Positive Profit Performance Through Revenue Culture

By , Principal Industry Consultant


Strong business cultures improve operational efficiency, asset value & talent retention

Blog Soundbites:

  • Hotel owners seek holistic strategies that account for bottom-line results—shifting to a profit performance strategy
  • Extended Stay America highlighted an 8.9% increase in net income over Q1 last year, citing revenue management culture as a contributing factor
  • Hoteliers must think about people, processes & technology to elevate profit performance

There are rising interests from hotel owners to seek a holistic revenue management strategy that takes into account bottom-line results and shifts to a profit performance strategy.

As hotels concern themselves more with rising reservation acquisition costs and the need to competitively differentiate through loyalty programs, unique stay experiences and personalized offers, a sound revenue strategy is even more prevalent.

In order for hotel operators to entice potential franchisee investors, they need to provide strong earnings results each quarter that demonstrate their ability to enact a disciplined and agile revenue strategy that increases net income.

Revenue strategy involves more than technology that generates pricing decisions. It’s a business culture that must be instilled across an entire estate to help improve operational efficiency, increase asset value and attract and retain top industry talent.

When a revenue management strategy becomes systemic and second nature, these practices can be put in place for other revenue streams to optimize all business and revenue a hotel generates, which leads to stronger quarterly earnings and more interested investors.

In a recent company release on their Q1 results, Extended Stay America (ESA) highlighted an 8.9% increase in net income over Q1 last year. In an article earlier this quarter, CEO of Extended Stay America Gerry Lopez was quoted stating, “The revenue management system and discipline we have installed over the last year and a half now have allowed us to be very nimble.”

He continued to explain that, despite the general opposition in the industry to OTAs, their revenue management culture and technology has allowed them to strategically leverage OTAs to “fill in the blanks,” viewing them as not only a distribution channel, but also a marketing channel.

It is this type of comprehensive effort and critical focus on improving a hotel’s bottom line that has given Extended Stay America the confidence to expand and extend the reach of their brand through franchise opportunities with interested investors. Lopez says, “People are eager, and to be honest, more (investors) have approached us than we have approached.”

When brands are able to demonstrate a clear aptitude in delivering ongoing results through a fortified revenue management culture, they are able to increase asset value (for reference, ESA’s stock price is up over 10% year-to-date) and attract additional investors.

As the largest US extended stay provider in the mid-scale segment, and with over 600 hotels in its portfolio, Extended Stay America has done an excellent job creating a culture able to capitalize on the demand in the extended stay segment. By better understanding their opportunity to monetize their product, they are able to better meet the needs of their guests.

Hotel competition is fierce — and it only continues to grow and evolve with changing business models and sharing economy entrants. To attract investors, achieve profitability goals and maintain strong talent, hoteliers must think about the people, processes and technology needed to elevate their profit performance and stay competitive in an ever-changing industry.

Blake Madril
Principal Industry Consultant

Blake is responsible for helping clients of IDeaS implement revenue technology and optimize profitability. Before joining IDeaS, Blake worked for individual hotel properties and a corporate management team. His roles ranged from operations manager to convention services director to corporate director of revenue management.

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