While net unit growth (NUG), a measure of the increase in available hotel rooms over a period of time, has been a key performance indicator for many hospitality brands, many hoteliers are now prioritizing net revenue growth (NRG) – the rate at which a company’s net revenue increases over time.
NB: This is an article from Duetto
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This shift is driven by economic pressures, shifting consumer behaviors, and regulatory challenges that make revenue maximization a more sustainable and profitable approach than mere expansion.
The factors favoring NRG over NUG
With the rise in cost of living, the financial landscape for hotel development has changed significantly. Borrowing costs are at all time highs which has made expansion less appealing than previous years. Combined with persistent inflation and labor shortages, operational costs are skyrocketing, reinforcing the need for hotels to extract higher revenue for existing properties rather than investing in new ones.
Demand for travel is also evolving. Five years on, we’re still recovering from the impact of COVID-19, with demand favoring hotels that optimize for revenue per available room (RevPAR) over those investing in expansion. There’s also been a significant generational shift in travel, with younger demographics opting for more authentic, meaningful experiences, over typical luxury travel, with a huge increase in live tourism, where large numbers are traveling for once-in-a-lifetime events.
Political instability further complicates expansion efforts. Entering new markets often means navigating complex taxation structures, environmental requirements, and government regulations, like those enforced in Barcelona to prevent overtourism. The knock on has been a push for more sustainable and efficient operations in favor of unchecked footprint growth.
How to achieve sustained NRG
If you’re looking to drive sustained profitability, you must adopt a multi-faceted approach that includes advanced revenue management, a focus on direct bookings, strategic upselling, improved operational efficiency, and a diversification of revenue streams.
The first component of this is dynamic pricing. By using a revenue management system (RMS) and leveraging automations, you can adjust rates in real time based on market demand, competitor pricing, and booking trends. Personalization is also essential, with the use of customer segmentation unlocking tailored promotions that drive direct bookings and build brand loyalty, a key finding highlighted in our 2025 hospitality trends report.
You can look to optimize direct bookings to reduce your reliance on online travel agencies (OTAs). Improving the experience of your own brand channels (website, apps etc.), offering exclusive incentives, and expanding loyalty programs, you can encourage guests to book with you directly.
