Category: Revenue Strategy

Revenue Strategy

Online travel agencies fill rooms. The question is how much each of those rooms really costs, and whether the hotel is choosing that cost or simply accepting it.

An OTA booking is not a bad booking. An OTA booking the guest would have made directly is an expensive one.

Every independent hotel I know has a complicated relationship with the online travel agencies. On one hand, they bring visibility we could never buy on our own. A traveler in London or São Paulo searching for a room in New York may never have heard of our hotel, and within seconds an OTA puts us in front of them.

On the other hand, that visibility comes with a price. Commissions are commonly in the range of 15 to 25 percent of the room revenue, and often more once visibility programs and promotions are added. On a busy night, that can mean that several rooms’ worth of revenue leaves the hotel before a single guest has checked in.

The answer is not to turn the OTAs off. I have never seen that work for an independent hotel. The answer is to understand the true cost of each booking and to manage the channel mix with the same discipline we apply to rates and occupancy.

01Know What a Booking Really Costs

Many hotels look at OTA commission as a single line on the monthly statement. That number is useful, but it does not tell the whole story. To understand what a booking really costs, management should look at it per channel and per stay.

• The commission rate, including any visibility or loyalty programs
• Payment and processing costs, which differ between OTA-collected and hotel-collected bookings
• Cancellation and no-show patterns by channel
• Average length of stay and average daily rate by channel
• How often the guest returns, and through which channel

When these numbers are placed side by side, the picture usually changes. A channel with a lower commission may bring more cancellations. A channel with a higher commission may bring longer stays during the nights the hotel needs them most.

The goal is not the lowest commission. The goal is the highest net revenue.

02Use the OTAs Where They Add the Most Value

OTAs are most valuable when they reach guests the hotel could not reach on its own: international travelers, first-time visitors, and dates when demand is soft. They are least valuable when they simply sit between the hotel and a guest who was already looking for it.

This is why I think of the OTAs as a partner for reach, not a replacement for the hotel’s own sales effort. Used well, the relationship can be very productive. In my own experience, a closer and better-managed partnership with Booking.com contributed to a 21 percent increase in sales. That did not happen by accepting every default setting. It happened by working the extranet, keeping content accurate, understanding the account manager’s programs, and choosing the right ones for the right periods.

A practical approach is to open the OTAs fully during low-demand periods, use their promotions selectively when pace falls behind, and protect more inventory for direct channels when demand is strong and guests are likely to book anyway.

03Make the Direct Booking the Easiest Choice

Many travelers find a hotel on an OTA and then visit the hotel’s website before they book. This is the moment that matters. If the website is slow, confusing, or shows a higher price, the guest goes back to the OTA, and the hotel pays commission on a booking it could have kept.

A direct booking should feel like the natural choice, not a sacrifice. That means:

• A booking engine that works well on a mobile phone, with the total price shown clearly
• The same or better rate than the OTAs, within the terms of the hotel’s agreements
• A simple, genuine reason to book direct: flexible cancellation, a better room choice, early check-in when available, or a small welcome touch
• Clear room descriptions, current photographs, and policies that match what the OTAs show
• A way to reach a real person quickly, by phone, email, or messaging

None of these require a large budget. They require attention. The hotel’s own website should always be the most complete, accurate, and welcoming place to book.

The guest who finds you on an OTA and then visits your website is telling you something. Make it easy for them to stay.

04Rate Parity Is a Daily Discipline

Few things damage direct bookings faster than a guest finding a lower price on an OTA than on the hotel’s own website. Sometimes this happens through a promotion the hotel forgot it had joined. Sometimes it happens through third-party resellers or a mapping error in the channel manager.

Whatever the cause, the guest only sees one thing: the hotel’s website is not the best place to book. Management should check rates across the main channels regularly, on both desktop and mobile, and correct differences quickly. Rate parity is not a one-time setup. It is a daily discipline, just like checking the arrivals list.

05Turn Every OTA Guest Into a Future Direct Guest

An OTA can introduce a guest to the hotel once. What happens during the stay decides where that guest books next time.

The front desk plays an important role here. A warm welcome, accurate information, a room that matches the photographs, and a sincere invitation to book directly on the next visit can change the guest’s habits. A short note at check-out, a business card with the website, or a thoughtful follow-up email where permitted can all help the next reservation come through the hotel’s own channel.

This is where revenue strategy and guest experience meet. The best way to lower acquisition costs over time is to give guests a reason to come back to you directly.

06Review the Channel Mix Every Month

Channel mix should be reviewed with the same regularity as occupancy, ADR, and RevPAR. Each month, management can ask a few simple questions:

• What share of room revenue came direct, and what share through each OTA?
• What did each channel cost in commission and fees?
• Which OTA bookings came on dates when the hotel would likely have filled anyway?
• Which promotions or programs actually produced additional business?
• Is the direct share moving in the right direction?

Small, steady improvements matter. Moving even a few percentage points of business from OTA to direct can make a meaningful difference to the hotel’s net revenue over a full year, without losing a single room night.

The OTAs will remain an important part of hotel distribution. Independent hotels do not need to choose between visibility and profitability. With clear numbers, a strong website, consistent rates, and a team that turns first-time guests into returning ones, they can have both.

If you would like a quick sense of what OTA commissions cost your hotel each year, our free OTA commission calculator takes about two minutes.

How smart hotel operations turn guest demand into sustainable growth.

After more than 20 years in hospitality, I have learned that successful revenue management is not simply about raising room rates. It is about understanding the business well enough to recognize an opportunity—and knowing when to act.

A higher room rate may look impressive on a report, but an empty room generates no room revenue. At the same time, filling every room too early or at the wrong rate does not necessarily mean we have maximized the hotel’s revenue potential.

For me, revenue management begins with occupancy, but it certainly does not end there. I want to understand how quickly reservations are building, how much time remains before arrival, what demand looks like in the market, which distribution channels are producing business, what those reservations cost us to acquire, and how much inventory remains. Together, those pieces help answer one important question: What should we do today to improve the revenue opportunity ahead of us?

01Occupancy Is Where My Revenue Strategy Begins

Over the years, I have developed my own occupancy checkpoints. I pay particular attention when occupancy reaches approximately 20%, 40%, 60%, 70%, 80%, and 90% or above. These percentages are not an industry formula; they are checkpoints I have developed through experience. Each time occupancy moves through one of these levels, I reassess the business.

At lower occupancy levels, my focus is naturally on generating reservations. Are our rates positioned correctly? Are we visible on all appropriate channels? Is the hotel website producing direct business? As occupancy moves through 60% and 70%, I pay closer attention to booking pace, remaining inventory, days until arrival and expected demand. At 80%, 90% and above, the remaining rooms become increasingly valuable if demand continues to support them, and it may be time to protect rate, reduce unnecessary discounts or become more selective about distribution.

A hotel can be full and still have missed a revenue opportunity if too much inventory was sold too early or too cheaply. Holding an unrealistic rate while rooms remain empty can be equally costly. A hotel room is perishable inventory; once tonight passes, an unsold room can never be recovered. Successful occupancy management is about balancing occupancy, Average Daily Rate (ADR), and Revenue per Available Room (RevPAR) while continuously responding to demand.

I have learned not to celebrate high occupancy until I understand how we achieved it.

02Booking Pace, Forecasting and the Uncertainty of Hospitality

Occupancy tells me where the hotel stands, while booking pace tells me where it may be heading. For this reason, I watch my occupancy checkpoints carefully and compare them with how quickly future reservations are developing. Looking 7, 14, 30, 60 or 90 days ahead can provide a very different picture from simply looking at tonight’s occupancy.

If a future period is approaching 70% occupancy and reservations are arriving faster than expected, there may be no reason to stimulate additional demand with unnecessary discounts; the opportunity may instead be to protect inventory and strengthen the rate. If that same period is sitting at 40% and reservations are arriving more slowly than expected, I may need to review rates, increase visibility, strengthen distribution or find another way to generate demand.

Hospitality is inherently uncertain. Seasonality, weather, holidays, citywide events, economic conditions, cancellations, competitor behavior and unexpected events can change demand quickly. No forecast will predict everything perfectly, but forecasting gives management something extremely valuable: time to respond. Recognizing a potentially weak period 30 days in advance gives us far more options than discovering it three days before arrival.

03Rate Strategy: Know When to Hold and When to Adjust

Revenue management is sometimes reduced to constantly changing room rates, but I see it differently. Rate strategy should respond to demand, booking pace, remaining inventory, time to arrival and market conditions. During high demand, lowering rates simply because competitors are doing so may sacrifice revenue unnecessarily. During a weak period, holding a rate the market is unwilling to accept can leave valuable inventory unsold.

Understanding the market is important. I want to know what comparable hotels are charging, what events are taking place, whether the market is experiencing compression, and how demand is developing. But every hotel has its own product, location, reputation, guest mix and value proposition. Competitive information should help us understand the market—not run our hotel for us.

The objective is to recognize when the market gives us permission to push the rate and when conditions tell us that stimulating demand may produce the better result. ADR and RevPAR help measure that balance, but experience helps interpret what those numbers are telling us.

04Distribution: Use the OTAs, but Strengthen Your Own Website

Online Travel Agencies are an important part of today’s hotel revenue strategy. They provide enormous visibility, expose independent hotels to travelers around the world, and can generate reservations from guests who might never have discovered the property otherwise. I believe in utilizing appropriate OTAs and allowing them to do what they do very well: generate reach and demand.

But distribution comes with a cost. A $200 reservation booked directly and a $200 reservation arriving through an OTA may produce the same ADR, but they do not necessarily produce the same net revenue after commission and acquisition costs. This is why I strongly believe every hotel should work toward having a self-sufficient website with a reliable direct-booking capability.

A hotel website should not simply be an online brochure. Guests should be able to discover the property, understand the rooms, see accurate photographs and information, check real-time availability and rates, and confidently complete a reservation directly. The objective is not to eliminate OTAs; it is to create the right business mix—using third-party distribution when it adds value while strengthening direct business, reducing avoidable acquisition costs and building a guest relationship the hotel can own.

05Reports Should Lead Somewhere

I have always believed strongly in reviewing hotel performance daily, weekly, monthly and quarterly, but reports should never exist simply because management is expected to produce them. Each reporting period should answer a different question and ultimately help us decide what to do next.

Daily, I want to understand what needs attention now: occupancy, pickup, cancellations, rates, remaining inventory and immediate opportunities. Weekly, I look at how future business is developing and where the strong periods or gaps are. Monthly, I review whether our decisions worked through occupancy, ADR, RevPAR, room revenue and distribution. Quarterly, I step away from individual dates and look for larger patterns that should influence future strategy.

Forecast accuracy is part of that learning process. If we expected 85% occupancy and finished at 65%, why? If we expected a weak period and finished much stronger, what did we miss? The purpose is not to criticize the forecast; it is to make the next forecast better. One report provides numbers, but consistent reporting reveals patterns, and patterns support more confident decisions.

06Technology Is Powerful, but Revenue Is Ultimately About Profitability

Revenue-management technology has become increasingly sophisticated. Revenue Management Systems can process historical performance, booking pace, competitor pricing, demand patterns and other information much faster than any individual manager. Larger hotels may have dedicated revenue teams, while independent properties may rely more heavily on the General Manager, sales team, ownership or outside revenue specialists.

I see technology as an advantage, not a replacement for management experience. The strongest revenue strategy combines technology, data, market knowledge and operational experience. A system may identify an opportunity a manager could miss, but an experienced operator also understands the property’s physical product, guest expectations, operational challenges, reputation and long-term objectives.

Revenue management also has to connect with profitability. Generating additional revenue is important, but OTA commissions, promotions, credit-card fees and other acquisition costs affect what the hotel ultimately keeps. That is why I like to ask not only how much revenue we generated, but how effectively we generated it.

07The Final Decision Still Belongs to Management

This is where everything comes together. Occupancy tells us where we stand. Booking pace tells us where we may be heading. Forecasting gives us time. Market information provides context. ADR and RevPAR help measure performance. Distribution tells us where the business is coming from and what it may cost. Reports reveal patterns, and technology helps process the information.

But none of those things makes the final decision by itself. Management still has to decide whether to increase or protect the rate, stimulate demand, remove a discount, adjust availability, strengthen a particular channel, push direct bookings, or leave the strategy exactly as it is because the numbers tell us it is working.

There is a particular satisfaction in watching a period that initially looked challenging begin to turn around. Reservations start arriving, occupancy moves through the checkpoints, rates strengthen, the business mix improves, and decisions made days or weeks earlier begin to appear in the results. For me, that is what makes revenue management interesting. It is not one rate change or one occupancy report; it is a series of informed decisions, made at the right time, that collectively improve the performance of the hotel.

Revenue is more than raising room rates. It is about understanding your business well enough to recognize an opportunity, having the information to evaluate it, and having the confidence to act on it.

The numbers provide direction. Management judgment turns that direction into a decision.