In the circle of tourism professionals, there is an indicator that traditionally represents the ultimate authority: Average Daily Rate (ADR). It’s very common to hear hoteliers boasting that they “increased their average rate by 20% this year.” But is the constant pressure for higher prices the only way to achieve healthy profitability?
If we analyze the market data objectively, we find that there is no single truth. In modern hospitality, the fixation on high average spend can sometimes overshadow the bigger picture.
Let’s consider a different perspective, which is often overlooked: Many times, a strategy that consciously reduces the price by 10% can lead to a 15% (or more) increase in final occupancy.
What does this mean in practical terms for the financial health of the accommodation?
First, the math of RevPAR (Revenue per Available Room) often favors this scenario. The largest volume of bookings, even at a slightly lower price, can generate more total revenue from rooms.
Second, and perhaps more importantly, the TRevPAR (Total Revenue Per Available Room) comes into play. An additional guest doesn’t just pay for their bed. He is a potential customer for the restaurant, bar, spa, or transportation services. These ancillary revenues multiply when the hotel is in demand and often exceed the small discount on the original room price.
Is there a “right” and “wrong” in the Value vs Completeness ?
The answer is that dogmatic thinking won’t fit. A high occupancy approach with a lower price can be dangerous if the variable operating cost of a room (cleaning, energy, supplies) is too high, devaluing the profit margin. On the other hand, it may be the absolutely right strategy for a resort that relies on the sales of its food and beverage (F&B) departments to be profitable.
At Horizone, our approach to Revenue Management does not dictate ready-made solutions.
Our role is to analyze the DNA of each accommodation. Weighing the fixed and variable costs, infrastructure, and target audience, we seek balance for each of our partners individually. Because at the end of the day, the goal is not to impress with the most expensive room in the area, but to answer the ultimate question:
What exact combination of Price and Completeness leaves the most money in your pocket?
