As Revenue Managers Raise Rates, Guests' Desires Get in the Way of Hotel Profitability – CoStar

Hotel revenue managers are trying to balance higher room rates that aren’t consistently trickling down to the bottom line for owners as guests expect more out of their stays based on what they’re paying.

Hotel revenue managers are addressing the anxieties of guests’ lives as much as they are processing the differences in owner goals and revenue strategy since the height of the pandemic.

With the various outside forces affecting hotel booking decisions — from geopolitical strife, inflation, higher energy costs and remaining health concerns lingering from the COVID-19 pandemic — guests are spending in ways they consider to be far wiser.

Steady hotel demand has kept average daily rate high, but revenue managers are still feeling pressured to help high rates trickle down to significant revenue gains on the bottom line.

Speaking at the Global Revenue Forum in London Tuesday, Laura Sharpe, operations director at Firmdale Hotels and a former general manager at Ham Yard Hotel, said flexibility with revenue strategy is more crucial than ever before. However, the nature of that flexibility has changed from year to year.

“In 2022, yes, there was the need to be flexible, but that remains the case now with guests finally becoming more confident to lock in dates a little farther out,” she said.

Joe Pettigrew, chief commercial officer of hotel asset management at Starwood Capital Group, said some of the changes the hotel industry made during the pandemic could be harmful if left in place for the long term. Among the biggest concerns is balancing lean staffing models with the high level of service guests expect, especially if they’re paying more for it now than in 2019.

“How much of the current high [average daily rate] is based on economic factors, and how will revenue strategy change if these high rates are not sustainable?” Pettigrew asked.

Sharpe said not every trend will remain, but guests are demanding seamless bookings and the ability to self-curate their hotel and destination experiences and packages to erase anxiety from the booking process.

She said the industry should be focusing on ways the retail sector has smoothed the customer acquisition process, even though others suggested the hotel industry already has had ample time to do this.

Kadira Canavese, head of global revenue management and distribution at Corinthia Hotels, said revenue-management teams must continually reinvent themselves.

She said during the pandemic her company has reassessed customer markets — how they changed and whether any markets had been isolated — to determine revenue strategy.

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