Focusing on Building Profit

By Nicole Young, CRME, Senior Corporate Director of Global Revenue Management, Rosewood Hotel Group, and member of HSMAI’s Revenue Optimization Advisory Board

With many hotel companies having the urgent need to finally focus on profit after a year of tackling other priorities, how can revenue professionals innovate to support a bottom-line strategy? Members of HSMAI’s Revenue Optimization Advisory Board (ROAB) shared their ideas for profit optimization a recent call. Here are key takeaways from their discussion.


Finding creative revenue streams is nothing new. In fact, it has been a huge discussion point throughout the pandemic. “It’s a continued conversation on a daily basis,” one ROAB member said. “People are still trying to connect the dots, and short term especially, every dollar counts.”

“We’re looking at finding the right pricing strategy for everything from a pot of coffee to a beer at the bar,” another member said. “Is the elasticity there where we could add an extra quarter for a bottle of beer when we have a big city-wide in town? We need to figure out how to start incorporating a lot of those plans and trying to find those revenue channels that are going to drive demand from everywhere.”

Other ROAB members mentioned that even though other revenue streams are important, hotel rooms are still the largest driver of revenue. However, it’s more profitable to attract higher-paying customers than just filling rooms. “We need to figure out how to continue to drive that premium experience, because right now there are many full-service hotels that are providing the exact same amenities as limited-service hotels,” one member said.

Another member added: “My hope is that we look at our distribution partners and third parties, and we put a lot of pressure on them to shift from heads in beds, to pushing our premium rooms and helping us monetize toward a higher customer.”

One member said that the pandemic-induced use of hotel rooms as temporary office space is still quite popular in some markets. “We are seeing increased trends in terms of searches that cater to people trying to get away from their shelter-in-place experience to a more normal lifestyle,” the member said. “We’re seeing that spike in a few markets distributors that cater to that day use, which has provided a substantial amount of revenue for some of our hotels.”


Flexible cancellation policies have been wildly popular with guests, who have been able to book without worrying about the possibility of their plans changing, but it can be difficult for hotels that calculate bookings into their future income streams only to have them canceled at the last minute. Regardless, ROAB members said that it is clear that flexible cancellation policies aren’t going anywhere anytime soon. “You’ve got to be as flexible as you have to, even if you took the deposit, even if you have said that it’s non-refundable,” one member said. “Unless you don’t care about the fallout that would occur if you don’t return people’s money.”

Knowing that there is a possibility that customers will cancel makes it harder to calculate earnings. ROAB members discussed the options around non-refundable deposits and flexible rates to maximize profit yet still keep customers happy. “Getting a booking now for the future doesn’t mean necessarily that’s money in the bank,” one ROAB member said. “And so that leads to finding a prepaid non-refundable strategy. To figure out how we lock in the cash and get it in the bank immediately. Prepaid non-refundable rates versus flexible rates is not a new topic for us.”

Another member added: “We are just beginning to test a new ‘pre-pay and save’ product, where there’s some incentive to book further out with a discount, but there’s a one-night deposit required. We’re still trying to test customer sensitivity to that. But I can tell you, there are some markets where that product is booking just like it was pre-COVID. I think that’s an opportunity for the industry to start driving some cashflow pretty quickly.”


Internal policies and plans affect the bottom line just as much as customer policies. One ROAB member said that her team has been doing a better job after receiving more training and getting more involved in the process of selling. “We have involved the revenue managers in the monthly P&L meetings for their properties now, so that they can understand how the decisions they are making from the top line translate all the way down to the bottom,” the member said. “And so, they are now specifically engaging in the whole of the business, rather than the parts.”

The member continued: “My revenue team actually also engages the sales team. They’re the ones deciding if sales gets to take our rate. So, I think it’s really about revenue management involvement. Not necessarily finding the talent externally, but making sure we built it internally.”

Another member added that it’s a difficult balance between investing in your team or company and having enough money to break even, especially with mounting bills and loans to be paid back. “You might find a considerable amount of owners in a position where they end up breaking even in 2021 with improved market, but their loan maturity is also next year,” the member said. “And on top of that, they have a PIP coming down the line. So, they’re going to be forced to put more pressure on the operational team, which isn’t sustainable, long term.”

Categories: Revenue Management
Insight Type: Articles