Recent research shows that the average company has 14.9% of revenue leaks.
NB: This is an article from Demand Calendar
Of course, no specific percentage or amount represents the average revenue leak for the hotel industry, as it varies depending on factors like location, property size, and management efficiency. However, there are several familiar sources of revenue leakage in the hotel industry, and addressing these can significantly impact a hotel’s financial performance.
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From a hotel general manager’s perspective, addressing revenue leakage requires a holistic approach, with the revenue manager playing a key role in delegating tasks and monitoring progress.
Typical revenue leaks in hotels
All hotels continuously want to improve the hotel’s financial performance and customer satisfaction. Here are five examples of potential revenue leaks, who should be responsible, how to monitor and follow up, the benefits, tools/systems that could help, and a few actions that would minimize the revenue leaks.
Incorrect or inconsistent room rates
The benefit is that correct and consistent room rates will lead to increased revenue and better competitiveness. The Revenue Manager is responsible for setting up the rate structure in the hotel PMS and ensuring consistent pricing in all distribution channels, including the correct rate mapping from the distribution channel to the hotel PMS. The hotel needs an RMS or a dynamic pricing tool integrated with the hotel PMS to minimize revenue leaks. In collaboration with the RM, the Front Office Manager secures that the hotel charges the guest the correct room rates. The following action points should be implemented.
- Regularly review and update room rates based on market demand, competitor pricing, and occupancy levels.
- Analyze the effectiveness of rate adjustments by tracking average daily rate (ADR), rate spread, and booked room type compared to the stay room type.
- Ensure consistent pricing across all distribution channels.
- Regularly review pricing strategy, market demand, and competitor rates.
Reservation errors and overbooking
The benefit is that fewer reservation errors will lead to higher occupancy rates, improved guest satisfaction, and reduced compensation costs. The front office manager and the reservations team manage reservations and prevent overbooking. The hotel needs a PMS or central reservation system (CRS) with real-time inventory updates and user-friendly booking handling. The following action points should be implemented.
