Three barriers to a profit-driven strategy.

Moving to a profit-centric strategy instead of a revenue-centric one is a goal of many commercial leaders, but getting there is easier said than done.

Three structural barriers hold most hotels back from making that transition — and for years, the industry has lacked the frameworks, data access, and tools needed to overcome them. That's beginning to change. Michael Grove, CEO of HotStats, and Nick Knight, Senior Director of Strategic Solutions and Enterprise at Duetto, sat down to examine what those barriers are, why they persist, and what's finally making it possible to break through them. Watch their conversation below or read the breakdown.

Barrier 1: The incentive problem.

The challenge.

As you know, a room sold is not always a profitable room sold.

The same room, on the same night, generates dramatically different net outcomes depending on how it was priced, through which channel it was sold, to which guest type, and what that guest did or did not spend beyond the room itself. Revenue managers have always known this in principle. In practice, technology has not always supported that level of visibility, and many systems still optimize primarily for room revenue without accounting for this difference. This has systemically resulted in teams being measured on what’s available (RevPAR), instead of what hits the bottom line.

When a commercial team is measured on RevPAR, the rational response is to chase the higher rate — regardless of acquisition cost, regardless of channel commission, regardless of ancillary yield — because that's what they're measured on. The simpler question drives the simpler decision.

This is not incompetence. It is a rational response to a flawed incentive structure. The problem is that it systematically undervalues the questions that actually determine whether a hotel is profitable:

• What does this booking cost to acquire?
• What is the total worth of this guest to the business?
• Which combination of decisions across pricing, channel, and segmentation delivers the most profitable outcome — not just the highest rate?

Your team could be growing revenue but eroding your margin simultaneously. Read more about the incentive problem here.

What to consider.

The blindspot that RevPAR creates is not new. The cost of ignoring it, however, is now too high to sustain, with increasing margin pressure from rising costs and market volatility being an inevitability.

The nature of hotels themselves is also changing, with hospitality becoming more complex.

 

“There are hotels where their key driver is actually conference and events revenues, and rooms is almost secondary. Managing those assets through a rooms-revenue lens means making decisions without most of the relevant information.”

            — Nick Knight

What you optimize for and base your strategy around can also impact investment. Institutional capital now makes up a significant share of hotel ownership, and institutional investors do not think in RevPAR. They think in net operating income, GOPPAR, and cap rate implications. The operators who can demonstrate profit performance — not just revenue performance — against a credible peer benchmark are increasingly the ones who attract and retain the right capital.

Barrier 2: Access to data.

The challenge.

The information needed to make profit-led decisions has always existed somewhere — scattered across departments, fragmented across spreadsheets, and reviewed at varying frequencies. The traditional methods of managing this data don't move at the speed decisions actually need to happen.

Historically, profit data might be reviewed once a month, once a quarter, or even once a year in a departmental review. Without that data readily accessible, commercial teams operate without the information they need to make profit-led decisions effectively.

What to consider.

Hotels have become increasingly complex. You can't flatline a revenue management methodology across your whole organization when some hotels are driven by conference and events revenues, others by rooms, and many by a combination across F&B, spa, and ancillary services. Each asset requires you to think on an asset-by-asset, region-by-region basis. And when you throw costs into the mix — which have shifted significantly — the operating model needs to shift with it.

Technology is now rising to meet the needs of these complex and multi-faceted hotels when it comes to rapid insights and profit data. Examples include:

• Duetto's demand intelligence tool, Advance: an AI-powered tool surfacing key demand insights without trawling through several dashboards or systems.
• Duetto’s benchmarking product, HotStats: enabling peer comparison and market insights, giving you the necessary profit data to inform your future strategy.

Visibility of insights at speed and profit data unlocks remarkable capabilities. For example:

For decades, refinancing conversations were anchored almost entirely in room revenue. Now, because you can actually produce granular ancillary data and connect segmented room performance to profitability outcomes, you start to create a picture that really helps with things like refinancing and overall financial positioning.

Barrier 3: Operationalizing profit data and insights.

The challenge.

Knowing that you should be optimizing for profit requires knowing how to turn that insight into daily action.

Consider a common scenario: A department head arrives with a budget request — a staffing addition, a capital investment, a new service proposition. The business case is built on intuition, on comparisons to last year, on a conviction that the investment will pay off. The conversation that follows is almost always the same: what are you actually basing this on? The honest answer is usually experience and judgment. Both have real value. But neither is evidence-based.

The challenge is interpreting data at speed in a way that supports daily decisions, recommendations, and informed strategy.

What to consider.

Solutions to this challenge require an operating model that closes the loop between commercial decision, profit outcome, and competitive benchmark — and operationalizes turning these insights into action. It requires commercial teams to measure GOPPAR, TRevPAR, channel profitability, and total guest value.

Many teams are already starting to shift from gut feel to asking profit-centric questions, such as: "Is this investment actually driving profit, or not?" The next step in this evolution is to operationalize this thinking into every decision, across every team equally.

We have a specific term for this way of thinking and operating: performance engineering. It's the discipline of connecting every commercial decision to its profit outcome, looking at overall hotel performance, and turning insight into action at scale.

To think and act with profit at the center, you need the right tool. The Revenue & Profit Operating System (RP-OS) gives you a view of your overall hotel performance, including GOPPAR, TRevPAR, and RevPAR, along with 1,000+ other financial metrics down the P&L. It also helps you act. It automates your pricing adjustments within guardrails you set, accelerates better decision making with AI-powered insights, and benchmarks your hotel against your compset and the market, so you know exactly how you're performing. All in one suite of products.

When every commercial function — revenue, sales, F&B, marketing, finance — is working from the same profit-led framework, the internal friction that consumes so much management time starts to dissolve. 

There's no arguing over attribution because everybody's focused on one goal: closing the loop from commercial decision to profit outcome and back again. That is the shift that changes everything, systematically breaking down each of the barriers covered.