Hotels Spent Decades Chasing Occupancy. Now the Smartest Ones Are Walking Away From It.

 By Pierre Marechal, Vice President, Strategic Advisory & Asset Management at JLL

For many hotel owners and investors, conversations about RevPAR growth often begin with a familiar question:

Can we push rates higher?

For decades, commercial strategies have largely revolved around a handful of established levers—increasing retail pricing, renegotiating corporate rates, improving wholesale contracts, or attracting higher-rated group business.

These fundamentals remain important. But they are no longer enough.

Today’s strongest-performing hotel assets are increasingly generating revenue growth through more sophisticated approaches that go well beyond headline rate increases. The focus has shifted toward how inventory is managed, how demand is shaped, and how every revenue stream within the asset is optimized.

In an operating environment defined by rising labor costs, margin pressure, and heightened investor expectations, commercial strategy is becoming a critical driver of asset value creation.

For owners, this means looking beyond occupancy and ADR in isolation. Increasingly, the discussion is centered on the quality, profitability, and sustainability of revenue—not simply the volume of room nights sold.

As hotel markets become more competitive and data-driven, sustainable RevPAR growth is becoming less about pricing power and more about commercial intelligence.

Your Most Profitable Guests May Not Be Your Most Occupied Nights

One of the most overlooked yet powerful opportunities available to hotel owners is business mix optimization.

Many hotels continue to rely heavily on lower-rated demand segments, including:

• Deeply discounted wholesale business
• Low-yield crew contracts
• Legacy corporate accounts
• Group business secured primarily to support occupancy

While these segments can provide base demand and improve occupancy stability, they can also dilute ADR performance and displace higher-rated transient demand during periods of strong market compression.

The key question for owners is no longer:

“How much occupancy does this segment generate?”

But rather:

“How much value does this segment create relative to the inventory it consumes?”

This is where commercial strategy and asset management increasingly intersect.

Leading hotels evaluate demand through a much broader lens, considering factors such as:

• Contribution margin
• Displacement cost
• Seasonality
• Booking behavior
• Cancellation patterns
• Ancillary spend
• Overall profitability contribution

In many cases, reducing lower-rated business—even at the expense of some occupancy—can deliver stronger RevPAR performance while significantly improving GOP.

Too often, hotels become fixated on occupancy percentages. Yet occupancy alone does not necessarily create value.

For owners and investors, revenue quality matters far more than room-night volume.

Yesterday’s Best Accounts Can Become Today’s Revenue Drag

Another frequently overlooked source of revenue leakage lies within contracted business.

Across many hotel portfolios, long-standing negotiated agreements remain in place despite significant changes in market conditions, demand patterns, and pricing environments.

Hotels often continue servicing:

• Corporate accounts negotiated years ago
• Wholesale agreements with diminishing strategic value
• Contracted business that no longer aligns with the property’s positioning

This became particularly common following periods of market disruption, when many hotels accepted lower-rated business to rebuild occupancy but failed to recalibrate those agreements once demand recovered.

A rigorous commercial review should assess:

• Actual production versus contracted allocation
• Realized ADR compared with transient opportunities
• Profitability contribution
• Booking windows
• Cancellation behavior
• Length-of-stay patterns
• Displacement impact during peak periods

Sometimes the most profitable decision is not to renew an account, but to reduce allocations, renegotiate aggressively, or exit the relationship altogether.

The same scrutiny should apply to sales resource allocation.

Many commercial teams continue dedicating significant time and effort to maintaining lower-yield business while underinvesting in higher-value demand generators.

From an ownership perspective, this is ultimately a capital allocation decision—ensuring that both inventory and commercial resources are directed toward the highest-return opportunities.

The hotels that consistently outperform their competitive sets are often those willing to challenge legacy commercial structures rather than simply renewing them year after year.

Every Room Night Has an Opportunity Cost

Inventory controls are often viewed as a technical revenue management function.

In reality, they represent one of the most powerful strategic tools available to asset owners.

A clear example is the growing use of non-last-room-availability (NLRA) clauses within corporate agreements.

Traditional last-room-availability contracts can severely restrict a hotel’s ability to optimize pricing during periods of strong demand. In markets characterized by compression, major events, or seasonal peaks, this can create significant opportunity costs.

NLRA structures, by contrast, provide operators with greater flexibility to:

• Restrict discounted inventory during peak periods
• Protect higher-rated transient demand
• Maximize ADR when market conditions strengthen

The financial implications can be substantial.

Even a relatively small portion of inventory tied to inflexible low-rated contracts can suppress overall market positioning and dilute RevPAR performance during key trading periods.

Importantly, adopting NLRA structures does not necessarily damage long-term client relationships. Many corporate buyers increasingly understand that flexibility is required within today’s dynamic pricing environment.

The objective is not to eliminate contracted business, but to ensure it remains aligned with both commercial strategy and ownership goals.

The Highest-Margin Revenue Is Often Already Inside the Building

Despite advances in technology and personalization, upselling remains one of hospitality’s most underutilized opportunities.

From a profitability standpoint, few revenue initiatives offer a more attractive return.

The reason is straightforward:

• Minimal acquisition cost
• Limited operational complexity
• Exceptionally strong margin contribution

Leading hotels now integrate upselling throughout the guest journey—from booking and pre-arrival engagement through to check-in and on-property experiences.

Pre-arrival upselling has become particularly effective, with hotels proactively presenting personalized offers for:

• Room upgrades
• Premium views
• Suites
• Club lounge access
• Spa treatments
• Airport transfers
• Wellness experiences
• Curated local activities

When executed effectively, these initiatives generate incremental revenue while simultaneously enhancing the guest experience.

Technology is making these strategies increasingly sophisticated by enabling offers based on:

• Guest profiles
• Booking behavior
• Length of stay
• Loyalty status
• Inventory availability

Importantly, upselling extends far beyond room upgrades.

Many hotels continue to leave substantial revenue untapped through under-monetized offerings such as:

• Early check-in
• Late check-out
• Premium amenities
• Dining experiences
• Experiential packages

For owners, these opportunities often require minimal capital investment while delivering meaningful revenue and profit growth.

Why Top-Performing Assets Are Looking Beyond RevPAR

RevPAR remains one of the hospitality industry’s most important benchmarking metrics.

However, it is increasingly insufficient as a standalone measure of performance.

The industry has steadily evolved toward a total revenue management mindset, recognizing that long-term profitability depends on optimizing every revenue stream within an asset—not just rooms revenue.

For many luxury, resort, and lifestyle properties, non-room revenues now represent a critical contributor to profitability and valuation.

These revenue streams include:

• Food and beverage
• Spa and wellness
• Meetings and events
• Destination experiences
• Membership programs
• Ancillary guest services

In many markets, strong non-room performance can offset pressure within the rooms division while strengthening the property’s overall competitive positioning.

Resorts are capitalizing on wellness travel demand. Lifestyle hotels are transforming dining concepts into destination experiences. Urban properties are expanding premium event spaces and flexible work offerings.

This reflects a broader shift in how asset performance should be evaluated.

The objective is no longer simply to maximize occupancy—or even RevPAR—in isolation.

The objective is to maximize total profitability and long-term asset value.

The Next Competitive Advantage Isn’t Higher Rates—It’s Better Revenue Decisions

As hospitality becomes increasingly sophisticated, the lines between commercial strategy and asset management continue to blur.

The strongest-performing hotel assets are rarely those that rely solely on rate growth.

Instead, they are the ones that consistently:

• Optimize business mix
• Reassess contracted demand
• Deploy inventory strategically
• Maximize upselling opportunities
• Embrace total revenue management

For owners and investors, this requires a more analytical and disciplined approach to commercial oversight.

Revenue growth should not be measured solely by how much rates increase year after year.

The more important question is whether the hotel is extracting the maximum possible value from its inventory, customer base, and broader revenue ecosystem.

Ultimately, sustainable RevPAR growth is no longer driven by pricing alone.

It is increasingly driven by the ability to make smarter, more creative, and more data-informed commercial decisions that unlock value across every segment, contract, and revenue stream within the asset.

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