Hotel Revenue Shift Reflects Change in Development and Guest Preferences

Historically, revenue management within the lodging industry has focused on renting guest rooms in a profitable fashion. Revenue managers, aided by sophisticated computer programs, helped hotels determine the proper balance between the volume of guest rooms rented, with the price charged to rent those rooms. These decisions are now made round the clock, with room prices on any given day changing by the hour.

As revenue management has evolved, other factors have been added to the equation. Now, it is not just rooms revenue that is evaluated. Hotels realize that an occupied room has the ability to generate other revenues within the property. Hotel guests order room service, grab a cocktail in the lounge, or attend the black tie banquet on the concluding night of their convention. They park their cars in the garage, and then get a massage in the spa. They also take advantage of on-site concessions such as car rental booths and gift shops. Per the 11th edition of the Uniform System of Accounts for the Lodging Industry (USALI), the revenue from these other sources are grouped into three categories on a hotel’s operating statement; food and beverage, other operated departments, and miscellaneous income.

Each year CBRE Hotels’ Americas Research collects hotel operating statements from thousands of hotels across the United States that volunteer to participate in our survey. The results of the survey are presented in the firm’s annual Trends® in the Hotel Industry report. The first edition of the Trends® report was published by Pannell Kerr Forster (PKF), the predecessor firm of CBRE Hotels’ Americas Research. Using data from the Trends® survey we are able to analyze historical changes in all revenues earned by U.S. hotels.

Composition of Total Revenue

From 1977 through 2015, total hotel revenue for the hotels that have participated in the Trends® survey increased at a compound annual growth rate (CAGR) of 4.2 percent. Three of the revenue sources exceeded the total revenue growth rate during this period. They are rooms (4.8%), other operated (5.5%), and Miscellaneous Income (4.9%). The lone source that lagged was food and beverage (3.1%).

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