How to increase hotel revenue: A practical guide for small hotels

What is hotel revenue, and what drives it for a small hotel?

Hotel revenue is the total amount of money that a property makes from selling its rooms and other products and services (e.g. parking, airport pickups, food and beverage, local tours). Hotels rely on two primary operational levers to grow revenue: a smart distribution strategy to sell more rooms and maximise occupancy, and earning more per booking through optimised room rates and add-ons.

For a deep dive on the strategy behind the management of revenue e.g., forecasting, segmentation, the metrics to track, check out our guide to revenue management for small hotels.

But if you’re in search of growth, this blog will give you all the best ideas on how to increase revenue at your hotel.

Why do occupancy and average daily rate both matter for hotel revenue growth?

While it’s tempting to focus purely on filling every bed or pushing your prices as high as possible, truly sustainable revenue growth comes from balancing how many rooms you sell with how much you charge for them. If you overcharge, your rooms sit empty, but if you drop your rates too low just to fill the property, you increase your operational costs and miss out on profit.

Sustainable revenue growth happens when you track both numbers together and find the sweet spot where you’re welcoming plenty of guests at a price that reflects the true value of your offering.

The metric that captures both at once is RevPAR (revenue per available room) — occupancy multiplied by ADR — which is why it’s the single most useful number to track. For a plain-English breakdown, see our quick guide to RevPAR for small accommodation providers.

How can small hotels increase revenue from distribution?

Listing your property across a complete suite of booking channels – online travel agencies (OTAs) like Booking.com and Expedia, metasearch engines like Trivago and Google Hotels, your own website – ensures your rooms are always visible to a large and diverse audience of potential guests. By balancing third-party visibility with your own commission-free direct booking option, you can fill more beds while keeping more profit in your pocket.

Maximising your reach doesn’t mean listing your property everywhere, because more listings means more listing management. It’s instead about being smart with where and how your rooms are displayed online:

• Drive direct bookings: While OTAs are great for visibility, they charge commission fees of 15-25% of the total booking value. While you need to abide by OTA rate parity rules, encourage guests to book directly on your website, to eliminate these hefty fees and inject that otherwise lost revenue back into your business. Direct channels also tend to carry the highest booking value. SiteMinder’s booking trends data puts hotel websites at the top for average value per booking. Listing on booking sites actually creates a ‘Billboard Effect’, where travellers discover your property on a major site like Expedia, then head to your hotel website to book directly with you.
• Connect additional channels: Relying on just one or two booking channels limits your property’s reach. By connecting to a few more – five or six is generally the sweet spot for small, independent hotels – you can experience a huge boost in visibility and reservation volumes. A smart channel manager allows you to update your room rates and availability across all of your platforms instantly, minimising the amount of listing upkeep you need to do and protecting you from double bookings.
• Optimise your online presence: Your OTA listings will deliver the first impression of your property to most potential guests. Ensure your property descriptions are accurate and welcoming, list your full range of amenities, and use professional photography that puts your hotel in the best possible light.

For the full breakdown of balancing OTA and direct channels, check out our guide to getting more direct bookings for your small hotel.

Channel managers vs. direct booking engines: which drives more revenue for small hotels?

Channel managers help you to administer all your online listings. Direct booking engines help you to secure reservations through your own website. These two systems might seem like they would compete against one another, but they’re actually complementary tools that work together to maximise your income.

The channel manager is your megaphone, broadcasting your rooms across the web to present your hotel as an option to people who wouldn’t otherwise know you exist. Your direct booking engine, meanwhile, is your ultimate profit generator – it’s where you should aim to direct people who have stumbled upon your hotel elsewhere on the web, as it allows you to secure reservations that are completely free from commission fees.

The most successful hotels know that one complements the other, so use a combination of both. Your channel manager helps you to fill up your calendar, your direct booking engine helps you to fill up your coffers.

Key takeaways

• Visibility and margin aren’t a trade-off. OTA exposure and commission-free direct bookings compound when you run them as one system.
• Channel count has a ceiling: past five or six, extra listings add admin faster than they add bookings.
• Distribution is only half the equation. The channels you list on drive volume, but your direct booking engine is what turns that volume into retained profit.

How should small hotels price rooms to increase revenue?

The perfect rate is the maximum that a guest is willing to pay for a certain room on a certain night. Instead of sticking to one flat rate all year round, you can increase your revenue by adjusting your prices based on factors like demand, seasonal shifts and competitor pricing. This ‘dynamic pricing’ strategy allows you to make more money at busy times of year, and fill more rooms during slower periods.

There’s a science to setting the ideal rate. You can begin to boost your earnings with the following practical steps:

• Embrace dynamic pricing: Setting your prices based on real-time demand is one of the quickest ways to grow your income, and there are a wealth of tools to help. When your area gets busy with a local festival or holiday weekend, nudge your rates up to capture extra profit. When things quieten down, lower them to maximise occupancy. 
• Monitor your local competition: Keep a close eye on similar properties in your area to ensure your rooms are priced competitively. If a nearby hotel lifts its rates because they’re nearly full, you have the opportunity to adjust yours too, ensuring you match the current market value. There are smart tools that can help you with this too.
• Create value-driven packages: Instead of dropping your base rate when bookings are slow, bundle your accommodation with extras like a late checkout, complimentary breakfast or a bottle of champagne on arrival, to protect your revenue while enhancing the perceived value of the stay for guests.

Pricing is a deep enough subject to warrant its own playbook. For the full range of approaches suited to small hotels, see our guide to hotel pricing strategies.

How can small hotels earn more from each guest?

Earning more from each guest is all about enhancing their stay with other products and services, rather than relying solely on the room rate. You can offer on-site services like food and beverage, airport pickups and bike hire. You can partner with local service providers to take commissions on tours, experiences and day spa sessions. And you can create package deals that offer a complete experience for a single, simple price. These strategies not only boost your revenue, they also create more personalised and memorable guest experiences.

How do you lift guest spend without feeling pushy? The following strategies are a great place to start:

• Master the upsell: The most effective way to upsell a guest is to encourage them to trade up to a premium version of whatever room or service they originally chose. They’ll pay a little extra, but they’ll get a better, more indulgent, more memorable experience because of it: a bigger suite, a better view, finer dining, a more intimate tour. You can also offer basics like late checkout or an extra night at a special rate.
• Introduce ancillary revenue streams: While upselling focuses on enhancing your current revenue streams, you should also consider creating entirely new ones. Think about the sort of products and services that would complement your current offering – an on-site bar or cafe, bike rental, local handcrafted souvenirs, venue hire – then actively promote them both before and during the guests’ stay. Speaking of which…
• Automate pre-arrival communication: Timing is everything when it comes to offering these extras. Send a personalised welcome email a few days before arrival that gives guests a rundown of available room upgrades and add-ons. The good news is you can fully automate this process with a smart tool, so you can make sales in your sleep.

For specific techniques, timing and scripts, check out our guides to creating ancillary revenue streams and upselling in small hotels.

How can small hotels increase occupancy and length of stay?

Filling your calendar is so much simpler when you attract the right travellers and consistently get them to stay an extra night or two. Length of stay (LOS) optimisation is important for hotel profitability because you’re preaching to the converted: people who have already chosen you, so take less convincing to stay a little longer than those who haven’t. Carefully crafted extended stay offers can maximise occupancy and reduce cleaning and turnaround costs, helping you to generate steady, predictable income through both busy and quiet times.

You can build higher occupancy levels and longer guest visits with the following tactics:

• Implement minimum length of stay rules: During busy periods like long weekends, holiday periods or local festivals, try setting a minimum stay requirement of two or three nights, to stop low value one-night bookings from blocking out your calendar.
• Design extended-stay packages: Encourage guests to stay longer by offering rewards like a reduced rate or a complimentary meal if they book three or more nights. This gives you more guaranteed revenue with fewer check-ins to manage.
• Launch targeted promotions: Craft promotions that speak directly to the types of guests most likely to visit your area at any given moment: e.g. romantic and luxurious weekend packages over winter, mid-week discounts for business travellers.
• Partner with local businesses: Team up with nearby tour operators, restaurants or event venues to create exclusive packages that combine different local experiences. This exposes your hotel to a new audience, and gives guests a compelling reason to stay an extra day to enjoy all the fun.

How does guest experience and reputation affect revenue?

Your property’s online reputation has a huge effect on the room rates you’re able to charge. Modern guests will often head straight to the review section of your listing or Google profile to see what former guests have said about their stay. A steady stream of glowing five-star reviews allows you to confidently justify higher rates.

Being a warm and attentive host is often enough to get travellers to share their positive experiences online, but it’s wise to actively encourage happy guests to post reviews with a post-stay email, perhaps even offering an incentive like a discount on their next stay in return for doing so.

Take the time to respond to reviews too: thank guests for their kind words and professionally address any constructive criticisms. A lot of potential guests will judge your hotel on how you respond to negative reviews, so be clear, calm and fair.

How can technology help small hotels increase revenue?

Modern tools built specifically for small, independent hotels are able to automate all manner of time-consuming admin, from suggesting ideal rates based on real-time demand, to updating availability across all listings as soon as a new booking comes in. These tools ensure your small property can compete with even the largest hotel brands, and help you to secure the most revenue possible.

When choosing a software system for your property, look for an integrated platform that offers the following revenue-maximising features:

• Capture commission-free direct bookings: A modern tool should include a booking engine that lets guests book a room directly through your website. These bookings are 100% commission fee-free, so you can keep the 15-25% of the total booking value that you would normally have to hand to an OTA like Expedia or Booking.com.
• Track competitor pricing in real time: To price your rooms correctly you need a clear view of your local market. Look for smart reporting tools that automatically monitor the rates and occupancy trends of your competitors, so you can price and package your rooms to stand out against them.
• Automate rate management: Instead of manually guessing when to update your room rates, choose a tool that automatically adjusts your prices based on live demand, so you always charge the maximum that a guest will be willing to pay, and never get caught out by a surprise demand peak, like when a local festival has just been announced.

Little Hotelier is a platform, built for independent hotels, that brings all of these tools together,  helping small properties secure up to 46% more bookings and 43% more revenue, at an ROI of 63x.

Frequently asked questions about increasing hotel revenue

What is the fastest way for a small hotel to increase revenue?

The quickest way for a hotel to boost its revenue is to implement a dynamic pricing strategy, adjusting your rates based on demand. If a sudden event, festival or weekend rush hits your area, you can make serious profit by nudging your rates up to a number that better reflects the popularity of your destination.

How can a small hotel increase revenue without raising room rates?

You can lift your income without touching your base rates by focusing on ancillary revenue and upselling. Offer premium room upgrades, late check out, bike rentals or breakfast to capture more guest spend.

How much can direct  bookings save on OTA commission?

Every reservation you win directly through your website is one you keep in full, rather than handing a slice to a third-party site like Booking.com or Expedia. Because the saving applies to the entire commission on every direct booking, even shifting a modest share of your reservations away from OTAs can add up to thousands of dollars in retained revenue over a year. That’s money you can reinvest straight back into your property.

What’s the difference between increasing revenue and increasing profit?

Revenue is the total amount of money your hotel brings in, while profit is the money you keep after paying all your costs. It is easy to increase your revenue by selling rooms cheaply through third-party sites, but your profit might actually shrink if they are sold below cost once commission fees and operational expenses are taken into account.

How can a seasonal property increase revenue in the off-season?

During quiet months, consider targeting business travellers, who are less prone to seasonal booking cycles, and also tend to book mid-week. You could rent out spaces for private events or to local businesses and organisations. You can also partner with nearby businesses to create winter experiences that give guests a reason to visit out of season.

How can an independent boutique hotel increase revenue on a limited marketing budget?

When funds are tight, focus on the free traffic generated by the Billboard Effect. Optimise your OTA profiles with professional photography and alluring, personality-laden descriptions. Once travellers find you on those large platforms and click through to your official website, win their direct booking by offering a small perk, like a complimentary drink on arrival or late checkout.