Flow through is a simple but powerful way to measure how much of your extra revenue actually turns into profit.
NB: This is an article from Little Hotelier, one of our Expert Partners
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As a small hotel owner, you’ve probably had months where bookings went up but, somehow, your bank balance didn’t. That’s exactly where flow through comes in.
At its core, flow through is the percentage of profit you keep from each additional dollar (or pound, or euro) of revenue. It shows whether that extra income is being eaten up by rising costs or if it’s adding real value to your bottom line.
Let’s say your hotel made $5,000 more this month than last month. Flow through tells you how much of that $5,000 you actually kept after covering costs like staffing, utilities, and supplies.
In the hotel industry, flow through is a key profitability metric. It’s especially helpful in spotting cost issues that might not be obvious when you’re focused on boosting bookings. And the best part? You don’t need to be an accountant to use it. With just a couple of numbers, you can start calculating flow through and making smarter decisions about your business.
In this article, we’ll show you what you need to know about flow through within your business, how it impacts your success, and how you can improve it with smart investments.
Why is flow through so important?
Running a small hotel means wearing a lot of hats: handling guest check-ins, managing staff, juggling bookings, and keeping the lights on. With all that going on, it’s easy to focus on top-line revenue and assume more bookings mean more profit. But without watching what happens to your costs, that extra revenue can disappear just as quickly as it came in.
That’s why flow through matters.
It helps you see more than how much you’re earning – it helps you see how much you’re keeping. Even a fully booked month can fall flat if higher occupancy leads to bigger utility bills, extra staff hours, or more cleaning costs that eat into your margins.
Flow through shines a light on where your money is really going. It gives you a clearer sense of whether your pricing, staffing, and other decisions are actually paying off.
When you’ve worked hard to grow your revenue, flow through helps you hold onto more of it.
By keeping an eye on your flow through percentage, you can:
