A Hotel Can Beat Its Competitors Even With Lower RevPAR. Here’s What Owners Are Missing. 

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

For much of the past two decades, hotel revenue growth followed a familiar pattern.

Markets recovered.

Demand increased.

Occupancies strengthened.

Rates rose.

RevPAR improved.

Success was often measured by how effectively hotels captured pricing power during favourable market conditions.

But hospitality is entering a different phase.

The gains from rate recovery are becoming harder to sustain. Competition is intensifying. Costs continue to rise. Guests are becoming more discerning, while investors are demanding stronger returns and greater accountability.

In this environment, future performance will depend less on a hotel’s ability to keep raising rates and more on its ability to make smarter commercial decisions.

That means understanding which demand is most valuable. Optimising business mix. Protecting inventory. Diversifying revenue. Using data more intelligently. And ensuring commercial decisions ultimately support profitability and asset value.

Pricing power will always matter.

But commercial sophistication is becoming the industry’s new competitive advantage.

Higher Rates Don’t Always Mean Better Performance

Occupancy and Average Daily Rate (ADR) remain fundamental indicators of hotel performance.

But neither is sufficient on its own.

A hotel can achieve record occupancy while diluting profitability through expensive distribution channels.

A property can increase rates while surrendering market share.

A resort can record lower RevPAR than its competitors yet outperform them financially by generating substantially more revenue from dining, wellness, experiences and other ancillary services.

The traditional metrics still matter.

They simply don’t tell the entire story.

For owners and operators, the challenge is increasingly to understand not only whether revenue is growing, but where that growth is coming from, what it costs to acquire and how much profit it ultimately generates.

That requires a different level of commercial thinking.

The Winners Won’t Simply Charge More

The hotels most likely to outperform in the coming years won’t necessarily be those commanding the highest room rates.

They will be those that understand the value of demand more deeply.

Rather than simply maximising occupancy, they will optimise business mix.

Instead of automatically renewing legacy contracts, they will continuously assess whether those agreements still create sufficient value.

They will protect inventory strategically during compression periods rather than filling rooms too early at lower rates.

They will monetise ancillary services more effectively and evaluate customers based on total spend rather than room revenue alone.

Most importantly, commercial strategy will become an ongoing discipline — not something revisited primarily during the annual budgeting process.

As markets become more competitive, the difference between average-performing hotels and market leaders will increasingly come down to the quality and consistency of commercial execution.

More Data Isn’t the Advantage — Better Decisions Are

Hotels now have access to an extraordinary volume of information.

They can analyse:

• Booking behaviour
• Demand patterns
• Guest preferences
• Spending habits
• Market movements
• Channel performance
• Revenue contribution

Yet access to data is not, by itself, a competitive advantage.

Almost everyone has data.

The differentiator is what happens next.

Many organisations continue to collect vast amounts of information without consistently translating it into actionable commercial decisions.

Which customers are actually the most profitable? Beyond that, what channels deliver the strongest net contribution? Ultimately, what demand should be accepted — and which should be displaced?

Where are guests willing to spend beyond the room?

Where is revenue being left on the table?

The next generation of hospitality leaders will be distinguished by their ability to turn information into action.

Commercial sophistication isn’t about knowing more.

It’s about making better decisions with what you know.

The Guestroom Is Only One Part of the Revenue Story

The traditional distinction between rooms revenue and non-room revenue is becoming less relevant as guests engage with hotels in increasingly diverse ways.

Wellness.

Dining.

Experiences.

Events.

Memberships.

Co-working.

Lifestyle services.

For many properties, these are no longer peripheral offerings. They are becoming meaningful contributors to profitability and competitive positioning.

This is why Total Revenue Management is likely to play an increasingly important role in hotel commercial strategy.

The objective is broader than maximising RevPAR.

It is about understanding the total economic value of a guest and identifying opportunities to create revenue throughout the entire journey.

A lower-rated guest who spends substantially on dining, wellness and experiences may ultimately be more valuable than a higher-rated guest who purchases only the room.

Commercially sophisticated hotels will increasingly be able to recognise that difference — and make decisions accordingly.

Owners Are Moving Closer to the Commercial Conversation

One of the most important changes is taking place at the ownership level.

Historically, many owners assessed commercial performance from a distance, focusing primarily on headline results.

That relationship is changing.

Investors are becoming more sophisticated. Asset managers are becoming more commercially engaged. Operators are increasingly expected to demonstrate not only what results they achieved, but how those results were generated.

Was market share gained profitably?

What did additional demand cost to acquire?

Are contracts strengthening performance or restricting pricing opportunities?

Is the asset capturing its full revenue potential?

This scrutiny should not be viewed as operational interference.

Done well, it creates stronger alignment between ownership objectives and commercial execution.

As the relationship between commercial decisions, profitability and long-term asset value becomes clearer, the traditional boundary between asset management and commercial strategy will continue to narrow.

Technology Won’t Replace Commercial Judgement

Artificial intelligence, automation and advanced analytics will undoubtedly reshape hospitality over the coming decade.

Forecasting will improve.

Pricing will become more dynamic.

Personalisation will become more sophisticated.

Commercial teams will be able to identify opportunities faster and at greater scale.

But technology should be viewed as an enabler — not the strategy itself.

The organisations that outperform won’t necessarily be those with the most advanced systems.

They will be those that know what they are trying to achieve with them.

Technology can identify a pattern.

Advanced systems can predict demand, recommend a price, and highlight an opportunity.

But people still need to understand the wider commercial context and decide which opportunities are worth pursuing.

The future will require both commercial intelligence and commercial judgement.

Technology can strengthen the former.

It cannot replace the latter.

Revenue Excellence Is Being Redefined

Hospitality has traditionally celebrated revenue excellence through occupancy leadership, ADR growth and market share gains.

Those achievements will continue to matter.

But tomorrow’s leading hotels will distinguish themselves in more ways than simply selling rooms at higher rates.

First, tomorrow’s leading hotels will understand customers more deeply. Next, they will allocate inventory more intelligently. They are also set to acquire demand more efficiently while diversifying revenue streams. Ultimately, these leaders will connect rooms, dining, wellness, experiences, and other revenue opportunities into a cohesive commercial strategy.

And, crucially, they will do these things consistently.

That is the emerging definition of commercial sophistication — the ability to make better decisions across the entire asset rather than optimising individual metrics in isolation.

Final Thoughts: The Next Advantage Is Smarter Decision-Making

There is no single formula for the next phase of hotel revenue growth.

Every market is different, and every asset has its own strengths, constraints and opportunities.

What is becoming increasingly clear is that sustainable performance will require a broader approach than relying predominantly on occupancy growth and pricing power.

The next phase will be more analytical, more integrated and more commercially demanding.

For owners, investors and operators, that creates an opportunity.

Hotels that understand the true value of demand, use data intelligently, diversify their revenue base and align commercial decisions with asset objectives will be better equipped to navigate periods when rates cannot simply keep rising.

Because the next competitive advantage in hospitality won’t come from a single pricing decision, technology platform or performance metric.

It will come from the quality of the decisions made across the entire business.

The hotels that outperform won’t simply be better at charging more.

They’ll be better at knowing where value comes from — and how to capture it.

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