances, hoteliers can strike a balance between offering top-notch guest experiences and ensuring a healthy bottom line. In an industry where margins can be tight, mastering the art of cost control can be the difference between thriving and merely surviving.

Typical hotel operating expenses list

Managing a hotel’s finances requires a keen understanding of both its revenue streams and its operating expenses. While the focus often lies on boosting revenue, a comprehensive grasp of the costs involved in running a hotel is equally crucial for profitability. Here’s a breakdown of some typical hotel operating expenses:

Staff costs 

One of the most significant expenses for any hotel is its labour. Hotel labour costs encompass salaries, benefits, training, and even recruitment expenses. Whether it’s the front desk staff, housekeeping, or the management team, ensuring they are compensated fairly is vital for maintaining service quality and guest satisfaction.

Utilities

Hotel utility costs can be substantial, especially for larger establishments. These include expenses related to electricity, water, heating, and cooling. Given the 24/7 nature of hotel operations, the average hotel utility costs can be higher than other businesses, making energy-efficient practices essential.

Housekeeping Supplies

Beyond hotel room costs, which cover the basic amenities in each room, there are recurring expenses related to housekeeping supplies. This category includes cleaning agents, fresh linens, toiletries, and more. Hotel laundry costs, in particular, can add up quickly, especially in establishments that prioritise providing fresh linens daily to guests.

Maintenance and Repairs

Hotels must be in top condition to ensure guest satisfaction. This means regular maintenance checks and prompt repairs when something goes awry. Whether it’s fixing a leaky faucet in a guest room or addressing larger structural issues, maintenance and repair costs are inevitable. These expenses, while often seen as reactive, can be managed proactively through regular checks and preventive measures.

In addition, hotel room expenses can encompass a range of other costs, from in-room entertainment systems to mini bar restocking. By keeping a close eye on each of these expense categories and understanding their impact on the overall budget, hoteliers can make informed decisions, ensuring both guest satisfaction and financial health.

Top 10 ways to save on hotel costs and maximise profits

It’s a truism that a lot of small improvements can smooth the edges of a greater strategy and provide major results. At your hotel, you don’t always need to be thinking of the next big plan to drive revenue and deliver increased profits for the business.

Making sure current operations are as streamlined as possible, and every space is being utilised to its full capacity, is the first step you should take when considering how to make your business more successful.

Here are 10 things you can focus on to cut costs at your property and make profits easier to achieve.

1. Ensure your property management system is the best in the industry

If your property management system (PMS) isn’t cloud-based, you’re missing out on serious benefits. With an automated cloud-based system there’s no need for an IT expert to maintain or operate it and it will save you a lot of time, especially when integrated with your other technology systems. Upfront costs will also be reduced without the need for any physical hardware.

2. Make mobile operating a priority for your PMS

This will let all your staff operate more efficiently. For example, housekeeping can communicate directly with the front desk system from a mobile device and check which rooms need cleaning or servicing, and which ones are occupied.

3. Be flexible about the hours your staff work

Maintaining consistent set hours for staff may not be the best thing for your business. It could mean at certain times your hotel is overstaffed, and at others understaffed. Instead, try a more flexible shift-based approach that allows you to be agile and use staff when you most need them and for specific purposes.

4. Optimise role requirements

This comes back to efficiency again. It should be made clear to housekeeping what is expected of them. If a room has simply been used as a stopover it won’t require as much cleaning time or preparation as a room that has been occupied for a week. The same principle applies to how many people are in a room. By setting standards here, staff can get more done, more quickly.

5. Reduce your hotel’s marketing costs

Paid promotion isn’t always guaranteed to garner more results. Try auditing your approach to marketing and putting more effort into free channels and organic traffic. Create quality content and build social media followings as much as you can without investing a large budget. A lot of progress can be made on Facebook, Instagram, and Google without spending money.

6. Be detail oriented about running the hotel

Taking a greater interest in energy efficiency could have significant long-term benefits for your hotel. Think about introducing occupancy sensitive cooling and heating systems that adapt to when people are present in the room. Power-saving lights such as LEDs are another great option, as well as lights that are motion-sensitive. Saving on power is an easy fix and can make a positive difference to your bottom line.

7. Capitalise on the food and beverage department

This provides one of the main opportunities to save money and gain extra revenue. Firstly, take note of how much food you actually need. If plates are consistently coming back with food left on them, it’s likely – unless you’ve had complaints about quality – that your portion sizes could be reduced, and less stock be ordered over time. A smaller menu will also help with this. Quality over quantity is always preferable.

8. Save on fixtures and furniture

Many suppliers of interior features have packages and bulk deals you can take advantage of. While it may be tempting to get unique and custom designs done, the costs could outweigh the benefits. It’s something to carefully consider and may come down to who your target market is. For instance, business travellers may be less inclined to worry about discovering quirky or special hotel designs.

9. Find a use for under-utilised spaces

If there is space in your hotel that is serving no purpose other than to create breathing room, consider using it for revenue purposes. It doesn’t even have to be anything permanent. For example, every now and then you might get a pop-up masseuse in, or an exercise class, or a cooking class. This will encourage guests already at your hotel to spend a little more than either they or you expected them to.

10. Host events and functions

Similar to the last point, if you have the space to host special events you should do so. Get in contact with potential partners to put on seminars, workshops, weddings, or whatever else may seem relevant or appropriate for your property. This way, you’ll have a revenue source that is coming from outside the guests staying at your hotel.

Best practices for reducing hotel expenses online

With the rise of dominant online travel agencies and the ever-evolving dynamics of digital marketing, hoteliers often grapple with escalating distribution costs. Balancing between maximising online visibility and managing expenses is a delicate act. Below, you’ll find the best practices to effectively reduce your hotel’s online expenses without compromising on reach or reputation.

1. Don’t put all your eggs in one basket

Statistics from HSMAI show 76% of independent hotel room nights are reserved through OTAs, costing hotels billions in commissions every year.

In order to increase direct bookings, hotels need to think about their overall web presence, not just OTAs. By having an Internet booking engine (IBE) on your branded website and investing in social and mobile technologies to drive sales, you can reduce the amount spent on third-party commissions.

In particular, you should be looking to leverage the native capabilities of mobile and social platforms as a means of communicating with consumers, providing information and facilitating transactions – not just promoting last-minute deals.

In today’s competitive environment, it’s safe to assume that channels will get more expensive over time, so it’s critical to invest in the ones that offer you the most control in your marketing efforts and communication.

The key is to maximise and optimise your search, social, mobile, ad retargeting, email, and voice channels to attract and retain guests.

2. Grow your customer database

Developing and maintaining your customer database is one of the most important things you can do to nurture your customer relationships and create relevant conversations with guests.

For example, a hotel CRM (customer relationship management) system, in conjunction with your PMS or CRS, can help boost your bottom line by gathering guest data from social media profiles, and sending targeted communications and promotions.

It can also help create offers based on a customer’s behaviour and provide valuable metrics and insights which can help you measure the overall effectiveness of your hotel’s marketing campaigns.

3. Benchmark how effective you are

Are you getting the best ROI? Benchmarking where you stand in the market can give you a better idea of how well you’re performing. For example:

• How do your revenues and costs measure up to others?
• What are you paying for your marketing channels?
• Are your acquisition costs high or low?

In the quest to stay on top of what it’s costing you to acquire guests and to keep them, your data and analytics are powerful tools for generating insights into your digital ROI and helping you discover the best distribution channels for reaching your target market.

4. Seek your competitive advantage

With hotels sitting in an ever-changing and volatile distribution landscape, they must constantly seek to improve their position in their market. Using a variety of channels (social, mobile, website, email and search), hotels can reach out to customers with special promotions and discounts, value-add deals and other incentives such as free room upgrades to get customers to book directly and build loyalty.

For example, Danubius Hotels offers guests a free £15 voucher for each night booked directly, along with the best price guarantee.

While OTAs have their rightful place in any hotel distribution strategy, the key is to find a balanced approach to direct and indirect business.

In particular, hotels need to pay attention to where their guests are coming from and measure the effectiveness of each channel by setting specific performance objectives.

By staying one step ahead of the game, you can effectively reach your guests and retain them.

How a premium hotel group can cut down costs and increase revenue

Cutting costs and increasing revenue is crucial, but once a certain business scale is struck, it becomes incredibly difficult to maintain that upward trajectory—particularly when all the quick wins are won. What can the director of a premium hotel group do to achieve further gains and growth for their business, without getting bogged down by inefficient, manual processes?

How does a booking engine cut costs and increase revenue?

Practically every successful hotel business relies on cutting edge technology to maintain their edge in an increasingly digitised and competitive accommodation landscape. With complex portfolios made up of dozens or hundreds of different individual sites, manually inputting real-time availability across the dozens (or hundreds…) of booking channels quickly becomes cumbersome. Human resource is whittled away, time is spent on admin instead of growth, and financial performance stalls as the hotel fails to shift gears.

As a result, hotels turn to booking engines—solutions that automate the booking process, both from OTAs and more importantly the direct booking process. By insourcing booking management to smart technology, hotel staff are able to do more with less. More bookings, more happy guests, more revenue, and less paid hours spent on unnecessary busywork just to get simple information online. 

Premium hotel groups are held to high expectations by their guests, so not just any booking engine will do the job effectively. Even a small error can have massive consequences – like double booking—that drains customer loyalty and kills any chance of rebooking or positive reviews. Premium hotels require premium processes—and that necessitates a premium engine driving the experience.

SiteMinder’s premium hotel booking engine

SiteMinder offers a booking engine that rated #1 within the industry, providing simultaneous and automatic updating of all rates and availability across hundreds of different OTAs, as well as a smooth, simple direct booking process that can be embedded easily into an existing or custom-made hotel website.

This minimises the amount of administrative time that needs to be spent updating the various booking channels, decreases operational costs and virtually eliminates the risk of overbooking rooms at exclusive properties.

Visit our case studies to read real-life examples of hotels using SiteMinder’s booking engine with great success.

Reduce hotel costs and elevate your revenue with SiteMinder

Controlling costs is as crucial as driving revenue. SiteMinder offers tools specifically designed to curtail unnecessary expenses while simultaneously enhancing revenue results. By implementing SiteMinder’s platform, you can achieve a leaner, more cost-effective model without compromising on guest experience or revenue potential.

• Streamlined Operational Efficiency. SiteMinder’s platform is designed to optimise hotel operations, reducing the overheads associated with manual processes and inefficiencies. Automated room inventory updates, centralised booking management, and integrated guest communications mean fewer errors, less wasted time, and a significant reduction in operational costs.
• Optimised Distribution with Lower Commission Costs. With SiteMinder’s channel management, you can tap into a vast network of booking platforms. By directing more traffic to direct booking channels and negotiating better commission rates with OTAs, SiteMinder helps you capture more revenue while simultaneously slashing commission expenses.
• Proactive Cost Analysis and Reporting. Knowledge is your first line of defence against rising costs. SiteMinder’s hotel business intelligence provides a clear view of your hotel’s expenditure patterns, allowing you to pinpoint areas of unnecessary spending. Whether it’s underperforming marketing campaigns, energy inefficiencies, or under-utilised assets, SiteMinder equips you with the data to make informed cost-saving decisions.

Hotel financing is the process of acquiring funds to operate a hotel. There may be a number of different reasons for seeking financing but ultimately it’s about raising money from external sources to achieve your goal.

Gaining capital is important for any business investment and, given their multifaceted nature, hotels are no different. You need to be sure your finances are in order before embarking on a large scale hotel project.

In this blog we’ll tell you everything you need to know about hotel financing and how to get funding for your business.

Hotel investment: Is it profitable to invest in a hotel?

Hotel investment is not a home run to profit. Just like any business investment, there are potential risks and pitfalls if it’s not managed well – and sometimes plain bad luck plays a part (like COVID-19).

However, the hotel sector can be lucrative. Post-pandemic, the industry is recovering well and there is still plenty of potential for growth moving forward. In 2022, 1,842 new hotels opened. This figure is forecast to grow in the following years to 2,480 global hotel openings in 2023 and 2,707 in 2024.

If you have the right combination of price, location, services, and strategy you can certainly run a profitable hotel business.

How does hotel funding work?

Hotel funding can take a few different forms and will depend on the approach you’re taking.

You might be:

• Refinancing your existing hotel
• Renovating your existing hotel
• Acquiring a hotel
• Building a new hotel

All of these options will require different levels of funding and may need to come from a variety of sources.

Generally though, when you receive money from a lender, the loan will involve aspects of business loans and real estate loans. On this basis, it will typically be approved in the way of a commercial real estate loan.

How to get funding for a hotel

Before you get funding for your hotel, it’s a good idea to have a solid business plan in place. This will help you and lenders understand what you need, and what the desired outcome is. It will also help you when you write a proposal or meet with potential investors or lenders.

Your business plan should include:

• A rough forecast for the expected financial performance of the hotel
• Your objectives, the team involved, and your strategy for success
• Industry and competitor analysis
• How much capital you’ll need
• The potential return on investment
• And more!

The more detailed, precise, and focused you can be with your business plan, the more likely it is that potential investors will be interested in it. If they can’t clearly see how they will get their money back and more, they will probably walk away.

What are your options when it comes to hotel financing lenders?

There are a surprising number of options available for financing your hotel. Some lenders are public, private, or government funded.

The type of lender that proves right for you will likely depend on the specifics of your project.

List of hotel investment partners and sources

Here’s a full list of potential lenders:

• Banks – Naturally banks are one of the most common sources of funding and handle small and large scale hotel loans.
• Private lenders – Investors who are looking to expand their portfolio are a good option, especially if you are launching a new hotel.
• Crowdfunding – If your project is for charity, is unique, or has a particularly important mission, then crowdfunding is certainly an option. It can be effective too, if you market it well.
• Government funding – While it may not be easy, there are situations where you could get a government grant for your project, or get aid due you being an entrepreneur.
• Self-financing – Not everything has to be outsourced. You also have the option of using your own assets and funds to finance a new project, as well as borrowing from supporters such as friends and family. You may not realise the full potential of your own finances and can work with professionals to optimise this before seeking a loan.
• Wealth management companies – Particularly large investors who have investments in a number of different areas will often hire wealth management teams to handle their money, and this may include new investments.

“We were aided by SiteMinder because they truly brought about a ‘revolution’ for our property. All tasks are integrated between our website, booking page, and property management system - effective handling of booking channels, thereby increasing revenue, and most importantly, improving our customer experience.”

Viki Edy Priyatna,

E-Business & Reservations Manager

Qunci Villas

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Hotel loans: Alternative hotel funding sources

Even a small hotel project or development might need multiple types of funding or loans.

Here are some examples of hotel loans:

• Commercial mortgages – This is a long-term loan that will cover the bulk of your initial capital, and be paid back slowly.
• Bridging loans – Designed as a short-term loan to ‘bridge’ a gap in your funding and get you over the line.
• Asset and equipment financing – Your hotel is going to need materials, equipment, and assets when it’s up and running. You can get financial support for these too.
• SBA – This is a small business loan from a bank to help small operators get up and running (specifically for the US)
• Tax loans – Tax loans can help ease the strain on cash flow, especially if your hotel is seasonal and tax bills crunch you at low periods of the year.
• Cash advances – Another cash flow aid is a merchant cash advance, which allows you to get money up front and repay it via customer transactions. This means you repay the money when you have it.

What all this can add up to in some cases is jigsaw funding – a combination of several types of financing that are all working towards a common goal.

Wherever your funding comes from, there are a few other key considerations you need to keep in mind.

Best practices for financing a hotel

Following best practices for financing your hotel will go a long way to making the process easier and more successful.

Here are a few rules to abide by:

• Create a watertight business plan – We mentioned this already but it’s important to have a clear vision and mission statement for your business.
• Build as much of your own equity as possible – The more you have before you seek investment or a loan, the more successful you’ll be.
• Seek investment partners that understand the industry – Someone who is experienced in the industry will know what it takes to succeed, and will help make the investment a good one in the long run.
• Research – It’s a good idea to look at case studies that might be similar to yours. Any successful venture is worth taking inspiration and learning from.
• Make your own smart investments – Once your hotel is up and running or you have taken control after acquisition, it’s important you have the right tech in place to make it successful. Use a platform like SiteMinder to help your business thrive online.

How to write a hotel funding proposal or ask for hotel development funding

Writing a hotel funding proposal should be approached in a very similar way to putting together your business plan.

Your proposal needs to be well organised and detailed, but also clear and succinct. Get to the selling point reasonably quickly so potential investors have something to chew on.

In general, your funding proposal should include:

• The nature of the project including what it is and where it is
• The reason why you are seeking funding
• Your vision and mission statement
• Who you are and why you should be supported
• How the project will develop and progress to completion
• How much funding you are seeking

There are a lot of other finer details too, such as the project title, time and date of issuing the proposal, the industry your project falls into, and more.

If it’s your first hotel project or development, it could be a good idea to have a team of experts on-hand to demonstrate to lenders that you understand the risks and have the right people backing your business plan.

Set your hotel up for financial success with SiteMinder’s platform

To make your hotel a long-term success and enjoy the rewards of a profitable business, you need smart technology on your side.

SiteMinder is the world’s leading hotel commerce platform, giving hoteliers everything they need to succeed online.

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• Attracting more guests from all around the world
• Boosting direct bookings
• Making more profit from each individual guest
• Ensuring an outstanding guest experience
• Staying ahead of the competition
• Being more efficient
• Having more control over your business

And most importantly; optimising your payments, cash flow, and overall financial performance with automation, seamless integration, and professional reporting.

Interested to learn more? Take a free trial of the platform today or watch a demo.

Hotel accounting is the process of recording and maintaining the financial records and performance of your hotel business. Good accounting makes the finances of your hotel easy to understand for management and other stakeholders – so they can make informed decisions.

Accounting can also involve the practice of correcting negative performance and offering advice about your hotel’s financial plans.

Without quality accounting, it will be very difficult for your hotel to achieve a successful revenue management strategy or sustainable business.

In this blog we’ll explain everything you need to know about accounting for hotels.

What are the types of hotel accounts?

Typically there are three types of accounts, or ledgers, a hotel keeps. They are:

• Guest accounts – A record of transactions that occur between a guest and your hotel. For example, when the guest orders room service.
• Non-guest accounts – Transactions that occur between your hotel and other parties, such as suppliers.
• Management accounts – This is a report that shows managers, owners, and stakeholders the overall health of the hotel, usually on a quarterly or bi-monthly basis. You can use this to create a number of important financial statements that will help you manage your operations.

Of course, within these three umbrellas there can be a whole range of different ledgers and metrics that are maintained.

For example, your hotel might use different ledgers for bar sales, restaurant sales, room service, room rentals, amenities hire, and more. This makes for more accurate reporting and stronger visibility when assessing performance.

What is the hotel accounting chart of accounts (COA)?

The chart of accounts will list the financial accounts that are set up for your hotel. It’s a way of documenting what records you keep and track to ensure the health of your business.

Commonly the chart of accounts will include:

• Revenue/Income – Money coming in from the services you offer (e.g room sales).
• Expenses – Money going out to pay for upkeep and maintenance of your property and services (e.g staff wages).
• Assets – Things that you own or manage that ensure future revenue (e.g your amenities).
• Liabilities – Things that will require you to pay money (e.g suppliers).
• Equity – Essentially the value of your business.

This is by no means exactly how you need to set your hotel up. Your chart of accounts will always depend on the specifics of your business and your priorities, but these metrics are a good starting point.

But you’ll see for each of the accounts listed above, you could keep a separate chart of accounts to maximise clarity and make it easier to go into the details of your hotel’s performance.

Why is hotel accounting so important?

Hotel accounting is extremely important for understanding the overall health and trajectory of your hotel’s finances. It allows you to understand more about your revenue and profitability, and all the financial factors that influence your property’s operations. Whether it’s budgeting, forecasting, or cost planning, accounting makes it much more effective.

Without adequate hotel accounting, you won’t know how much money is coming in or going out, where you’re spending too much, and opportunities you aren’t capitalising on.

Basically, without good accounting your hotel can get trapped in a cycle of debt, barely keeping its head above water. Or even worse, the business could collapse without you realising until it’s too late.

Knowing that hotel revenue in the US is projected to reach US$408.80bn in 2023, accounting is important to help ensure you minimise lost revenue and maximise your profit.

How do you maintain accounts in the hotel industry?

Some aspects of successful hotel accounting are non-negotiable. If your property is going to run smoothly month-to-month and year-to-year, your finances have to be in order.

Maintaining good, clean, accounts means:

• Keeping an up-to-date balance sheet – This describes your brand’s assets, liabilities, and equity at any given time
• Using profit/loss statements – It’s vital to understand whether you’re losing or making money, and how much, so you can make strategic adjustments.
• Using cash flow reports – Cash flow is essential for making sure you don’t fall too deep into debt. Your income and expenses need to be in sync otherwise you risk compromising parts of your business.
• Providing staff with advanced training – An in-house accounting department is ideal, in which case you need to ensure staff are adequately qualified and also using the best software available. Otherwise, you can outsource your accounting to a team of professionals in the area.
• Implementing an effective revenue management strategy – Tracking key KPIs and metrics will help your overall performance and make accounting much less stressful.
• Utilising software to help manage accounting – Automated accounting software can make everyone’s job much easier. It saves time, provides more accurate data, and makes insights more digestible.

All this and more, keeping in mind that some aspects of accounting in the hotel industry are completely unique compared to other industries (we’ll discuss this soon).

How important is it to have an accounting protocol in my hotel?

Having a set protocol for accounting in your hotel is very important. By having a process in place that includes regular analysis and reporting, you’ll be able to maintain a more accurate picture of your hotel’s financial position.

Key hotel accounting procedures

When you begin working with an accountant, or your in-house finance team, you should set out a few key goals on:

• How many accounts and ledgers you want to manage
• What data you want to track
• How you want the data to be recorded
• What reports should be used
• How often reporting should be done
• The objectives you want to monitor

Putting these steps together and documenting them will help establish them as a standard operating procedure within your business and ultimately make you more successful.

Common hotel accounting jobs and roles

As mentioned, accounting for hotels can be unique and varied since hotels can have many different departments with different accounts and different transactions taking place.

All of these can have an impact on accounting, including:

• Night auditing – It’s the job of a night auditor to ensure that each new day begins smoothly, with an accurate transition of facts and figures from the previous day. This includes providing a report for an accountant to review to make sure everything is correct.
• Managing sales – Obviously how many rooms are sold and how they are sold impacts revenue and transactions. If rooms are oversold and there are double bookings and cancellations, this negatively affects revenue across the board.
• Managing revenue – With packages, promos, extras, add-ons, and a possible myriad of room types, room pricing can be extremely variable. Maximising the value of every room and guest will ultimately influence the hotel’s accounts.
• Front line staff – Whether it’s front desk staff, bar staff, restaurant staff, or staff at other amenities, it’s important that all transactions are accounted for and that errors are kept to a minimum.
• Cleaning and maintenance – Keeping a tight schedule, maintaining high quality of work, and getting jobs done efficiently is crucial not only for cost-effectiveness but also guest experience and the bottom line.
• Back of house staff – Things like processing payroll and staff rostering have to be done accurately and efficiently to ensure money doesn’t slip through the cracks.

Then there’s also the accounting itself which we have talked about, where proper financial reporting, budgeting, and forecasting are crucial.

The value of hotel accounting software

The good news is that hotel accounting software can make everything we’ve discussed so far much simpler.

Online software has had a huge impact on the hotel industry in all aspects – including being able to sell more rooms in more places, manage reservations and revenue easier, increase efficiency, boost profit, and enhance guest experience.

Hotel accounting is no different. There is plenty of software on the market that can allow hoteliers to manage their accounts, without needing to be an accountant or data scientist themselves.

What are the main benefits of using a hotel accounting system?

The benefits of using a hotel accounting system often overlap with the advantages of using any automated hotel management system. It enables you to:

• Save time on manual tasks (no more frustrating spreadsheets)
• Bring fragmented data into one manageable location
• Streamline data collection and make it more digestible
• Generate reports almost instantly
• Make reporting more accurate
• Enhances your ability to make real-time decisions with quicker results
• Gives you greater control over your business and more flexibility

By working quicker and more accurately than a human can, software gives you more time to focus on strategy instead of getting caught up in all the tiny details. The tiny details are important, but software makes them immediately accessible and displays them in a way that is easy to understand and reconcile.

Types of hotel management accounting software

When it comes to types of software to use for accounting, you really should be using online, or cloud-based software, that is powered only by an internet connection.

This allows your data to be constantly synched and always up-to-date, not to mention accurate. It also enables you to work remotely, rather than be chained to a desk or cooped up in a back office. As long as you have a laptop or mobile device and a stable internet connection, you should be able to manage your accounting from anywhere.

Common hotel accounting software includes:

• Freshbooks – Accounting software for small to medium sized businesses, including hotels.
• QuickBooks – QuickBooks is full of smart features and has a high customer satisfaction rating and flexible pricing plans.
• Sage Business Cloud Accounting – Sage utilises AI and has a high level of interactivity allowing hoteliers to operate their accounting function in real-time.
• Xero – Xero is well known and widely used by small businesses across many industries, including the hospitality industry.
• M3 – M3 is hotel accounting software that has been built and designed specifically for hoteliers, making it an attractive option.

So how do you make a choice?

What is the best hotel back office accounting software?

When it comes to choosing the best back office accounting software for your hotel, it’s always a good idea to research a few different options. Make a list of potential providers so you can compare features, pricing models, and how each product aligns with your preferences.

Do you want basic accounting software that’s super easy to use? Or do you want more powerful software that can make your complex tasks simpler? How much will you spend and what do you see as a healthy return on investment? There’s plenty of questions to ask yourself as you go about making a purchase decision.

It certainly also helps to look at reviews and aggregators. One of the most trusted sites to check hotel software is HotelTechReport. It collects hundreds of reviews for dozens of providers and is regularly updated to reflect the most recent data. Other sources to see reviews and compare providers include Software Advice and Capterra.

If you base your decision on the data of HotelTechReport, which surveyed more than 600 hoteliers, the best hotel accounting software is as follows:

• Highest HotelTech Score – M3
• Most Recommended – M3
• For Luxury Hotels – Aptech Computer Systems Inc

You’ll see there are a number of different categories, including different property types, sizes, and locations. Time and time again, M3 and Aptech are the two providers that pop up at the top of the list.

Gain better control of your hotel accounting with the help of SiteMinder’s platform

Here at SiteMinder, we’re known as the world’s leading hotel commerce platform. SiteMinder makes it easier to manage your hotel online and succeed as a modern business.

While we can’t do your hotel accounting for you, we can help those financial reports look a lot better in the long run.

Our powerful technology helps you bring all your crucial operations into one central hub that you control, enabling you to:

• Gain more online visibility and win more bookings
• Boost direct bookings and increase profit
• Optimise your website for conversion
• Expand your revenue streams with metasearch
• Price strategically and competitively to maximise revenue
• Connect with a larger ecosystem to enhance your capability and efficiency

Just like automated hotel accounting software, SiteMinder lets you automate and accelerate your business – giving you more time and freedom to make the best decisions for your business.

Interested to learn more? Take a risk-free trial for 14 days here or watch an online demo of the platform.

ALOS is an abbreviation that means ‘average length of stay.’ In the hotel industry, it refers to the average number of nights guests stay at your property over a given time.

For example, if your ALOS was 4.5 in the third quarter of the year, each booking during that quarter was for 4.5 days on average.

ALOS usually shifts throughout the year, depending on the season and its respective travel patterns.

It also differs depending on the property type, location and target market. Resorts that welcome mostly leisure guests often have a longer average length of stay. On the other hand, city properties with a focus on business travellers usually see guests stay fewer days.

In this article, you’ll find everything you need to know about ALOS, and how to use it to further improve your property’s results.

What is the average length of stay in the hospitality industry?

The average length of stay, commonly referred to as ALOS, is a pivotal metric that hoteliers around the world employ to gauge the performance and health of their business. At its core, ALOS measures the average number of nights a guest spends at a hotel. A higher ALOS typically indicates that guests are choosing to stay longer, translating to increased room revenue and potentially higher guest satisfaction. It’s a simple equation: more nights equal more revenue.

However, while the allure of a high ALOS is undeniable, it’s essential to approach this metric with nuance. There isn’t a universal “golden number” for ALOS that suits all hotels. Factors such as the hotel’s category (luxury vs budget), its geographical location, seasonal trends, and its target demographic can all influence what a “good” ALOS looks like for that particular establishment.

To illustrate, consider some industry data: Hotel Tech Report cites that the average length of stay for a typical US hotel hovers around 1.8 nights. Meanwhile, Statista presents a comparable figure for New Zealand hotels, averaging 1.7 nights. But a closer examination of the New Zealand statistics reveals intriguing nuances: motels and serviced apartments in the country boast a higher ALOS of 2.1 nights, while backpacker accommodations outpace them all with an impressive average of 3.15 nights. This is nearly double the average for standard hotels!

Does this disparity suggest that backpacker accommodations are inherently more successful or lucrative than traditional hotels? Not quite. Backpacker lodgings cater to a distinct demographic: travellers, often younger, seeking longer stays at budget-friendly rates. If a luxury hotel were to pivot its strategy to chase a similar ALOS, it might inadvertently alienate its core clientele and dilute its brand value.

While ALOS serves as a valuable barometer for hotel performance, it’s not a standalone metric. It’s imperative for hoteliers to contextualise ALOS within their specific market segment, location, and business model. And, as with all metrics, it’s most effective when considered alongside other key performance indicators to paint a holistic picture of a hotel’s success.

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How do you calculate the average length of stay?

Calculating the average length of stay is easy. Determine the average length of stay for guests at your hotel by following these steps:

• Add up the number of room nights booked for a given time (e.g. one month, quarter or a custom period).
• Add up the number of reservations for the same time.
• Divide the number of room nights by total reservations to get your ALOS.

ALOS formula for calculating average length of stay

Average length of stay = Total number of room nights / Total number of bookings.

What is an example of average length of stay?

The New Dawn Hotel in Miami is a 30-room hotel, with a maximum room night capacity of 900 for the month of April. Over April, there were 700 room nights booked, split between 350 individual bookings.

Average length of stay = 700 / 350 = 2 nights stayed per booking, on average

Why is it important to track the average length of stay at your hotel?

Understanding your hotel’s average length of stay can help you on several fronts. First, ALOS reveals booking patterns across seasons and during events. This allows you to create pricing and distribution strategies that maximise high-demand periods and continue to drive business even when things slow down.

Second, knowing how your ALOS shifts during the year lets you run your operations more efficiently. For example, it’ll be easier for you to schedule cleaning, maintenance and front-of-house teams, because you can gauge the level of guest turnover.

“At first I thought it was just a myth that using SiteMinder could boost revenue. But it turned out to be true. Revenue did increase, we are also more efficient in terms of time; we can get more work done.”

Shadi Wijaya,

Corporate Director of Revenue

The Phala Group

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Five tips to improve ALOS and maximise business revenue

As a rule of thumb, long stays are better for your operation’s profitability. They mean fewer check-ins and check-outs, less time spent cleaning rooms and fewer resources devoted to generating new bookings. So, let’s look at how you can increase the length of stay at your property.

1. Set a minimum length of stay booking restriction

Minimum stay restrictions are the most straightforward way to increase ALOS since they simply don’t allow shorter bookings. They work best during high-demand times, e.g. over holidays or important trade shows, when the majority of travellers are willing to stay longer. 

Avoid using these rules as a year-round blanket solution though as this could cause you to lose bookings during low season.

2. Make longer stays more attractive with LOS pricing and packages

LOS pricing is a more flexible alternative to rigid minimum stay requirements. It means implementing pricing rules that calculate rates based on the check-in date and the length of stay. This way you offer guests a more attractive deal if they book extra nights. 

Alternatively, you could promote packages such as “4 for 3” or “7 for 6.” Especially during the low season this can encourage longer stays because the discount makes more people think “why not?”.

3. Entice guests to spend more time

If you want guests to stay longer, make the idea irresistible by highlighting all the activities and services at your hotel and in the nearby area. For example, promote your spa or showcase the many day trips that are possible from your property. 

By providing a variety of options, you cater to a range of interests and give guests a good reason to stick around.

4. Make it easy to extend the stay

Once guests are in-house you’ve got another chance to encourage them to tack on an extra day or two. Reach out to them the day before they check out and offer an attractive deal such as a free dinner or 10% off if they extend for a night. You can do this by calling their room or, better yet, via an automated email, SMS or other forms of direct messaging. 

This lets guests choose on their own time instead of putting them on the spot. Digital communication also allows you to include a link where travellers can easily see the conditions and extend in just a few clicks. The simpler you make this step, the more guests will take you up on the offer.

5. Target remote workers with attractive deals

The remote work trend is here to stay, so why not cater to flexible employees? Offer packages including everything they need such as high-speed Wi-Fi, desk space, F&B credits, a laundry allowance and other perks. That will make your property their top pick next time they want to work from a new location.

Implementing just a few of the tips above is quick and can help you drive up your property’s average length of stay. Given the many advantages of a higher ALOS, it’s more than worth it to put in this time and effort.

So, brainstorm how you could use these ideas at your hotel and get to work. It won’t be long until you start seeing the benefits of welcoming guests for longer stays.

Hotel financial statements are designed to provide insights into a specific aspect of your business. As a hotel operator, staying on top of your finances is essential to the long-term profitability of your business. With the right financial information at your fingertips, you can make sound decisions for your hotel, fine-tune your business strategies, deal with any red flags before they become bigger problems and drive sustainable growth.

This guide walks through everything you need to know about financial statements for hotels: what they include, why they’re important, common types of financial statements and what key insights they can provide.

What do hotel financial statements include?

Hotel financial statements include information about the financial activities of your hotel. The exact information included differs depending on the statement, as we’ll cover in more detail below.

Generally speaking, though, financial statements cover information about the incoming and outgoing money of your business. This can give you a clear picture of your past, current and predicted future performance.

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Why are hotel financial statements important?

Financial statements are a critical component of running a profitable and sustainable hotel. They can tell you things like:

• Whether you’re making enough hotel revenue
• Whether that revenue is translating into hotel profits
• How much you’re spending on operational expenses and overheads
• Whether you have enough cash on hand to pay the bills

Financial statements can help with:

• Operations – Financial statements can be used to review the efficiency of your hotel operations and make necessary adjustments to processes, staffing, etc.
• Investment – You use financial statements to figure out if you have the appropriate funds and financial standing to invest in new areas for your hotel.
• Credit and loans – Lenders will ask for financial statements to determine if your hotel is financially stable enough to receive a loan.
• Marketing & pricing – Analysing financial statements can indicate whether your hotel’s marketing and pricing strategies are bringing in enough revenue, and whether you need to adjust your approach.

What is a hotel income statement?

A hotel income statement, also known as a profit and loss statement, P&L statement, statement of operations or statement of earnings, tells you how much money (revenue) your business brought in and how much of a profit you earned from that revenue over a particular period.

Hotel income statements are designed to provide financial insights into a specific aspect of your business. As a hotel operator, staying on top of your finances is essential to the long-term profitability of your business.

A hotel income statement shows you how much money your hotel is making, and how much you’re losing. You can use an income statement to analyse your profits and losses over any time period you like, but they’re most commonly created for a month, quarter or year. 

You can also use an income statement to compare your profitability against the industry average (as of June 2020, the average hotel profit margin was around 18%).

What is a hotel income statement used for?

A hotel income statement gives you a general overview of how your business is performing financially over a specific period. This can be helpful for setting prices for your rooms or services to maintain a healthy profit margin.

You’ll also need a current income statement if you want to apply for a hotel business loan. Banks and lenders will check your net income compared with your expenses to make sure your hotel is financially stable enough to lend money to.

Elements of a hotel income statement sample

There are three main elements of a hotel income statement:

1. Revenue

Revenue, also called sales or income, covers any money received from operating your hotel. This includes income from:

• Rooms
• Food & beverage
• Entertainment
• Guests services such as massages and spa treatments

2. Expenses 

Expenses include all your outgoings, such as:

• Cost of goods sold (COGS)
• Rent or mortgage
• Staff wages
• Utilities
• Franchise fees, if applicable
• Property taxes and insurance
• Debts
• Marketing and advertising expenses

3. Net profit 

This is calculated by subtracting all your expenses from your revenue.

Hotel income statement example

Here’s a simple, hypothetical hotel income statement example:

Tips for preparing an income statement in the hotel industry

Preparing an income statement in the hotel industry is crucial for understanding the financial health of your business. Here’s how to do it effectively:

• Gather all relevant data. Before you begin, ensure you have all the necessary financial data. This includes revenue from room bookings, food and beverage sales, and any other ancillary services your hotel offers.
• Categorise your revenues and expenses. Break down your revenues by category, such as room sales, event space rentals, and dining. Similarly, categorise your expenses into fixed costs like salaries and rent, and variable costs like utilities and supplies.
• Control for seasonal variations. The hotel industry often experiences seasonal fluctuations. Ensure your income statement reflects these changes, helping you plan for peak and off-peak periods.
• Include depreciation. Hotels have significant assets that depreciate over time, such as furniture and equipment. Factor in these depreciations to get an accurate picture of your net income.

Other types of hotel financial statements

There are several different hotel financial statements you can use to look at different aspects of your business. Here are some of the most common types to be aware of.

Balance sheet for hotels

A balance sheet, also called a statement of financial position, summarises all of your hotel’s business assets (what you own) and liabilities (what you owe).

In a nutshell, a balance sheet shows you how much money you would have left over if you sold all your assets and paid off all your debts at a particular point in time. This is known as your equity.

The formula for calculating your equity is as follows:

Equity = Assets – Liabilities

What is a hotel balance sheet used for?

Like an income statement, a balance sheet provides a picture of the financial health of your hotel.

By analysing a balance sheet, you can assess whether you have borrowed too much money, whether your assets can be converted into cash quickly if needed (i.e. if they’re liquid) and whether you have enough cash on hand to cover expenses.

Balance sheets are also used to secure business loans and funding from private investors.

Elements of a hotel balance sheet

The three main elements of a hotel balance sheet are as follows:

1. Assets

Assets cover everything you wholly own, which includes tangible and intangible items such as:

• Property
• Equipment
• Furniture
• Food & beverage inventory
• Other inventory
• Cash
• Vehicles
• Intellectual property
• Trademarks and patents

2. Liabilities

Liabilities cover everything you owe, which includes items such as:

• Short-term and long-term loans
• Accrued bills such as mortgage/rent and utilities
• Staff wages owed
• Taxes owed

3. Equity

Equity is the combined value of all your hotel’s assets after deducting your liabilities.

Hotel balance sheet example

Here’s an example of a hypothetical hotel balance sheet:

Cash flow statement for hotels

A cash flow statement shows how much cash is going in and out of your hotel over a specific period. This is known as your cash flow.

Having enough cash on hand to pay the bills and buy goods and assets is an essential part of hotel management. A cash flow statement can tell you whether you’re likely to run into any issues in this area.

You might be earning steady hotel revenue but if you’re overspending or your expenses are too high, you can quickly end up with negative cash flow. And even if you’re profitable, if there’s not enough cash landing in your bank at any time, paying the bills such as rent/mortgage, wages and inventory can be a challenge. That’s why it’s important to keep an eye on your cash flow throughout the year.

What is a hotel cash flow statement used for?

A cash flow forecast tells you how much cash you have coming into and going out of your business. With this information, you can make necessary adjustments to improve your cash position, such as cutting expenses, finding new hotel revenue streams or changing your pricing and marketing strategies.

At the other end of the spectrum, if you have a cash surplus, you can consider investing back into your hotel through upgrades and renovations, hiring staff or expanding your operations.

A cash flow statement can be used to see if you:

• Have enough cash to cover expenses
• Need to make adjustments to your pricing or marketing strategies
• Can afford to upgrade or renovate
• Can hire new staff (or need to reduce headcount)
• Should consider borrowing some money

Elements of a hotel cash flow statement

The two core elements of a hotel cash flow statement are as follows:

1. Cash incoming

This covers all the main cash-generating activities of your business, such as room bookings, food and beverage sales and other sales.

2. Cash outgoing

This includes all the expenses related to running your hotel, including loans, wages, fees, interest and other costs.

Your cash balance is calculated by subtracting the total of your cash outgoing from your cash incoming.

Hotel cash flow statement example

Here’s an example of a simple quarterly cash flow statement for a hotel:

How to use hotel income statements effectively

An income statement isn’t just a piece of paper; it’s a tool that can drive strategic decisions. Here’s how to use it to your advantage:

1. Look at how your expenses are affecting your net profitability

Regularly scrutinising each cost, from utilities to staff salaries, can unveil potential areas for savings. For instance, while some costs are fixed, there might be variable expenses where negotiations or alternative solutions can lead to reduced outlays. Supplier contracts, in particular, should be revisited periodically to ensure you’re getting the best value for your money.

2. Understand whether you’re bringing in enough of a profit

After all overheads are accounted for, does the profit align with industry benchmarks? If there’s a noticeable discrepancy, it might be an indicator that your pricing strategy needs recalibration. Perhaps there’s room to adjust room rates during peak seasons or introduce special packages to attract more guests.

3. Fine-tune your sales and marketing strategy

If substantial resources are being channelled into marketing campaigns but room bookings remain stagnant, it’s a clear sign that the strategy needs re-evaluation. Embracing innovative marketing approaches, such as personalised promotions, loyalty schemes, or even strategic partnerships, can be the catalyst that propels your revenue to new heights.

Hotel financial statement: Key summary

Financial statements are a key part of running a successful and profitable hotel. Although different types of financial statements show different information, they all provide insights into your hotel’s financial standing. 

The three most common types of financial statements for hotels are:

• Income statement (also known as a profit & loss statement)
• Balance sheet
• Cash flow statement

Together, these three financial statements can tell you:

• Whether you’re earning enough revenue
• Whether your hotel is profitable
• How much you’re spending
• Whether you have enough cash on hand to pay the bills
• Whether you can afford to invest in growth, such as through renovations and upgrades
• Whether you should adjust your pricing or marketing strategies
• Whether you might need to consider borrowing some money

With these insights, you can make smarter and more impactful decisions about your hotel.

A STAR report, or an STR report, is a benchmarking tool that compares your hotel’s performance in relation to a group of similar hotels (competitors). 

What does STR mean on a property report? STR stands for Smith Travel Research, or the organization that provides the STAR report. Although it’s spelled ‘STR’, the correct pronunciation is ‘STAR’ so the terms ‘STR report’ and ‘STAR report’ are often used interchangeably.

It’s important to note that STR reports or STAR reports aren’t related to star ratings that help you gauge guest satisfaction. Rather, an STR report uses a variety of KPIs and metrics to show how well your hotel is performing compared to your competitors. To do this, STR Inc. uses data from your competitive set (compset), which is a group of hotels that you choose for comparison purposes.

STR reports are typically released weekly, although you can also choose to receive reports monthly or yearly if preferred.

This guide covers all you need to know about this essential hotel benchmarking tool: what an STR report is, what it can tell you, how to get one and how to read and analyse one.

What does STR stand for within the hotel industry?

Before we look at STR reports in more detail, what exactly does ‘STR’ stand for?

STR Inc. is a hotel analytics company founded in 1985 as Smith Travel Research. The company is the recognised leader in hotel industry benchmarking and provides market data including supply and demand and market share information on a global scale.

For example, STR data reveals that the average occupancy rate across US hotels in August 2022 was 66.5%, and the average daily rate was US$151.49.

STR Inc. compiles all of the data they receive into STR reports, which can be used by hotels across the globe to benchmark their performance against relevant competitors.

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What can an STR report help with?

An STR report can help you to:

• Benchmark and compare your performance
• Stay on top of your competitors and your market
• Understand what qualifies as ‘good’ and ‘bad’ performance for your market
• Make strategic pricing decisions to improve profitability
• Monitor the effectiveness of your business strategies over time
• View supply, demand and revenue changes for your in market (driven by new hotels, more/less customers or economic changes, for example)

Benchmarking with an optimal compset

Comparing your performance against your competitors is a critical step when measuring your success. However, to benchmark accurately, you need to choose a group of competitors with a similar profile to your hotel.

This is where your competition set, or compset, comes in.

When ordering your STR report you’ll need to choose a compset, which STR Inc. uses as a basis to compile and deliver data that’s relevant to your hotel.

Generally speaking, an optimal compset includes 3-5 hotels that:

• Are located in the same geographical area as your hotel (some exceptions to this would be if your hotel is in a very remote area or the other hotels in your area have a distinctly different target market)
• Have similarly priced rooms
• Offer similar amenities and/or services

One thing to keep in mind is that you can change your compset with subsequent STR reports, so don’t worry too much about getting it perfect the first time around.

How to get a STAR report for your hotel

To get an STR report, you can head to the STR website and request a demo or purchase a report. Once you’ve registered, you can choose whether to receive new reports weekly, monthly or yearly. Here’s how to  get star report for hotels in three simple steps:

• Step 1: Navigate to str.com. Once there, click “Request A Demo”, either on the homepage or by selecting a specific report that you’re interested in (under “Data Solutions” > “Performance Data” in the main menu).
• Step 2: Fill in your details. Once you’ve clicked “Request A Demo” you’ll be asked to supply some basic details about yourself and your business. STR will soon be in touch with a demo, and if all goes well, you’ll receive instructions for creating an STR account.
• Step 3: Log in and generate reports. Demo complete and STR account created, you can log in, choose your STR plan and begin to generate reports via your STR dashboard.

You’ll get access to 18 months of historical data, which includes year-on-year, year-to-date, and running 3 and 12-month data percentage changes and indexes. The reports cover various KPIs and metrics, which we’ll cover in more detail below.

How to read and analyse an STR report

Looking at your STR report for the first time can be confusing given the amount of data available. That said, with a bit of background reading it shouldn’t take long to familiarise yourself with the key terms, KPIs and metrics, and what they mean for your hotel.

A good starting point to read an STR report is to scroll down to the ‘Monthly Performance at a Glance’ tab. This tab contains a general summary of your hotel’s performance against your competitive set for the current month, year-to-date,
running 3-month and running 12-month periods.

A more involved way to analyse your STR report is to compare the current week’s performance to your performance during the same week last year. You can also do this for your compset.

Once you have a better handle on the ins and outs of the report, you can dive deeper into the data to review your performance against KPIs including occupancy, ADR and RevPar.

Index numbers in an STR report

When reading your STR report, you’ll see your performance is calculated as an index. Your index number tells you whether or not your hotel is outperforming your compset against three key KPIs: occupancy, ADR and RevPar. The index is calculated by dividing your KPI values by the average KPI values of your compset, then multiplying by 100.

An index number higher than 100 indicates you are capturing more than your fair market share, whereas an index number below 100 indicates you are capturing less than your fair share.

In other words, the higher your index number, the better your hotel is performing. An index below 100 tells you there’s room for improvement to compete more effectively in your market.

Tabs in a STAR report

These are the tabs you can expect to see in a typical STR report, and the information they provide:

1. Monthly performance at a glance

This tab is a summary of your hotel’s performance against your competitive set for the current month, year-to-date, running 3-month and running 12-month periods.

Questions to ask when reviewing this tab:

• How does my hotel compare to my competitors this month?
• What has changed since last month?

2. STAR summary

Here you’ll see a summary of your hotel’s occupancy, ADR and RevPar versus your compset and others industry segments, for the current month, year-to-date, running 3-month and running 12-month periods.

Questions to ask when reviewing this tab:

• How does my hotel perform compared to other industry segments?
• How does my compset perform compared to other industry segments?
• How does the performance compare for different time periods?

3. Competitive set report

See a comparison of your hotel versus your compset for the most recent 18-month period, as well as for the year-to-date, running 3-month and running 12-month periods.

Questions to ask when reviewing this tab:

• How has my compset’s performance changed over the last 18 months?
• What seasonal trends exist?
• What do the index numbers show?

4. Response report

Here you can find details of properties in your compset that have reported data to STR over the past 24 months.

5. Segmentation summary

Your segmentation summary compares your hotel versus your compet’s segmentation data for the current month and year-to-date. Segmentation data includes occupancy, ADR andRevPar broken down by the source of business (transient, group and contract).

Questions to ask when reviewing this tab:

• How do I compare to my compset and market for different sources of business?
• How do numbers of different business sources change on weekdays versus weekends?

6. Segmentation analysis

This tab shows monthly occupancy, ADR, RevPAR, index and ranking analysis of transient, group, contract and total business for the past 18 months. It compares your hotel’s data to your compset and your broader market.

7. Segmentation day of week

On this tab you’ll find monthly occupancy, ADR, RevPAR, index and ranking analysis of transient, group, contract and total business by day of week for the current month. It compares your hotel’s data to your compset and your broader market.

8. Additional revenue analysis

This is a monthly revenue analysis for room, food and beverage, other and total for the past 18 months. It compares your hotel’s data to your compset and your broader market.

Questions to ask when reviewing this tab:

• How do I compare to my compset and market in relation to food and beverage, and other revenue?
• How have additional revenue numbers changed over time?

9. Daily data for the month

This tab shows occupancy, ADR and RevPAR by day of the week for the entire month. It compares your hotel’s data to your compset.

Questions to ask when reviewing this tab:

• How did the daily data add up to the monthly numbers?
• Were there specific times during the month where my hotel won or lost in Occ or ADR?
• How did special events or seasonal fluctuations contribute to my hotel’s performance?

10. Day of week and weekday/weekend

This tab details occupancy, ADR and RevPAR for each day of the week and weekday/weekend for the current month, year-to-date, and the same day of the week for running 3-month and 12-month periods. It compares your hotel’s data to your compset and your broader market.

Questions to ask when reviewing this tab:

• How did my hotel perform compared to my compset on weekdays versus weekends?
• Are there days where I am outperforming or underperforming more than usual?
• How does performance vary over time?

What are the most important tabs in a hotel STAR report?

The three most important hotel STAR report tabs to pay attention to are:

• Tab 1 – monthly performance at a glance: Look at this tab to get a quick one-page summary of your performance relative to your competitors.
• Tab 2 – STAR summary: Get a more detailed comparison of your hotel to your competitors and various industry segments. If you’re beating your competitors but both you and your competitors are losing to industry segments, it could be worth reviewing your compset.
• Tab 3 – competitive set report: Use this tab to see a historic comparison of your hotel to your compset over time.

KPIs in a hotel STAR report

A STAR report details important KPIs for your hotel and for your competitors (compset). The three core KPIs to be aware of are:

1. Average daily rate (ADR)

ADR, which stands for average daily rate, is the average income per occupied room your hotel makes in a set period of time.

ADR = Total room revenue/total rooms sold

You can use ADR to forecast for specific weeks, months, or seasons, and then set performance goals for your business – making plans to improve any areas you thought you could have done better in the past.

2. Occupancy (Occ)

Occupancy rate is the percentage of occupied rooms in your hotel at a given time. It is one of the most high-level indicators of success and is calculated by dividing the total number of rooms occupied, by the total number of rooms available, times 100, creating a percentage.

Occ = Total rooms occupied/total rooms available for sale x 100

3. Revenue per available room

RevPAR stands for revenue per available room, and is one of the most common and important hotel metrics. It provides an insight into the number of rooms that are being sold at a hotel and how much revenue is being generated from those bookings.

RevPar = ADR x Occ

If the RevPAR of your property is increasing, it can mean your average room rate or occupancy rate is increasing – or both.

By analysing these three KPIs in your report, you can discover:

• How occupancy (Occ), average daily rate (ADR) and revenue per available room (RevPAR) for your hotel compares to ADR, Occ and RevPAR of your competitors.
• What drove revenue generation (RevPAR) for your hotel and for your competitors. This could be Occ, ADR or both.

How are hotels compared on the STAR report for RevPAR?

STR reports index your hotel’s performance in three key metrics: occupancy rate, ADR and RevPAR. The definition of RevPAR is room revenue divided by rooms available, and the higher the number, the better.

STR’s Competitive Set Report directly compares your hotel’s RevPAR against the average achieved by your competition (defined as your ‘competitive set’ or ‘compset’ in the STR report). Your report will also tell you how you rank against the hotels in your competitive set.

The final piece of RevPAR analysis in your STR report is the indexed number. This calculation sees the performance of your hotel divided by the average performance of your competitive set, then multiplied by 100. An indexed score of 100 tells you that your hotel has captured its fair share of the market. A score above 100 tells you that your hotel is capturing more than your fair share, and the higher the number, the better your comparative performance. Likewise, a score below 100 tells you that your hotel is capturing less than your fair share, and the lower the number, the worse your comparative performance.

Your STR report can also analyse RevPAR in terms of change over time (by day, week, month or year, both in pure terms and relative to your competition), and by source of business (e.g. transient, group or contract).

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Shadi Wijaya,

Corporate Director of Revenue

The Phala Group

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Hotel STR report analysis tips

Follow these best-practice tips to get the most out of your STR report:

1. Keep an eye on trends

Whether caused by seasonal fluctuations, adjusted pricing or a change in your business strategy, look out for trends that could be positively (or negatively) impacting your hotel’s performance and the performance of your compset.

A good place to start is to look at your index number. If it’s above 100, you’re doing better than your compset average, and if it’s below 100, there’s room for improvement. Ideally you want to see your index number trending upward over time. If it’s trending downward, look to see if the same trend is happening to your compset and other industry segments. 

This can tell you whether it’s isolated to your hotel or a result of wider industry fluctuations.

2. Compare year-on-year performance

Hotels and accommodation providers are particularly susceptible to seasonal fluctuations, so a drop in performance over a week or month isn’t necessarily a major warning sign. However, a general improvement in year-on-year performance shows that your hotel is growing steadily in the long term.

If your performance has dropped compared to last year, try to figure out why that’s the case. Perhaps a tourist campaign brought more guests to your hotel last year, or maybe there has been an overall downturn in discretionary spending. If you can’t attribute the downturn to any broader causes, it could be time to rethink your strategy and start looking at new ways to bring in revenue or attract a different subset of guests.

3. Make notes of your insights

While an STR report contains a lot of valuable data, you need to dive deep into the meaning behind the data to make meaningful improvements to your business. Taking time to analyse your reports thoroughly and make notes of your findings is a crucial first step in developing more effective strategies that help you win a bigger share of your market and outperform your competitors.

An STR report is just one piece of the puzzle when it comes to managing your hotel effectively and ensuring your long-term success.

A revenue manager is a role in hotel management that is responsible for pricing room inventory to maximise profit.

Hotel revenue manager duties include making the most revenue with rate premiums when there is an abundance of demand and setting competitive and sustainable rates in the low season when market demand is more fiercely contested.

Few roles in the hotel industry have evolved as quickly as the hotel revenue manager. Powered by technological advances, the rapid sharing of knowledge and online training, the discipline is synonymous with smart pricing decisions and expectations are always high in the highly competitive accommodation market.

Whether you are new to the industry or catching up with the latest trends, this blog will introduce you to the importance of hotel revenue managers, their responsibilities, and how to succeed in the role.

How important are hotel revenue managers in the hospitality industry?

Hotel revenue managers are important because they ensure prices are set right in high and low seasons, focused on profitability and the achievement of strategic goals. 

Selling hotel rooms has always presented a unique challenge, where every day begins with a number of available rooms ready to sell that will perish. Once the night is over, if the room is not filled, the opportunity is lost.

Naturally, filling a room with the right customer at the right time for the right price is the goal. Enter the hotel revenue manager who continuously solves this ever-changing puzzle, where occupancy and ADR are two key pieces. 

By analysing vast amounts of data, from booking patterns to guest reviews, hotel revenue managers can help hotels to capitalise on peak periods while also maintaining a steady flow of guests during quieter times.

However, it’s not just about filling rooms; it’s about maximising value. Hotel revenue managers must think several moves ahead, considering various factors like seasonal trends, local events, competitor pricing, and even global economic shifts. Their strategies must be fluid, adapting to ever-changing market conditions.

Moreover, in today’s digital age, with the proliferation of online travel agencies and guest review platforms, the role of a revenue manager has expanded. They must also navigate the complexities of distribution channels, ensuring that their hotel is visible and appealing to potential guests from all corners of the globe.

In essence, the expertise of hotel revenue managers ensure that hotels not only attract guests but do so in a manner that optimises profitability. In an industry where margins can be slim and competition fierce, the importance of a skilled revenue manager cannot be overstated.

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What does a revenue manager do in a hotel?

Revenue managers usually sit alongside sales and commercial teams, who attract potential guests and often require pricing recommendations for groups, corporate clients, and any other business.

Know that it is not uncommon for them to disagree: while a sales manager is incentivised to bring in the group of 10, the revenue manager might disagree, when there are only 10 rooms left for that night and demand is high. 

In this case, the revenue manager anticipates they could sell those rooms at a higher rate, without a group discount, to other guests. As much as hotel revenue management appears like a science, it also is an art and requires interpersonal skills to get to the most desired outcome for all.

Hotel revenue manager job description 

Whether you are looking to get into the field yourself or interested in hiring the right person for the job, you might ask: what does a revenue manager do in a hotel, and what should be detailed on their job description? 

Let’s look at experience, skills and characteristics before diving into responsibilities typically included on a hotel revenue manager job description.

Skills and Experience

Depending on the level of the role, whether they are part of a team or the one go-to Revenue Manager for the hotel, the required experience may vary. 

At minimum, you are well advised to look for prior experience in revenue management, as well as experience in using IT systems to a degree that matches your needs.

This may involve manually producing reports or could be their ability to discern differences between data from different platforms and technologies or even consolidating data and data mining.

Hotels that use specific revenue management systems will be keen to find someone who is not a first-time user, but perhaps brings insights and skills with the tool that will benefit them.

At the same time, technology should not become a barrier when it is teachable, especially because this facet of the role will continue to evolve over time.

An experienced revenue manager is used to presenting their insights to hotel leadership and convincing key stakeholders of strategies to apply. 

Data and technology power their insights, but their interpretation of price elasticity will also be fuelled by prior scenarios they have lived through and some gut instinct.

Personality and Characteristics

From a personality standpoint, expect a revenue manager to be a strong problem-solver, who brings creative solutions and who is able to communicate complex scenarios to others with ease.

Their best attempts at spotting potential issues or opportunities early and solving them, will only come to fruition if they can make others understand and rally around the chosen strategy.

Traditionally, revenue managers were expected to show signs of aptitude for maths and analytics. Today, the demands of the role have evolved to include a lot of technology, and internal and external data, ultimately adding a desire to work with new technologies to the mix of characteristics.

And while developments are not showing signs of slowing down anytime soon, someone who is keen to continue learning will find joy in a revenue management position.

Responsibilities

Hotel revenue manager responsibilities and duties will, to varying degrees and dependent on a hotel’s particular need. 

A hotel revenue manager’s daily checklist can include any of the following:

• Running or supporting the revenue management team, including pricing of the hotel’s reservations and meeting & events or other enquiries
• Delivering day-to-day as well as promotional strategies in support of key revenue management metrics, such as ADR, RevPAR, occupancy and channel mix
• Handling departmental goal setting and budget, including negotiations with third parties on commissions
• Reviewing business performance and providing recommendations to improve financial performance
• System maintenance and ongoing training and education

Hotel revenue manager salary

The pay range for a hotel revenue manager varies significantly depending on the aforementioned skills, experience and educational factors. It also varies depending on where you are – and who you ask.

• In the United States, Salary.com and PayScale report average salaries between USD$75,000 – USD$100,000 and USD$31,000 – USD$81,000, respectively.
• In Canada, salaries are between C$47,000 – C$85,000.
• In Australia, the average salary is around AU$66,500.
• In the United Kingdom, the average salary for a revenue manager is about £43,500.

The size of the hotel will also make a significant difference to salary expectations. Generally, revenue managers at larger hotels will also have team management responsibilities, as well as have a hand in policy development and liaising with senior management and other departments. 

Revenue managers for smaller hotels, on the other hand, may not have a team to manage, and may be expected to analyse booking trends, advise on pricing strategies, and generate revenue reports.

How do leading hotel revenue managers use technology?

Revenue managers rely on internal as well as external data for their decision-making.

Internal data includes any piece of information that is generated by the hotel, and would, for example, reside in the PMS. This includes historic performance data as well as future reservations, measured in pick-up and pacing.

External data is information that the hotel cannot generate themselves. 

Examples are STR reports, which inform the hotel of its comp sets performance, their ADR and occupancy levels by scale. This type of performance data empowers meaningful comparisons, making it easy to understand if an achieved ADR or occupancy level were better or worse than at competing hotels. 

External data also includes creating easy access in a digestible format to publicly available information: this includes competitors’ rates or a hotel’s own rate parity across channels, through rate shopping.

Most recently external data is also providing demand forecasting tools: current examples rely on either segmented data feeds by hotels anonymously disclosing their on-the-books data or tracked search activity, indicating local market demand.

Skilled revenue managers know how to interpret each of their data sources independently, and can draw a cohesive and meaningful understanding from all data sources combined.

To make their job easier, many leading revenue managers use integrations between tools, for example integrating external data into the same view as their internal data; hotel commerce platforms are an example of a tool that unites information in this way.

Revenue management systems (RMS), from basic to advanced, tend to offer a variety of integrations and rules, thereby making their price recommendations useful but also open to the human touch of proficient revenue managers.

Technology alleviates the strain of processing ever-growing amounts of data manually and empowers nimble, real-time strategies and decision-making: a skill that, when applied well, can make a significant difference to performance.

“At first I thought it was just a myth that using SiteMinder could boost revenue. But it turned out to be true. Revenue did increase, we are also more efficient in terms of time; we can get more work done.”

Shadi Wijaya,

Corporate Director of Revenue

The Phala Group

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Three tips for hotel revenue managers to boost income and profit

As a crucial part of a hotel’s financial strategy, revenue managers must balance guest satisfaction with profitability, and a proactive approach to learning and adapting to new trends is essential. While the role is far more complex than what can be distilled into a few short paragraphs, the three below tips provide a foundation to build success on for revenue managers. 

1. Know your changing cost

With high inflation rates and an increasing cost of labour, the cost that it takes to operate a hotel has changed. Profit margins have changed, and so your RevPAR and ADR also need a regular pulse check during a volatile time.

Economic conditions vary year-on-year, so expect operating costs to continue to adjust. 

As an advocate for the story behind the numbers, revenue managers need to remain clear on what success looks like in any given scenario and help their peers navigate the landscape.

2. Understand the price recommendation

RMS tools’ price recommendations are powered by complex algorithms, but the best revenue managers have a solid understanding of just how the system arrived at its recommendation.

This knowledge will help them spot any anomaly or uncharacteristic swing that may be driven by the data that feeds the system or any other unusual circumstance and lets them adjust accordingly in an informed way, if needed. 

In a similar way, technology can break and integrations can fail: a human’s ability to spot any such issue quickly is crucial. Suppliers and their user support should be able to provide any such education and ongoing information about updates to revenue managers.

3. Master new types of customers before your competitors do

It’s not just cost that changes every year, but locations worldwide have also been welcoming new types of travellers: for example, the traveller who also works (sometimes with their families), as opposed to the traditional business traveller. 

Understanding nuances in your local market demand and how specific offers and inclusions may help attract a desirable type of traveller to your hotel can make a significant difference.

Customer data as well as human insights by customer-facing teams are crucial, so make sure you actively listen for this type of information and apply it to gain an edge.

EBITDAR stands for earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs (EBITDAR). It’s useful for businesses such as hotels, restaurants or casinos that have unique or variable rent costs.

EBITDAR exists alongside, but should not be confused with, earnings before interest and tax (EBIT) and earnings before interest, tax, depreciation, and amortisation (EBITDA).

It helps analysts understand the ability of the business to generate profits, even after spending huge rent or restructuring costs as a part of its operations.

EBITDAR is yet another way to track your hotel’s financial health. You might be more used to tracking metrics such as RevPAR, TrevPAR, or GOPPAR, but EBITDAR can really help you measure your performance against similar properties in the industry.

Let’s dive deeper into EBITDAR, why hotels should use it, how to calculate it, and how it can help increase hotel revenue.

Why should hotels use EBITDAR?

For hotels, EBITDAR offers a more comprehensive view of operational performance by excluding the costs associated with property rentals or leases. This is crucial because, unlike other businesses, hotels often have substantial rental or lease expenses, which can distort the true picture of their operational efficiency when using traditional metrics like EBITDA. 

By using EBITDAR, hoteliers can make more informed decisions about their operations, identify areas for improvement, and benchmark their performance against competitors in a more apples-to-apples comparison. In an industry where margins can be thin and operational efficiency is paramount, EBITDAR serves as a valuable tool for hotel managers and investors alike.

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EBITDAR vs EBITDA: Is it the same? 

EBITDAR and EBITDA are similar, except that EBITDAR excludes restructuring and/or rent costs.

Both are used to compare the performance of two companies but using EBITDAR better allows you to remove variability from your analysis.

EBIT is also used as a basis for both metrics, and is needed before you start calculating your EBITDAR.

How to calculate EBITDAR

EBITDAR = EBITDA + Restructuring/Rental Costs

Remembering that: EBITDA = Earnings before interest, taxes, depreciation, and amortisation.
​
For example, if your hotel earns $1.6 million in a year, and it has $600,000 in total operating expenses, you first need to subtract operating expenses from revenue. This results in $1 million of EBIT (operating income).

Now consider that within the operating expenses there is depreciation of $10,000, amortisation of $10,000, and rent of $70,000.

To find the EBITDAR, you need to exclude depreciation, amortisation and rent ($10,000 + $10,000 + $70,000). This means adding it back onto your operating income.

EBITDAR = $1 million EBIT + ($10,000 + $10,000 + $70,000) = $1.09 million.

What is a good EBITDAR?

For many hotels, EBITDAR may not be that different from EBITDA. As such, you can apply the same margin benchmark as EBITDA: around 10% can be considered a strong EBITDAR margin (EBITDAR / total revenue). 

When to use EBITDAR 

Using EBITDAR is particularly helpful when comparing peer companies within the same industry, or even different properties within the same company, as it reduces variability.

For example, similar hotels in different cities and different parts of a country will have significantly different rent costs. Using EBITDAR allows you to compare the performance of the properties based on their core income activities, giving you a clearer picture of which one is more profitable.

Note that EBITDAR is most applicable for large businesses or businesses with a lot of assets, such as an enterprise level hotel brand.

It can help with:

• Viewing overall performance
• Comparing performance
• Budgeting and restructuring decisions
• Investing

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Corporate Director

Chatrium Hotels & Residences

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Benefits of using EBITDAR formula for hotels

Using EBITDA as part of ongoing performance analysis has a number of advantages for hotels:

• Financial performance – EBITDAR gives a more accurate representation of a hotel’s earnings by excluding rental and lease expenses. This allows stakeholders to gauge the true profitability and financial health of the establishment.
• Comparison of other properties – By using EBITDAR, hoteliers can benchmark their property against competitors or other properties within a chain, ensuring a fair comparison that excludes varying rental or lease costs.
• Operational efficiency – This metric focuses on the core operations of a hotel, helping management identify areas of improvement and streamline processes for better profitability.
• Valuation of asset – EBITDAR can be a crucial factor when determining the value of a hotel as an asset, especially when considering potential sales or acquisitions.
• Management evaluation – By excluding external financial obligations, EBITDAR allows for a clearer assessment of management’s effectiveness in running the hotel’s core operations.
• Risk assessment – EBITDAR can highlight potential financial risks by providing a clearer picture of earnings before major expenses. This can be instrumental in making informed decisions about future investments or operational changes.
• Transparency – For investors and stakeholders, EBITDAR offers a transparent view of a hotel’s performance, ensuring that they have a clear understanding of where the hotel stands financially without the distortion of rental or lease costs.

GOPPAR means gross operating profit per available room. GOPPAR is a popular performance metric because it deals with measuring hotel profits, which provides a strong and clear picture of overall business health.

Hotel revenue managers commonly have key performance metrics around GOPPAR and often an entire revenue team can be involved in its analysis.

Having this information on hand allows you to build a much stronger strategy moving forward, ensuring your hotel is always growing.

GOPPAR is a necessary performance indicator to track on a regular basis at your hotel if you want a good idea of your bottom line.

Just like other metrics such as RevPAR or TrevPAR, GOPPAR allows you to look at key revenue insights and make smarter business decisions based on data.

So let’s take a closer look at how GOPPAR applies to your hotel.

How to calculate GOPPAR

GOPPAR is calculated by dividing the gross operating profit (GOP) by the total available rooms (TAR) in the hotel.

The GOPPAR formula looks like:

GOPPAR = GOP / TAR

GOP is the total revenue – total operating expenses. This includes revenue from all sources, such as rooms, food and beverage, and other sources, minus expenses such as labour, utilities, and maintenance.

A GOPPAR calculator is similar to a RevPAR calculator except it eliminates fees and expenses from the revenue figure first.

For example if you want to measure it for the period of a year:

• 100 rooms x 365 days in a year = 36,500 available rooms in the year
• Total hotel revenue, including room revenue, food and beverage etc = $6 million
• Expenses including supplies and salaries etc = $2.5 million
• GOP = $3.5 million
• GOPPAR = $3.5 million/36,500 = $96

So this means in the chosen year, each individual room is earning an average profit of $96.

Why should you use the GOPPAR formula at your hotel?

GOPPAR is a beneficial metric to consider because it not only provides you with an insight of the revenue that you are generating per room, but also the costs that are associated with generating this revenue. It is one of the most effective ways to analyse the bottom line of hotel performance and develop plans to improve it.

Regular monitoring gives you an opportunity to make minor adjustments to your revenue management strategy along the way, such as figuring out how you can cut costs without a detrimental effect on service.

For example, while you might be excelling in high level indicators such as your average daily rate, there could be other areas in which you have too many expenses. Staffing is one area that can impact profitability – in the low season, do you need as many staff hours as normal? Perhaps there’s a chance to save money and increase profit.

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Benefits of using GOPPAR calculations for your hotel

Financial performance

Utilising GOPPAR calculations provides a comprehensive view of your hotel’s financial health. Unlike other metrics, GOPPAR considers both revenue and operational costs, giving you a more holistic understanding of your hotel’s profitability and an instant read (and point of comparison) on how your business is performing.

Room profitability

Typically, GOPPAR is used as a holistic, hotel-wide metric. However, it is possible to calculate GOPPAR for different types of rooms (e.g. standard rooms vs suites), if you can break down operational costs (e.g. maintenance, staffing, etc) and room-type-specific revenue to that level of detail. 

If two different room types generate the same revenue, the one with lower operational costs will have a higher GOPPAR, highlighting its greater profitability.  Understanding the profitability of individual room types can guide pricing strategies, promotional efforts, investment decisions, and operational adjustments, allowing you to focus your efforts on improving GOPPAR on those aspects of your hotel that will have the most impact.

Benchmarking

With GOPPAR, you can benchmark their performance against competitors or industry standards. By comparing your GOPPAR with that of similar establishments, you can gauge where you stand in the market and identify areas for improvement or innovation. Of course, this still requires that you have reliable competitor insights available.

Cost control

By breaking down profits on a per-room basis, GOPPAR helps identify cost inefficiencies for the hotel as a whole. Recognising which hotel sites are underperforming in terms of profit can guide cost-cutting measures, ensuring resources are allocated more effectively and revenue generation strategies are better targeted.

Improve guest experience

A higher GOPPAR often correlates with a better guest experience – and a lower GOPPAR may indicate that guests aren’t willing to book rooms, buy upgrades, or be enticed by your ancillary services. By focusing on increasing this metric, hotels are indirectly enhancing the services and amenities they offer. A satisfied guest is more likely to return and recommend, driving both revenue and improving your reputation.

“Since implementing SiteMinder, we have experienced a significant increase in online bookings, up to 60%, through effective yield management strategies based on market trends. This has minimised revenue loss from vacant rooms while maximising our occupancy rates.”

Prapinporn Phanchakorn,

Assistant Director of Sales

Silavadee Pool Spa Resort

Read more

GOPPAR vs. RevPAR

While GOPPAR and RevPAR (revenue per available room) are both measured using available rooms, there are some big differences.

RevPAR gives you a broad view of how well your property is operating, by uncovering how much revenue each room is generating.

GOPPAR goes further, making it possible to understand what factors are impacting overall profitability – since it takes into account expenses from labour, food and beverages, amenities, and more.

Both are useful and it’s still good news if you are increasing your property’s RevPAR, but GOPPAR should certainly be considered before any major strategic decisions are made.

It was introduced in 1998 and can be calculated hourly, weekly, or monthly.

Tracking the RevPASH metric is important for understanding the usage and revenue of a ‘seat’ and allows you to better plan your food and beverage operations.

While you might be more accustomed to tracking metrics like RevPAR, ADR, or TrevPAR at your hotel, RevPASH is also an incredibly important metric to measure, especially if you have any kind of restaurant, theatre, or similar outlet in your property where guests gather and spend revenue.

So, let’s explore what RevPASH means for your business.

What is the use of RevPASH in hotels?

In the context of hotels, especially those with dining facilities, RevPASH helps in determining how well the available seating space in a restaurant or dining area is being used to generate revenue. The higher the RevPASH, the better the performance.

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How to calculate RevPASH

To calculate RevPASH you need to divide total outlet (e.g restaurant) revenue by the available seats multiplied by opening hours.

The formula for calculating your RevPASH is as follows:

RevPASH = Total revenue / available seat hours

Total Revenue means the total sales generated during a specific period. It could revenue from food, beverages, and other services offered by the restaurant.

Available Seat Hours is the total number of seats available in the restaurant multiplied by the number of hours the restaurant is open for service. It reflects the potential capacity for generating revenue.

For example: $15000/(50 seats x 8 hours) = RevPASH of $37.50.

Once you know how to calculate RevPASH you can start thinking through how you can enhance the revenue of your hotel restaurant. Is it a matter of staying open for longer, getting more customers in at the peak of the day, or running promotions?

What does a high RevPASH mean?

A high RevPASH in a hotel indicates optimal and efficient utilisation of the available seating space within the hotel’s dining facilities to generate revenue. What does that actually mean though? Here’s a breakdown:

• Optimal space utilisation – A high RevPASH means that the hotel is effectively using its dining spaces. Whether it’s the main restaurant, a café, or a rooftop bar, the seats are frequently occupied, and the turnover rate is high. This suggests that guests are consistently choosing to dine in the hotel’s facilities, and the seating arrangements are accommodating a good number of patrons throughout operational hours.
• Increased revenue generation – A primary objective of monitoring RevPASH is to gauge revenue generation. A high value indicates that the hotel’s dining facilities are not just attracting guests but are also successfully translating those visits into significant revenue. This could be due to a combination of factors such as competitive pricing, quality of food and service, or unique dining experiences offered.
• Operational efficiency – A high RevPASH can also hint at efficient operations. It suggests that the hotel is effectively managing its resources, including staff scheduling, inventory management, and promotional activities, to ensure that the dining areas are busy and profitable during open hours.
• Guest satisfaction – While RevPASH is primarily a financial metric, a consistently high value can indirectly indicate guest satisfaction. If guests are choosing to dine frequently at the hotel’s facilities and are spending more, it’s a good sign that they are enjoying the dining experience, which can encompass food quality, ambiance, service, and overall value for money.

A high RevPASH in the hotel context is a positive indicator of both financial success and operational effectiveness for the hotel’s dining facilities. It suggests that the hotel is not only attracting guests to its dining areas but is also providing an experience that encourages them to spend, thereby maximising revenue from available seating space.

What does a low RevPASH mean?

As you can imagine, a low RevPASH is an indicator that something isn’t going well for the hotel’s dining areas, either due to internal operational issues or external challenges. A low RevPASH could indicate:

• Underutilisation of space – A low RevPASH suggests that the hotel’s dining spaces are not being used to their full potential. The seats might remain unoccupied for longer durations, leading to wasted space and missed revenue opportunities.
• Reduced revenue generation – A primary concern with a low RevPASH is that the hotel’s dining facilities are not generating the expected revenue. This could be due to various reasons, such as uncompetitive pricing, lack of promotions, or an unappealing menu.
• Operational challenges – Operational inefficiencies might be contributing to the low RevPASH. This could include mismanagement of inventory, leading to frequent out-of-stock situations, or poor staff scheduling, resulting in either overstaffing during slow periods or understaffing during peak times.
• Guest dissatisfaction – A consistently low RevPASH can be an indirect indicator of guest dissatisfaction. If guests are choosing not to dine within the hotel’s facilities or are spending less when they do, it might suggest issues with the quality of food, service, ambience, or perceived value for money.
• External competition – The hotel might be facing stiff competition from nearby restaurants or eateries, drawing guests away from the hotel’s dining options. This can be particularly challenging in areas with a vibrant dining scene.
• Lack of marketing and promotions – The hotel might not be effectively marketing its dining facilities or offering promotions to attract guests. A lack of visibility or awareness among guests can lead to reduced footfall and spending.
• Seasonal or external factors – Sometimes, external factors, such as off-peak seasons, local events, or even economic downturns, can impact the dining habits of guests, leading to a temporary dip in RevPASH.

Why should you use the RevPASH formula at your hotel?

RevPASH is a great metric to track daily if you have a hotel restaurant. It will let you see the impact of any adjustments you make to your revenue management strategy, and identify any challenges you need to address.

For example, if you notice that guests are coming to eat at your restaurant in small parties of two or three, you could consider changing your layout to include more small tables, allowing more total guests to dine on average.

Or you could attract more diners with meal discounts but raise the prices on your drinks. Keeping an eye on the menu of your closest competitors is also a good idea to see how you can outdo them with your own.

Whatever tactics you try, they have no value if you aren’t measuring their success with RevPASH.

TRevPAR stands for total revenue per available room. TRevPAR accounts for all the ways your hotel makes money and applies it back to how many rooms you have.

For example, your hotel will take revenue from all sorts of places including your bar, restaurant, parking, pools and spas, mini bar, massages, exercise classes, gym, retail sales, activity bookings etc.

There’s a lot more money coming in outside of reservations. However, it’s still relevant to track this against your rooms because the money is still being generated from the guests in those rooms.

TRevPAR is a key performance indicator to track on a regular basis at your hotel. Just like other metrics such as RevPAR and ADR, TRevPAR will give you key insights into how revenue is being earned at your property and what you can do to optimise it.

So let’s take a closer look at the meaning of TRevPAR.

Why should you use the TRevPAR formula?

Since TRevPAR takes into account all revenue of your hotel and relates it back to the number of rooms, you could argue that it provides a better ‘big picture’ view than a metric like RevPAR does.

Especially if you are a larger hotel, different departments such as restaurants, bars, or other amenities can have a big impact on overall business success. TRevPAR is a great way to consider all the factors that generate revenue from guests.

Tracking TRevPAR also allows you to look into how you can gain an edge on competitors or learn more about your guests. If you compare your hotel with competitors and notice price disparities between similar services, there may be a chance to raise some of your fees and increase your revenue, without losing business.

Similarly, if you notice guests are flocking to a particular amenity or menu item, you can safely increase prices without harming popularity – again increasing your TRevPAR figure.

How do you calculate TRevPAR?

TRevPAR is calculated by dividing total revenue by the total number of rooms. The TRevPAR calculation can be summarised as:

TRevPAR = Total Revenue / Total Available Rooms

Where:

• Total Revenue is the sum of all revenue streams for a given period (e.g., daily, monthly). This includes room revenue, food and beverage revenue, and any other sources of income; and,
• Total Available Rooms is the total number of rooms available for sale during the same period.

So if your hotel revenue for a day was $15,000, for example, and your hotel has 110 rooms, TRevPAR would equal $136. This means that, on average, each available room (whether occupied or not) contributed $136 to your hotel’s total revenue for that day.

Naturally you’ll want to try to increase TRevPAR as this will indicate an increase in average revenue, occupancy, or both.

TRevPAR vs RevPAR

At first glance TRevPAR appears very similar to RevPAR (Revenue per available room) but it’s quite a different measurement. While RevPAR relates only to room revenue, TRevPAR accounts for the total revenue of your property and measures it against your guest rooms.

Both are useful and perfectly viable metrics to track, with RevPAR providing the quickest and easiest way to keep an eye on your hotel’s performance.

However, neither takes into account any costs incurred or the actual occupancy rate of your hotel.

Top strategies to increase TRevPAR for your hotel

To elevate your TRevPAR, it’s essential to adopt a multifaceted approach that not only attracts guests but also maximises their spending. Here are some top strategies to consider:

Segmented marketing

Understanding your target audience is the first step to effective marketing. Segment your audience based on demographics, travel purpose, or booking behaviour. Tailor your marketing campaigns to resonate with each segment, ensuring that your promotions and offers align with their preferences and needs. For instance, business travellers might value fast Wi-Fi and conference facilities, while families could be drawn to package deals that include meals or local attractions.

Apply dynamic pricing on room upgrades

Dynamic pricing isn’t just for standard room rates. Apply this principle to room upgrades as well. Monitor demand and adjust the price for suite or room upgrades based on occupancy rates, seasonality, or special events. This can entice guests to opt for a more luxurious stay, boosting your revenue per booking.

Personalise guest experience

A personalised guest experience can lead to higher guest satisfaction and, consequently, increased spending. Use data from previous stays to tailor services to repeat guests. Whether it’s their preferred room type, a bottle of their favourite wine waiting in their room, or recommendations based on their past activities, these personal touches can enhance guest loyalty and encourage additional spending.

Enhance direct bookings

While OTAs can increase visibility, direct bookings often offer higher profit margins. Invest in a user-friendly website, offer exclusive deals or perks for direct bookings, and employ retargeting strategies to bring potential guests back to your site. By driving more direct bookings, you reduce commission costs and have better control over the guest experience from the start.

Offer add-ons

Maximise revenue by offering guests add-ons during the booking process or their stay. This could range from breakfast packages, spa treatments, guided tours, or even themed dinner nights. By bundling services or offering exclusive experiences, you can increase the average spend of each guest, contributing positively to your TRevPAR.​

ADR is metric used in the hospitality industry to help  measure the overall performance of a hotel business. ADR means average daily rate which is defined by the average income per occupied room your hotel makes in a set period of time.

Your hotel average daily rate is crucial because it is one of the key indicators of your hotel’s financial health. Data is becoming ever more valuable as you look for ways to recover from economic setbacks and gain an edge over the competition.

Hotel ADR becomes a strategic ally that paints a clearer picture of your revenue landscape,  especially in a time when hoteliers are still navigating the challenges of economic recovery post COVID-19 and looking to grow their business.

This blog will provide a comprehensive guide to ADR, including why it’s so important and how your hotel can improve average daily rates.

Why is ADR important in the hotel industry?

ADR is a quick and effective method of measuring your hotel’s performance. By looking at your average daily rate, you can easily start to strategise ways to boost your bookings and revenue.

You can use hotel ADR to forecast for specific weeks, months, or seasons, and then set performance goals for your business – making plans to improve any areas you thought you could have done better in the past.

For example, if you look at your historical ADR figures and identify trends, you’ll start to understand your market better, as well your property’s seasonality.

What is the ADR formula for hotels?

The formula for ADR is generally presented as room revenue / number of rooms sold.

For example if your hotel earns $5000 from 20 rooms sold, ADR = $250.

You can apply this formula for any set time period you choose.

How to calculate ADR

The best way to calculate ADR is to use the above formula. You can also use an online calculator which will let you make a number of calculations quickly and easily.

Try it for yourself by using SiteMinder’s free ADR calculator.

Factors that affect hotel average daily rate

Managing the average daily rate is a crucial aspect of your hotel’s revenue strategy. It’s not just about the final number; it’s about understanding the factors that shape that number and how you can leverage opportunities and mitigate risks. Here’s what you need to know:

Location

Location is a factor in practically all hotel operations, and ADR is no exception. If your hotel is in a prime area or near major attractions, you’ll likely command a higher rate. It’s essential to consider how the convenience and appeal of your location influences your pricing, as well as how you can best leverage the uniqueness of your location to differentiate yourself from the competition and secure more bookings.

Seasonality

Seasons change, and so will your average daily rate as a result. Peak tourist seasons, holidays, and even specific weekdays can affect your ADR. Compare your ADR over a weekend during summer to a winter Wednesday to see what we mean. Knowing how your ADR changes season by season will help you best understand how to adjust your rates and strategy to stay competitive throughout the year.

Competitor pricing

Your competitors’ pricing strategies can influence your ADR. Regularly monitoring what similar hotels are charging helps you position your hotel strategically in the market, ensuring that your pricing aligns with your brand and offerings. Even for luxury hotels, it’s a fact that price is one of, if not the most, important factor in whether a guest chooses to book with your or your nearest competitor.

Hotel type and reputation

Your hotel’s category and reputation in the market play a vital role in determining your ADR. Depending on your audience, guests Luxury amenities, guest reviews, and ratings all contribute to how much guests are willing to pay. Building and maintaining a strong reputation allows you to command higher rates.

Special events

Special events, conferences, or festivals near your hotel can all spike demand and thus average daily rate. Being proactive and aligning your pricing and marketing strategy with these events can create opportunities to increase your ADR during those periods.

Economic factors

Good or bad economic conditions can impact how much your guests are willing or able to spend on particular aspects of their travel experience, accommodation included. 

Booking channels

Different booking channels come with unique costs and benefits. Balancing these channels and understanding their impact on your net ADR is key. Encouraging direct bookings and managing commissions from OTAs can help you maintain a healthy ADR.

Guest segments

Understanding your guest segments allows you to tailor your pricing to different types of travellers. Whether it’s business travellers, families, or solo adventurers, offering targeted pricing ensures that you attract the right guests at the right price.

How to increase ADR in a hotel?

You can increase your hotel’s ADR by raising your room rates. However, simply increasing room prices isn’t always the only, or best, option.

Here’s a list of 8 simple tactics you can try at your hotel to increase ADR.

1. Focus on increasing the spend from high-value guests

Your OTA channel partners will have data on which guests deliver higher ADR on average, such as business travellers or couples travelling for leisure. You can then strategise on how you target these segments.

2. Track the overall economy and market demand

By keeping track of market fluctuations you’ll have a better idea of when you can raise prices, by how much, and for how long.

3. Keep an eye on the competition

By analysing and tracking your closest competitors, you’ll be able to find points of difference that allow you to boost your price. You’ll also see when they are changing their rates and decide if you should or can do the same.

4. Upsell and cross-sell

Giving guests the option to upgrade and buy extra items or services at the point of booking will help drive up the spend from each individual guest, in turn boosting your hotel ADR.

5. Use promotions and packages

Incentives like discount promotions and all-inclusive packages can allow you to increase your occupancy rates. With higher occupancy, you have more chances to win revenue from guests during their stay.

6. Offer extended stays

Find ways to keep your already sold rooms occupied by enticing guests to stay an extra night; perhaps by offering them a free meal and drink at your restaurant.

7. Personalise wherever possible

By personalising your service you’ll build a stronger relationship with guests. This makes it more likely that they will spend extra, leave positive reviews, and come to stay again.

8. Work hard on your online reputation

The better your reviews and online reputation is, the higher your conversion rate will be. This means your cost of acquisition will decrease and the guests who stay with you will be highly motivated.

“Since implementing SiteMinder, we have experienced a significant increase in online bookings, up to 60%, through effective yield management strategies based on market trends. This has minimised revenue loss from vacant rooms while maximising our occupancy rates.”

Prapinporn Phanchakorn,

Assistant Director of Sales

Silavadee Pool Spa Resort

Read more

How to set KPIs for your hotel average daily rate

It’s unlikely your hotel ADR will remain steady through a month or year, as there are many factors that can influence it. It’s important to understand all the potential impacts on your average daily rate so you can know how to respond.

Some KPIs that will tell you more about how you can optimise ADR include:

• Events in your area
• Seasonal travel trends
• Global economic factors
• Traveller behaviour changes
• Naturally occurring events such as the weather
• High and low demand periods
• Channel performance

By looking through these lenses, you’ll have a much clearer overall picture of your business and how ADR relates to that.

For instance, if you’re in a high demand period but your ADR isn’t increasing you need to figure out why and how you can remedy it.

It’s also important to remember ADR only tells part of the revenue story at your hotel. For example, a higher ADR doesn’t necessarily mean more revenue for your business – ADR might go up but it doesn’t help if your occupancy has gone down.

With this in mind, make sure you’re tracking other key metrics such as RevPAR, GOPPAR, RevPAM and more.

Seven expert interviews with tangible insights and a wealth of knowledge. Get actionable knowledge your hotel can take away and put into practice quickly.

In this edition we spoke to Markus Seemann, founder of 9seemeilen Hospitality, about all things hotel revenue management.

Every hotel deserves professional revenue management

Having founded 9seemeilen Hospitality in 2019 after almost two decades of experience in large hotel chains such as Accor and Starwood, Markus Seemann has made it a mission to give hotels of all sizes access to professional revenue management services, one that he speaks passionately about.

“I believe that not only chain hotels should have access to revenue management but also all other hotels. Mostly, however, it fails because either the necessary expertise is not available or the time for it is missing. This is where we come in,” he explained. “We support the hotels in strategic revenue management. This means that we develop new strategies together with the hotel in order to lead the business into an economically successful future.”

It’s a full scale business that keeps Markus busy, however he still relishes the chance to get away from the desk, keeping an adventurous spirit and a passion for travel alive.

“I spend a lot of time hiking in the mountains. Being so close to the Austrian Alps, that’s a natural choice,” he said. “It clears my head for new things and sharpens my focus on the essentials. It’s a nice side effect of the sometimes hour-long and very challenging ascents.”

“Another hobby of mine is diving. From the heights to the depths, so to speak. The sea is so breathtakingly beautiful and I enjoy the silence underwater. I prefer to be in warm waters like off Mexico or in the Red Sea. Travelling is also a passion of mine, which fits quite well, as this allows me to discover new hotels again and again.”

When hoteliers need to seek help and what it takes to succeed

As every hotelier knows, revenue management can be a highly complex challenge. It becomes a full-time job at larger hotel brands wanting to maximise revenue and profit.

For hotels that may not have the resources, expertise, or budget to get it right, Markus and his team are there to help.

“Hoteliers should always resort to external help when there is a lack of the two factors – expertise and/or time,” he explained. “Hoteliers simply cannot do everything 100% themselves all of the time.”

Time is often the enemy of hotel management, and for revenue management to be effective it needs to be given full attention. So, if a property is struggling Markus will take a holistic approach to improving its performance.

“We first look at the existing costs in the business and, on this basis, develop a new rate model and distribution strategy that is more agile, flexible, and efficient,” he detailed. “The goal is to generate the best possible revenue, to further expand market share and to position the property optimally through price.”

“Taking a holistic approach also means looking at processes within the hotel, as well as the tech stack.”

2022 is the year of tech stack optimisation and mastering common challenges

Each year brings greater demands for hoteliers to respond to. Greater demands from guests, and higher demands to collect and analyse data with which to make smart and fast decisions. Maximising performance depends on the ability to easily access accurate data and be able to draw conclusions and act accordingly.

It’s no easy task if your tech stack isn’t working together and your data is fragmented. Markus said 2022 is crunch time for hoteliers looking to get things in order.

“In the past two or three years, there has been a tremendous amount of software development for hotels. We now have so many options and tools at our disposal, and we should take advantage of them.”

“Often, outdated technology creates major problems for hotels. For example, it means certain processes have to be repeated over and over again because there may not be an appropriate interface. This is frustrating. Not only for the employees but it can ultimately end up impacting the guest experience.”

With this in mind hoteliers should look at how they can centralise their operations under one roof to increase efficiency and growth potential. Platforms such as SiteMinder offer everything a modern hotelier needs to succeed in growing revenue and profit.

When it comes to revenue management in particular, a good idea for hoteliers is to learn how they can conquer the challenges they are constantly faced with. Markus explained a few of them.

“Basically, I see a few points over and over again. One of them is that most hoteliers have never questioned what they actually have to take in at least for their rooms so that all costs are paid and covered at the end of the year,” he said.

“Most of the time, prices are based on gut feeling. But gut feeling has never been a good advisor when it comes to money and numbers. A proper break-even point analysis with a corresponding calculation of price limits is existential for every hotel. Otherwise, there is no target to work towards.”

Only by focusing on key performance indicators can hoteliers control the fate of their business in real-time and set a plan for future success.

“This is where we come, of course,” said Markus. “These are exactly the points where we support the hotelier to give them back the rudder of their business.”

Best practice revenue management and success stories

So, how much of revenue management is data and how much of it can be handed over to intuition and creativity? Well, Markus says there is room for both but it is conditional.

“It depends a bit on what period of the year I am in and what I want to try. If it’s peak season and I need to generate the maximum revenue, then I’d rather not experiment. I prefer to rely on a consistent analysis of hard numbers, data and facts and stick to my plan,” he said.

“In the off-peak times, however, creativity can certainly be given more rein. Basically, I am a great friend of creativity in this area. Unconventional paths may also be taken to reach the goal. But of course you must not lose sight of the key figures. If they develop negatively, you should get back on track very quickly. Then the experiments should stop.”

This prevailing focus on the end result is why Markus has been so successful in helping the hotels that have come to him for assistance. The pandemic delivered one of his most memorable and satisfying client experiences.

“It was 2020 and we were in the middle of the first lockdown. No demand, no guests, no revenue. A very difficult time for all of us.”

“Before this in 2019 we were working with a client, adjusting his rates almost daily and keeping an eye on his metrics. COVID-19 put a spanner in the works but when it became clear hotels in the region would slowly reopen we needed a plan.

I assumed that the demand would increase by leaps and bounds – my customer disagreed and said he would like to take over the adjustment of the prices for the month of June himself, as he would need as much occupancy as necessary to make up for the missing turnover on the previous two months.

We basically had different views on this, as I think that starting a price war on your marketplace is not a good signal. In addition, more occupancy does not necessarily result in more revenue.

This is exactly what happened. At the end of June, my customer had an increase in occupancy of almost 10%, but the ADR and revenue was far below the previous year and the possibilities.

Afterwards we took over the rate control for him again and in the following months we were able to see sales increases of more than 20% and increases of the RevPar of almost 18.00 EUR in one month.

That was great! Happy customer – happy us!”

Thank you for the chat Markus! Find out more about Markus and his services here.

Cash flow management, the real or virtual movement of money at your hotel, is important for maintaining the smooth operations of your business.

The definition of cash flow management is “the process of monitoring and managing the money that travels in and out of your business.” The proper management of cash flow in the hospitality industry allows a hotelier to accurately forecast how much money the business might need on hand at any given time in order to meet its financial responsibilities.

Cash flow problems occur when the cash timing of your expenses and income are not aligned. If you have bills to pay, but there is lag from invoices you have sent out, your cash flow is interrupted and you start to experience debt.

To avoid this situation you need to manage your cash flow efficiently, so this blog will run through some tips to keep you on top of your finances.

Why is cash flow management important?

Cash flow issues can easily snowball into serious situations. In fact, many businesses don’t survive due to poor cash flow management.

On the other hand, effective cash flow management can help you make better decisions, grow your business, and achieve the best outcomes for your hotel.

Cash flow is vital at your hotel because you always need money on hand to:

• Pay suppliers
• Pay bills
• Pay for repairs
• Perform renovations
• Pay staff
• Absorb refunds and cancellations

If you aren’t generating your incoming revenue promptly or regularly, you’ll quickly run into problems. It’s important that you can secure your hotel’s liquidity and build cash reserves by always tracking your performance and using any data at your disposal, and ensuring on-time payments from customers and suppliers. When an online travel agent (OTA) takes payment on your behalf for instance, you need to make sure you claim your payment as soon as you are able.

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Hotel cash flow analysis and audit

Analysis is important in every facet of your business to determine where money is being spent, where money is coming in, and where money can be saved. Analysing your cash flow enables you to make decisions on how you will improve it.

Will you:

• Raise your room rates?
• Undertake extensive cost-cutting?
• Make efforts to improve staff and operating efficiency?
• Switch or change your promotions?
• Introduce new packages and/or extras?
• Increase or decrease the amount of third-party channels you connect with?
• Pivot your strategy to attract more direct bookings?

These are all questions you should consider, and can answer with certainty if you’re performing regular analysis at your property.

Performing a revenue audit

A revenue audit involves verifying all your hotel’s revenue transactions through a set period of time. The idea is to identify where your business could be earning more money or where you’re spending more than you need to. You may need to take into account seasonality – peak and off peak periods – when you do this.

It will let you gather insights, drive data-led decisions, and streamline your cash flow. How often you perform an audit is up to you but make sure you are doing it at least every few months.

Upstay has provided four easy steps for performing a revenue audit:

1. Segmentation

Segmenting makes your data more spread out, accessible, and easier to work with. Once you’ve segmented, you can gain a good overview of who your customers are, what they are doing, and what value they offer your hotel.

2. Comparison

Compare yourself to your competition. Picking one of similar size and type will give you a good perspective on how you’re set up relative to what else is on the market for guests. Use what you can gather on other hotels to see where you could improve or gain an edge.

3. Analysis

This involves looking into your internal operations. That includes all currently used technologies, employees, and the payroll overall. A revenue audit should highlight where the money is going and how it’s being used – only then can you manage revenue more effectively.

Are you maximising your potential revenue from all possible avenues such as your distribution, food and beverage services, and ancillaries? Make sure you know if and when you’re hitting your key performance indicators.

If you aren’t meeting them, is it because they need to be reassessed or because something is not working as it should?

4. Overview

The last step of the process is to overview your pricing, revenue, and finances. Overviewing your existing pricing strategies will let you make any needed adjustments based on your audit.

Cash flow management example

Hotel cash management is a subject that can feel complex, confusing and generally hard to define, so a cash flow hotel example can help to bring a bit of clarity.

A good hotel cash flow statement example can be found here. This is an example of a trended monthly cash flow statement, which CFOs and other internal financial managers use to track and analyse cash flow trends month on month. Particularly high or low numbers are highlighted to make the information easier to digest, which helps a financial controller ensure that cash is moved wherever and whenever it is needed.

Cash flow hotel example

The following table is provided as a sample cash flow for illustrative purposes only—it is not intended for actual use. The data and descriptions are fictional and do not represent the financial activities of any specific entity.

Cash flow management techniques

The importance of hotel cash flow can’t be understated – so how can a hotelier improve their property management and cash flow management? The following strategies can help to ensure you always have the necessary cash on hand.

Dynamic pricing strategies

The most effective way to manage cash flow? Get more cash flowing in. Dynamic pricing strategies are a way to ensure you generate maximum revenue for every room, by monitoring factors like demand and competitor pricing to set room rates that are tempting for potential guests while making you more money.

Diversification of revenue

Putting your rooms to one side, what other ways might your hotel bring in cash? Diversifying your revenue streams through services like a bar, a restaurant, a day spa or tour offerings can increase cash flow and make your hotel more financially resilient.

Monitor expenses

Regularly review your outgoings to guard against unnecessary financial waste. This process can help you identify serious savings, e.g. trading disposable items for washable, to increase your levels of available cash.

Hotel cash flow projections

Being able to properly forecast demand and make projections for revenue and expenses will go a long way to smoothing out your hotel’s cash flow.

Using revenue management systems, business intelligence tools, or other hotel software such as a channel manager and booking engine allows you to accurately track a number of data points to inform strategy, such as:

• Which of your packages or promos deliver the best returns
• What extras are popular with guests
• Which booking channels perform optimally
• Market price comparisons
• How competitors are setting rates
• How much labour and staffing will be needed

The more information you have at your disposal, the more precise you can get with setting rates at different times of the day, month, or year. You’ll also know what kind of offers to put to market and when to use particular promotions to drive extra business.

Having key insights is especially important in the COVID-19 era when demand might be interrupted at any point, or be generally decreased, because you’ll be able to react and adapt much quicker.

One key strategy is around optimising your business mix. It can be tempting in 2021 to treat any incoming business as great business, given the world’s unpredictable state. However, this could result in more issues. If low-value guests drive down ancillary revenue, hotel profits could again suffer.

Cash flow management strategies

Something you can do to maintain a healthy cash flow is to keep some general health checks and tasks top of mind.

Here’s a list of tips and tricks to use when thinking about how to prevent your cash flow from stagnating:

• Set clear payment terms on invoices that are sent to guests
• Send invoices promptly and chase them up the minute they are overdue
• Always take seasonal and competitive pricing into account
• Forecast as accurately as possible
• Build good relationships with suppliers to negotiate extended payment terms
• Take note of warning signs such as delays in paying or being paid and a lack of liquid cash between transactions
• Regularly evaluate performance to understand where problems are occurring
• Setup automated payment processes where possible
• Consolidate vendors so there’s minimal movement of funds and it’s easier to reconcile payments all in one place
• Being clear on which costs are fixed and which are variable
• Ensure all upsells and add-ons have been charged to prevent revenue leakage

Remember that many pieces of the puzzle make up a successful small hotel operation. Having a clear overview is the best way to spot and fix early cash flow issues.

Cash flow management tools: Guest payments & automation

Creating efficiency and clarity in how you accept and process payments from guests can certainly help you smooth out your cash flow. As stated, it’s important you can get paid as quickly as possible and that you can access that money as soon as possible, to ensure you have cash on hand.

Guests and nations across the world are increasingly going cashless. The top five countries by percentage of non-cash payments are:

• Belgium (93%)
• France (92%)
• Canada (90%)
• United Kingdom (89%)
• Sweden (89%).

Asian nations are set to explode in this sphere too. South Korea is already in the top 10 and is quickly becoming almost entirely cashless. In China, purchasing is shifting from a mobile-first approach to “mobile-only”.

Not only do you need to be prepared for this from a guest experience perspective, but an operational perspective. The first step is automating your online payments.

By adopting a hotel payment processing solution, you can automate transactions, accepting payments and submitting refunds in a single click.

Integrating a payment gateway with your booking engine enables you to take deposits via credit/debit card at the time of booking, helping you to ensure cash flow, prevent fraudulent credit card use, and secure bookings (prevent no-shows).

The idea of automating is one that should take hold across your business if you want to increase efficiency, make your hotel easier to run, gain greater insights, and ultimately improve cash flow. Using hotel technology to manage distribution, bookings, payments, and forecasting ensures you always have instant, accurate, and integrated data to work with. This will let you know your financial health at any point in time.

Recruitment and staffing

Naturally the amount of staff you employ, how much you pay them, and how many hours they work are factors that will affect how much cash you have to play with.

Labour rates, benefits, insurance, and taxes only continue to grow so being efficient with recruitment and staffing can make a big difference to your bottom line.

No hotelier wishes to have staff sitting around under-utilised as a result of not having enough work to do, but neither do you want your staff overworked and stressed because there isn’t enough of them. Accurate demand forecasting plays a major role in knowing how to schedule staff and tasks such as housekeeping duties.

Automation and tech enters the thought process again here. How does your labour stack up to new technology? For example, can manual front desk tasks be automated by a property management system and channel manager? Virtual assistance and online check-in is becoming much more prominent today.

Leasing vs buying

Whether you have bought or are leasing your commercial hotel property may also have impacts on cash flow.

There are pros and cons for both scenarios. For instance if you buy the property you have these benefits:

• You can sell it – obvious one but the ability to liquidate can be valuable
• You have control over changes – if you need to make alterations to boost performance you have the freedom to do so
• Your repayments are a fixed cost that you can factor in every month

However some disadvantages include a large upfront cost, limited flexibility, and ongoing costs you have to bear.

Leasing gives you a lot of capital that is freed, but expenses can be variable and there is greater uncertainty.

Make sure you are weighing up all options whenever thinking about what is the best financial move.

Hotel sales is the practice of selling hotel rooms and services to guests. Generally, hotels have dedicated sales teams that focus on implementing tactics to improve hotel room sales and boost revenue.

Whether it’s peak season or off-season, one of the main goals of a hotel should be to develop and execute room selling techniques designed to increase profitability.

Let’s delve into how you can achieve this.