While hoteliers have a general understanding of which guests are most likely to drive profits — typically brand- or property-loyal travelers who book directly at retail rates and stay for more than three nights — the math of just how profitable any individual booking might be can get daunting and complicated quickly.
Experts say there are various data points to consider beyond a guest's nightly rate when it comes to determining profitability. Those include online travel agency commissions or other forms of customer acquisition costs, the costs of labor associated with providing service, and whether those guests are paying resort or destination fees.
Speaking during the "Finding Your Most Profitable Customers" session at the 2026 Hotel Data Conference, Allison Frazier, vice president of revenue management for Peachtree Group, said all of this adds up to a "big mindset shift" from traditional revenue management to profit management.
"As all these things evolve, distribution costs change and costs are going up — labor costs are getting higher — everybody's trying to say, 'Hey, how do we drive profitability?'" she said. "At our company, we try to make that part of our culture. We understand that it's not just about always selling the highest [average daily rate] and that's it, or that it's about getting that highest occupancy and that's it. But it's everything else that goes into that then drives overall profitability."
She noted this requires communication and coordination between different departments, particularly revenue and sales, to help understand the importance of repeat business and length of stay, or how food-and-beverage spend factors into the profitability of bookings in group contracts.
Nadia Panasyuk, vice president of revenue strategy for First Hospitality, said steep increases in labor costs, particularly in union-heavy labor markets such as Chicago, have made finding profits all the more difficult. First Hospitality manages roughly 10 hotels in Chicago alone, she said.
"Obviously we can't raise our rates 40% just because the labor costs went up 40%, but we can look at that lowest-rated layer of business and rethink that," she said. "We've also looked at remixing within the segment."
She said this has driven her team to take more risks in shifting their strategy, often prioritizing higher rates over higher occupancy due to the lower labor costs associated with selling fewer rooms.
"It's giving the teams permission and safety to try something new that they've never tried before because we're in an environment we've never been in before," she said. "And we've had a lot of success this year. We've got several hotels that are maintaining or growing share, but through a little bit of occupancy erosion and making it all up in ADR."
She said destination and resort fees are also key to maintain profitability, but it's still vital that you show guests some value for the associated fee, often through things like on-property food-and-beverage credits.
Guests "don't love the fees, and as a customer, they offend me, but the math is mathing," Panasyuk said. "The occasional complaint you're going to get does not offset the increase in profit that you're getting. I hate that that's the truth, but it is."
While heavy reliance on OTAs has typically been tied to lower expectations of profitability because of commissions and other costs tied to promoting listings on those platforms, experts said hoteliers can see positive results if they're used judiciously.
"I think it's about understanding your demand, understanding when you need which type of business to ultimately drive the most profitability," Frazier said.
Kathleen Cullen, executive vice president of PTG Consulting, agreed, saying you have to pay close attention to how you're spending money to raise your profile on those platforms.
"It's just being very smart and having a strategy behind it, really understanding the stacking of all the potential costs or discounts that are being added," she said. "It is easy to forget about one or two, then before you know it ... what you're netting is much lower than you intended."
Frazier said increasing hotel brand franchise fees and marketing fees makes the direct-versus-OTA booking profitability math even more complicated.
"It's difficult sometimes to truly put a number on because there's not a lot of transparency, but trying to understand what costs really are associated with each of those channels, whether it's brand or OTA, also helps you make better strategic decisions and drive overall profitability," she said.
Cullen said one complicating factor is that OTAs are making a focused shift to get more B2B bookings on their platforms after decades of being more consumer focused. A shift to more guests potentially booking on AI platforms means they're less likely to pay attention if a hotel booking is made direct or through a third party. She said the AI is mostly just going to try to find the lowest publicly available rate.
"Keep in mind, we're not asking 'Find me the lowest rate on this channel.' [The AI] doesn't care. It's not discriminating where it's finding it, so it will bring back that low rate that is undercutting your own rate, and our consumers are booking them," she said.
Ultimately, independent hotels might have a new advantage in the era of AI because they have greater control over how they appear online, Cullen said.
"We have to have a strategy behind that and understand all the different layers and how all of that is working," she said. "We cannot be dumping inventory out there without truly understanding."
The hope hoteliers have in terms of AI is that it could also be a significant tool in driving profitability and sorting through the disparate data streams required to get a full picture.
"I think AI gives us an opportunity to finally unify a bunch of data sources and look at data more holistically," Panasyuk said. "You know a lot of hotel tech stacks are held together with duct tape, string and a revenue manager who's afraid to go on vacation, so there's a lot of interface discrepancies and reports don't all match. I think that's where there is opportunity with AI to finally solve that, even if it doesn't come through system infrastructure, but something that takes all the different systems and brings it together."