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Your Hotel ADR Is Up 12%. So Why Is Your P&L Still Bleeding?
Let me guess. Your last board meeting went something like this:
"ADR is up 12% year-over-year. RevPAR is strong. We're beating our comp set."
Then the CFO asks the question everyone was avoiding: "So why are we still not profitable?"
Silence.
This is happening across markets, segments, and brands. Hotels are reporting record ADRs and still struggling to convert revenue into profit. The problem isn't demand. It's what we choose to measure and optimize. Because here's the uncomfortable truth: ADR is a vanity metric. It looks good on STR reports. It makes ownership feel like you're winning. But it tells you almost nothing about whether your hotel is actually making money.
After working with properties across 15+ markets, we've seen the same pattern repeatedly. Hotels obsess over ADR while the metrics that actually determine profitability get ignored. Let's fix that.
Five metrics that matter more than RevPAR if you actually want profits.
You celebrate a $285 ADR from OTA bookings. Sounds great until you calculate what you actually keep after commissions, payment processing fees, and loyalty program costs.
Real example: A 180-room property had a gross ADR of $268. They were beating their comp set by 8%. Management was thrilled. Then we calculated their net ADR after all acquisition costs.
Blended net ADR: $221. Not $268. They were leaving $47 per room on the table in distribution costs.
What changed when we shifted focus to net ADR:
The lesson: Stop celebrating what guests pay. Start tracking what you keep. Net ADR is the only ADR that hits your P&L.
ADR tells you the average room rate. RevPAR tells you revenue efficiency. Neither tells you if you're profitable.
GOPPAR (Gross Operating Profit Per Available Room) does. It accounts for revenue AND costs. It's the difference between looking busy and actually making money.
Case study: Two comparable hotels in the same market. Both 200 rooms. Both reporting to the same ownership group.
Hotel A:
Hotel B:
Hotel A looked like the clear winner on every traditional metric. Higher ADR. Higher occupancy. Higher RevPAR. But Hotel B was 21% more profitable.
Why?
The insight: Revenue doesn't equal profit. You can win every ADR and RevPAR battle and still lose the profitability war. GOPPAR forces you to account for the full commercial picture.
ADR only measures room revenue. But what about F&B? Spa? Meeting space? Parking? A guest paying $180 for a room who spends $140 on property is worth more than a guest paying $220 who spends nothing else.
Real scenario: A coastal resort had an ADR of $312. Solid by market standards. But their TRevPAR told a different story.
Meanwhile, a competitor with $285 ADR (9% lower) had a TRevPAR of $348 because they captured significantly more on-property spend.
What we restructured:
Result after 8 months:
If you only optimize room rates, you only optimize room revenue. Profit lives in total guest spend and cost discipline.
You increased revenue by $850,000 last year. Congratulations. But how much of that actually became profit?
Flow-through measures what percentage of incremental revenue drops to GOP (Gross Operating Profit). Industry benchmark is 60-70%. Most hotels are closer to 35-40%.
Case example: A 220-room urban hotel increased total revenue by $1.2M year-over-year. ADR was up. Occupancy was up. The team expected bonuses.
GOP only increased by $380,000. Flow-through was 32%.
Where did the money go?
They grew revenue but sacrificed margin. The ADR increase didn't translate to profitability because costs grew faster than revenue.
What we changed:
Following year: Revenue increased $780,000. GOP increased $520,000. Flow-through improved to 67%.
The principle: Revenue growth is meaningless if costs grow faster. Flow-through tells you whether you're building a profitable business or just a busy one.
Every booking has a cost. OTA commissions. Credit card fees. Sales team salaries. Marketing spend. But most hotels don't calculate what they actually pay to acquire each guest by segment.
Real analysis from a 165-room property:
When we calculated net contribution (ADR minus acquisition cost minus variable operating cost), the ranking flipped:
The segment with the highest ADR (OTA) ranked third in actual profitability. The segment everyone assumed was low-value (walk-ins) was second most profitable.
What changed:
The lesson: Every segment looks different when you subtract what it costs to acquire it. Customer acquisition cost by segment shows you where to invest, where to defend, and where to walk away.
The hotels that consistently outperform their markets don't obsess over ADR. They obsess over:
These metrics are harder to track. They require more sophisticated reporting. They force uncomfortable conversations about efficiency, cost structure, and channel strategy. But they're the only metrics that matter if your goal is profitability, not just performance theater.
Hotels that outperform long term don't chase the highest ADR. They design their commercial strategy around what converts to GOP, cash flow, and resilience.
At dhi Hospitality, we help hotels build reporting frameworks and commercial strategies around profitability metrics, not vanity metrics. Book you free consultation today.
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