What is a Good Annual Increase in Hotel Revenue? 3 samples

⏱ You will read this in just 4 minutes

Multiple factors fuel the growth in the travel industry, including the desire for travel and the impact of digital influences. Like we commented in our post about hotel revenue management formulas, Hotel revenue consists of revenue per available room (RevPAR), average daily rate (ADR), and occupancy rates, which have showcased a positive growth trend over the past decade.

If you own or manage a hotel, “What is a good annual increase in hotel revenue?” is a question that commonly pops up.

It can help you assess the success of your strategies and discover whether your hotel business performs better than average competitors. So, before you fine-tune your revenue management processes to boost your revenue growth, let’s take a look at the range of realistic annual revenue increases.

There is no better way to do it but to look at 5 case studies and see how hotels managed to increase revenue growth and to what extent.

Case study 1

The first case study is of the 5-star Luxury Resort Hotel in Taormina. The hotel’s primary goal was to increase revenue in peak season and maximize profits. To do it, they decided to work with an outside agency specializing in hotel revenue management.

The agency determined that the best course of action was to boost ADD and occupancy rates. To improve their financial performance, the hotel first implemented a dynamic pricing strategy in all the resorts. They also decided to monitor and correct the rate parity violation in real-time through the use of proper software.

Finally, the hotel implemented direct sales stimulation to capitalize on every possible opportunity in the market. Given the scope of changes and improvements, the results were not surprising at the annual revenue check-up. The hotel increased RevPar by 39%, and its occupancy rates went to 74.33%.

Case Study 2

For the second case study, we’ve chosen an NYC Manhattan Hotel. The hotel is a part of a developing chain and currently has 100 rooms. The hotel had to overcome many challenges to increase annual revenue. Some of these problems were renovation running late, re-opening the hotel restaurant, rising  labor costs and expenses, and primary focus on the OTAs.

However, the hotel managed to overcome these challenges and increase its annual revenue. To do it, the hotel had to put a complex strategy into action. They came up with a new revenue management process. One of the critical actions includes simplification of room rates.

They also started using a forecast to identify and analyze trends. The hotel became more focused on direct sales and leveraged email marketing to keep potential and past guests in the loop with the personalized offers.

By the end of the year, the hotel saw an increase in RevPar year over year of 36.5%; the following year, the RevPar index grew 9%, leaving us with an average annual increase in hotel revenue of 22.8%.

Case Study 3

Our third case study takes us to Budapest and one of the world’s leading 5-star hotels,  part of a well-known hotel chain. The hotel decided to bring improvements to its upselling program. It would help the hotel generate more revenue, increase guest satisfaction rates, and improve employee engagement and satisfaction levels.

The hotel decided that everyone on the staff who had contact with guests should play a role in the sales process. To do it, the hotel hired an agency to train and coach the staff. They wanted to help the staff change attitude and behavior to successfully upsell to guests.

After the training, the hotel achieved all three primary goals. The one that is the most relevant to us is the annual growth increase. One year following the training program, the hotel saw an increase of 14.5% in annual revenue.

 What is a good annual increase in hotel revenue then?

All of the hotels from the case studies we’ve shared with you faced different challenges and implemented appropriate strategies to overcome them. However, there is one thing all of them share in common – average annual growth in revenue of approximately 20%.

All of the hotels had a  yield management strategy in place. Some focused on fine-tuning their online presence, while others focused on generating additional revenue streams through upselling. If you are interested in unlocking the hidden revenue opportunities and selling additional ancillaries and room upgrades during the pre-arrival phase, please check out UpStay.

+ posts

Graduated from Standford University, Arielle has over 5 years of experience in the Hospitality industry. She holds an MBA in business administration from the IDC Herzliya, Israel. She currently works as Account Manager at UpStay, building and maintaining strong, long-lasting customer relationships. She is deeply passionate about helping hoteliers unlock significant new revenue streams from unsold premium inventory.

linkedin

Leave a Reply

Your email address will not be published. Required fields are marked *