For years, the hospitality industry has focused on one golden metric—occupancy. The logic is simple: the more rooms you fill, the more revenue you generate. But is that really the best way to measure success? Not necessarily.
Faimly standing at check in desk
For years, the hospitality industry has focused on one golden metric—occupancy. The logic is simple: the more rooms you fill, the more revenue you generate. But is that really the best way to measure success? Not necessarily.
While high occupancy rates can boost revenue, they don’t always translate to profitability. If a hotel is spending too much on operations, discounting rooms to fill them, or failing to optimize its pricing strategy, it could be making more money on paper while actually losing in the long run.
So, what should hotels focus on? Profitability. Real success in hospitality isn’t just about booking more rooms—it’s about keeping more profit after expenses. Let’s break down why occupancy isn’t everything and explore some progressive strategies to increase profitability.
Many hotels push occupancy as their primary success metric. But here’s the catch:
Instead of simply filling rooms, the goal should be the revenue potential in every guest engagement while figuring out the areas where the most wasteful areas of operating expenses are. For instance, how many hours a week do your guest-facing teams focus on admin tasks like internal email exchanges compared to the total hours engaging with guests?
Shifting from an occupancy-driven mindset to a profitability-focused one requires a combination of smarter pricing, operational efficiency, and targeted investment. Here’s how hotels can make that shift:
Revenue management is no longer just about filling rooms—it’s about pricing them strategically while also opening up new lines of revenue outside the room. Hotels that leverage dynamic pricing models can adjust rates based on demand, competition, and booking patterns, ensuring they capture the most value per booking.
Rather than focusing only on Average Daily Rate (ADR), a more effective strategy is to optimize total revenue per guest by factoring in ancillary spending on dining, spa services, and premium experiences.
Investing in revenue management software gives hotels the real-time insights they need to price smarter, not cheaper. With data-driven recommendations, hotels can maximize profitability without constantly resorting to deep discounts, ensuring they get the best value for every booking.
Cost control is crucial to profitability, but cutting costs without knowing what staff need first can ultimately hurt the guest experience and your profit margins. Usually the first things to be cut from budgets are areas like training and development, updating staff facing technologies, or investing in new ones.
Instead of making across-the-board cuts to areas that affect the staff experience, hotels should identify where small amounts of time can be saved and repurposed. Look for areas that create operational friction the most often, or more importantly the areas that cause the most stress for your staff. Dial into those stressors, and focus on mitigating or outright solving those areas first. This way, staff feel more confident to stay efficient which allows both leaders and their teams to better and more quickly identify areas for more improvement.
Oftentimes technology can play a key role in both helping identify new ways to remove friction and stress on teams by automating processes. Whether it’s automating check-ins, room service requests, monitoring energy management, all those little moments free up staff from administration of hospitality to focus on delivering hospitality and higher-value guest interactions.
Hotels that diversify their revenue sources can boost profitability without relying solely on room sales. Offering premium on-site experiences, such as wellness programs, fine dining, and exclusive activities, encourages guests to spend more during their stay, not just on their room.
Also, partnering with local businesses to provide unique experiences not only enhances guest satisfaction but also allows hotels to earn a commission while offering perks that add value to the stay. For instance, a popular trend with staying power is when hotels partner with local restaurants that are aligned with their guest preferences to offer up “pop-up” dining events during high traffic occupancy times.
The first and most important step is to understand the contextual factors that play into the decisions your guests are making over time to better predict what offerings and partnerships you should be pursuing.
Attracting the right market segments can make all the difference in profitability. Hotels should use guest data and analytics to identify high-value travelers—those who are more likely to spend on premium amenities and services.
Encouraging direct bookings can also help reduce reliance on online travel agencies (OTAs), which often take a large cut of each reservation.
A well-designed loyalty program can also drive repeat business and increase spending. When guests feel rewarded, they’re more likely to return, upgrade their stays, and take advantage of more on-property offerings—leading to long-term profitability.
Modern hotel technology can boost profits by improving efficiency and guest satisfaction. AI-powered guest messaging can handle common requests instantly, which cuts down call volume and frees up staff to focus on more meaningful guest interactions. Faster responses mean happier guests and fewer resources wasted.
Automated check-in and check-out systems take the hassle out of front desk operations. This reduces labor costs while giving guests a smooth, seamless arrival and departure experience.
And when it comes to saving money, smart energy management solutions help lower utility expenses without sacrificing guest comfort. This ensures a more efficient, cost-effective operation that directly boosts the bottom line.
In conclusion, the question isn’t, “How full is your hotel?” It’s, “How profitable is each guest interaction across the entire journey?”
Want to make data-driven decisions that improve profitability? Alliants’ industry-leading solutions help hotels optimize revenue, streamline operations, and elevate guest engagement. Get in touch with us to learn how we can help your hotel thrive.
