How to prevent revenue leakage in your hotel

Prabhash Bhatnagar
Prabhash Bhatnagar


As a hotelier, it is possible that you are leaving no stone unturned in making sure that occupancy rates at your property are consistently high. You might even be focusing on improving your offerings, services and staff productivity. When you work so hard to increase profitability at your hotel, the last thing you want to see is a revenue leakage happening.

What is Revenue leakage in the hotel industry?

Revenue leakage happens when you are losing revenue due to several mistakes at multiple levels – mistakes that are often unintentional and go unnoticed. Revenue leakage in the hotel industry is a major cause concern for almost all types of hoteliers. It happens in most of the areas/departments of your hotel operations. Left unchecked, revenue leakage can lead to a huge financial loss at your hotel.

Tips to prevent revenue leakage at your hotel

You need to first identify and eliminate business practices and services at your hotel that don’t generate enough revenue to cover up the expenses/investment done on them. In such cases, let’s look at some of the areas of your hotel operations that need your immediate attention.

Keep an eye on manpower/labor costs

At hotels, labor costs make up about 40% to 50% of the total operating expenses. If you are able to cut your labor costs without impacting daily operations and guest service, you can save a lot for sure. Look at every staff member’s productivity and find how they have contributed towards the growth of your hotel. Make a careful assessment and find out how many staff you actually need to run your hotel smoothly.

If you arrive at the conclusion that a 20-member staff can do the job for you, then there is no point in keeping more. Train and encourage your staff to perform other tasks outside their prescribed roles when required. Simply speaking, your hotel should neither be overstaffed nor understaffed.

Adopting a smart cloud-based Hotel Property Management System can also drastically help in increasing staff productivity and efficiency, as the Hotel PMS would automate and streamline all your daily operations. With cloud Hotel PMS, you don’t have to invest in servers at your hotel. And without servers and hardware, you don’t have to have a dedicated IT team. Thus, you have enough scope to cut labor costs that would add to your overall revenue.

Save on energy bills

Energy bill accounts up to 6% to 8% of a hotel’s operational expenses, and this also one area where revenue leakage happens. According to Energex, a company that specializes in providing occupancy-based energy management solutions to hotels, guests spend over 50% of their time outside of their rooms, while in-room utilities like lights and ACs are left running. In such cases, to regulate the energy consumption in order to slash your energy bills, implement a smart energy management system that can be integrated with your Heating, Ventilation and Air Conditioning (HVAC) system. The system monitors your rooms’ occupancy status by sensing your guests’ thermal body signature and controls the rooms HVAC accordingly. This is another great way to prevent revenue leakage at your hotel.

Implement strict stock & inventory management practices

Be it your F&B inventory or other room-related inventory, you need to have a process to tightly control your stock to prevent wastage and theft that lead to revenue leakage at your hotel. Adopt a smart cloud-based hotel property management system that helps you have an efficient materials/stock/inventory management process in place.

The integration of Hotel PMS with a Point of Sale (POS) system allows you to keep an eye on your available stock. It lets you know the stock that should be consumed in any given day/month, so that you can plan the procurement process in advance. You can also set alerts to know which items have reached the reorder stage so that you don’t place an order for those items to avoid overstocking as overstocking too can lead to wastage. Be it a soap bar, shampoo, towel or food items, track product-wise consumption of all the materials and prevent wastage and pilferage.

Leverage the power this Hotel PMS and POS system integration to view detailed reports about stock consumption and make the right decision. In simple words, you should be in a position to predict demand and supply rate with great accuracy to put a check on revenue leakage.

Restructure your marketing costs

Marketing your hotel is another area that needs a huge budget. If you are spending money on digital marketing through pay-per-click or cost-per-click, don’t forget to measure the ROI. Run a campaign for a month or two and see the difference. Monitor the impact of these campaigns on your hotel’s online visibility, booking conversion rate, etc. If you don’t get to see desired results after repeated attempts, you may want to stop it or start from scratch with a new approach and reduced budget.

However, you can put a little bit of extra effort on SEO marketing to grow your hotel’s organic reach. The mantra here is to understand your hotel’s niche, your target audience while coming up with marketing strategies that can give you maximum results with less investment.

Here are a few more tips that can help you in the context –

  • Be cautious while rolling out offers and discounts
  • Make sure that such freebies don’t eat into your profits
  • Ensure an error-free billing process to avoid billing related discrepancies
  • Don’t lower your room rate or offer any discounts when your occupancy looks good

While some of the above-mentioned tips can help you prevent revenue leakages at your hotel, there are other numerous ways to ensure the same in other operational areas of your hotel. Leave us a comment if you think we have missed out one something.

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Tips to handle revenue leakage at your hotel