Revenue Manager’s Guide to Hotel Profitability

Hotel profit margin is the share of total revenue a hotel keeps as profit after paying its costs.

Two hotels can have the same RevPAR but make very different profits. One may achieve it through higher occupancy at a lower rate and rely more heavily on commissionable channels. Another may achieve the same RevPAR with a higher rate, lower acquisition costs and fewer rooms to service.

Profitability gives revenue managers a fuller view of performance. While ADR, occupancy and RevPAR show how rooms performed, the profit metrics used in the hotel industry show how much of the revenue generated was actually retained.

This guide covers how hotel profit margins are calculated, what current industry benchmarks can tell you, the profitability metrics most relevant to revenue management and the commercial decisions that influence the result.

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Key takeaways

• There is no single “good” hotel profit margin. The right benchmark depends on the hotel’s market, operating model, revenue mix and cost structure.

• More revenue does not automatically mean a better margin. Revenue can grow while costs grow faster, and a lower margin percentage can still produce more absolute profit.

• RevPAR only tells part of the story. GOPPAR, flow-through, acquisition cost and TRevPAR help show whether the business being accepted is actually improving profitability.

• Revenue managers influence profit through the business they choose to take. Pricing, channel mix, displacement, ancillary revenue and forecast accuracy all affect how much revenue ultimately reaches GOP.

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What is hotel profit margin?

Hotel profit margin is the percentage of revenue a hotel retains as profit.

Hotels use several profit measures because each one includes a different set of costs.

The three you are most likely to see are gross operating profit (GOP) margin, earnings before interest, taxes, depreciation and amortization (EBITDA) margin and net profit margin.

Margin	What it shows
GOP margin	The share of total operating revenue left after departmental expenses and undistributed operating expenses have been deducted. It shows the profitability of the hotel’s core operations before costs such as management fees, property taxes, insurance, interest, depreciation and tax.
EBITDA margin	The share of total operating revenue left after operating expenses and additional hotel-level costs such as management fees, property taxes and insurance have been deducted. It excludes interest, depreciation, amortization and tax, so it gives a broader view of the property’s operating profitability without bringing financing structure into the result.
Net profit margin	The share of total revenue left after all operating, ownership and financing costs have been deducted, including interest, depreciation, amortization and tax. It shows the final profit available after the full cost structure of the hotel has been taken into account.

For revenue managers, GOP is usually the most useful of the three because pricing, occupancy, channel mix and business mix can all affect it.

EBITDA becomes more relevant when management and ownership are assessing the property after costs such as management fees, property taxes and insurance.

Net profit is more closely tied to the owner’s final return. Debt, depreciation and tax can change it without reflecting a change in the hotel’s commercial performance, so it is less useful for judging an individual revenue management decision.

What is the average hotel profit margin?

Published averages vary depending on the profit measure being used and the hotels included in the sample.

In CBRE’s survey of 2,216 US hotels, the average gross operating profit (GOP) margin in 2025 was 34.8% and the average EBITDA margin was 22.8%.

Margin	2024	2025
GOP margin	35.1%	34.8%
EBITDA margin	23.3%	22.8%

Both were slightly lower than in 2024.

The underlying figures provide more context. Total operating revenue grew 2.6%, while operated and undistributed department expenses rose 3.0%. GOP grew by 1.5%.

In other words; GOP increased, but because costs grew faster than revenue, GOP margin fell from 35.1% to 34.8%

Or even more simply put: revenue increased, but profit grew more slowly.

What is a good hotel profit margin?

There is no single good hotel profit margin. CBRE’s 2025 results varied widely by segment, with luxury and resort hotels growing profit while economy and midscale hotels declined.

The right comparison depends on the hotel’s business model, market and cost structure. A 120-room airport hotel, a city-center luxury hotel and a resort have very different revenue streams and operating costs.

A limited-service hotel may earn most of its revenue from rooms, while a resort may also generate revenue from restaurants, spa, golf, retail and events. Staffing levels, seasonality and service model will also affect the margin a hotel can expect to achieve.

The highest margin percentage is not always the best commercial outcome.

Take a hypothetical 120-room hotel whose revenue grows from $10 million to $10.5 million:

	Year 1	Year 2
Total revenue	$10.0m	$10.5m
GOP margin	35%	34%
Gross operating profit	$3.50m	$3.57m

The GOP margin has fallen by one percentage point, but the hotel is still making $70,000 more in gross operating profit. So a lower margin does not necessarily mean the hotel has become less profitable.

To judge whether a margin is good, compare it against four reference points:

• Your own history: Is GOP margin improving or declining, and what has changed in the business mix or cost base?

• Budget and forecast: Is the hotel generating the level of profit expected from the revenue it produces?

• Comparable hotels: How does performance compare with hotels that have a similar market, segment and operating model?

• Revenue growth: When the hotel adds revenue, how much additional GOP does it generate?

How do you calculate hotel profit margin?

To calculate hotel profit margin, divide the profit figure by total revenue and multiply by 100.

Using the Year 2 figures above:

GOP margin = $3.57 million ÷ $10.5 million × 100 = 34%

If costs below GOP reduce earnings to $2.42 million:

EBITDA margin = $2.42 million ÷ $10.5 million × 100 = 23%

Net profit margin is calculated in the same way, using net income after interest, depreciation, amortization and tax.

Net profit margin = net income ÷ total revenue × 100

Which metrics help revenue managers understand hotel profitability?

ADR, occupancy and RevPAR show how rooms are performing. Profitability analysis goes further by looking at total guest spend, the cost of acquiring demand and the profit generated from the business the hotel accepts.

Metric	What it tells you
ADR	Average room revenue for each room sold
Occupancy	The share of available rooms sold
RevPAR	Room revenue generated per available room
TRevPAR	Total hotel revenue generated per available room
Acquisition cost	What the hotel spends to acquire a booking
GOPPAR	Gross operating profit generated per available room
Flow-through	How much additional revenue becomes additional GOP

ADR and RevPAR

Average daily rate (ADR) shows the average room revenue earned for each room sold.

ADR = room revenue ÷ rooms sold

Revenue per available room (RevPAR) combines rate and occupancy.

RevPAR = room revenue ÷ available room nights

or:

RevPAR = ADR × occupancy rate

They remain core revenue management metrics, but both are focused on room revenue. They do not show what the guest spends elsewhere in the hotel, what it cost to acquire the booking or how much profit the business produced.

TRevPAR

Total revenue per available room (TRevPAR) includes revenue from across the hotel.

TRevPAR = total revenue ÷ available room nights

For a full-service hotel or resort, that can include food and beverage, parking, spa, retail, golf and other ancillary revenue.

Two guests may both pay $250 for their room. If one also spends $80 on breakfast, parking and spa, the room revenue is the same but the total value of the stay is not.

TRevPAR captures that difference.

Acquisition cost

The same room rate can produce different net revenue once acquisition cost is taken into account.

A simplified example:

Booking	Room revenue	Acquisition cost	Revenue after acquisition cost
Direct	$200	$12	$188
Commissionable channel	$200	$36	$164

Acquisition cost can include OTA commissions, transaction fees, digital marketing spend, booking engine costs and loyalty costs.

The lower-cost booking is not automatically the better piece of business. A commissionable booking may be valuable on a soft date if it brings demand the hotel would not otherwise have captured. On a date that is likely to sell out, the same booking may displace demand with a higher rate or lower acquisition cost.

GOPPAR

Gross operating profit per available room (GOPPAR) measures the operating profit generated from the hotel’s available room inventory.

GOPPAR = GOP ÷ available room nights

RevPAR tells you how much room revenue the hotel generated from its available inventory. GOPPAR shows how much operating profit the hotel generated from that same capacity.

RevPAR can rise while GOPPAR falls if the cost of acquiring and servicing the additional business grows faster than the profit it produces.

Flow-through

Flow-through shows how much additional revenue becomes additional GOP.

Using the year-over-year change in our example, revenue increased by $500,000 and GOP increased by $70,000.

Flow-through = $70,000 ÷ $500,000 × 100 = 14%

So 14% of the additional revenue reached GOP.

Why can hotel revenue grow while profit margin falls?

When revenue grows faster than profit, some of the additional revenue is being absorbed elsewhere in the business.

Several things can contribute to that:

• occupancy grows through lower room rates

• channel mix shifts toward higher-cost booking channels

• a promotion discounts demand that may have booked at a higher rate

• group business displaces higher-rated transient demand

• shorter stays increase housekeeping and servicing costs

• ancillary revenue carries higher delivery costs

• labor and other variable costs increase faster than revenue

A lower margin is not automatically a poor result. The question is how much profit the additional business contributed and whether that return was worth the capacity and cost required to generate it.

What costs reduce hotel profit margin?

Different costs affect different profit measures.

The day-to-day costs associated with running the hotel reduce GOP, while management fees, property taxes and insurance come later and reduce EBITDA. Interest, depreciation, amortization and tax then reduce the final net profit.

For revenue managers, the most useful costs to watch are usually the ones tied to bringing in demand and servicing it once it arrives.

Cost area	Examples	How it affects profitability
Distribution and acquisition	OTA commissions, transaction fees, marketing and booking costs	Reduces the value retained from each booking
Rooms	Housekeeping labor, laundry, amenities and supplies	More occupied rooms and shorter stays can increase servicing costs
Food and beverage	Labor, ingredients and supplies	Additional revenue only adds to profit after the cost of delivering it
Other operating costs	Utilities, maintenance, technology, sales and administration	Reduce GOP and can rise as the hotel becomes busier
Costs below GOP	Management fees, property taxes and insurance	Reduce EBITDA rather than GOP
Financing and accounting costs	Interest, depreciation, amortization and tax	Reduce net profit further down the P&L

Some costs rise as you sell more rooms. Each extra stay can mean more housekeeping hours, laundry, amenities, payment fees and energy use. Sell another 30 rooms and those costs start to add up.

Other costs do not change much from one booking to the next. Property taxes, insurance and most salaried roles do not suddenly change because occupancy moves from 60% to 80%.

For a revenue manager, this changes how you look at incremental business. On a soft night, an extra booking can be attractive because much of the hotel’s cost base is already being paid. As occupancy builds, servicing that demand can become more expensive. You may need more labor, more laundry, more energy or additional operational support.

The same CBRE study recorded labor costs up 2.9% per occupied room, utilities up 5% and property operations and maintenance costs up 3.8%.

If those costs rise faster than revenue, less of the additional revenue reaches GOP and flow-through weakens.

How to improve hotel profit margin

Revenue managers do not control every cost in the hotel, but they have a direct influence on the quality of the business the hotel accepts, the rate charged, the cost of acquiring that demand and the forecast passed to operations.

Overall, the focus is on the value of the business being accepted, not just the revenue it adds.

Price for the demand on each date

A $150 room rate can be a good decision on one night, but a poor one on another.

On a soft midweek night with plenty of inventory still available, a lower rate may generate demand that would not otherwise materialize. On a high-demand or compression night, the same rate may displace business willing to pay more and you end up selling your room for far less than you could otherwise have done.

The right rate depends on lots of different factors including your pickup and how you are pacing for that date, how many rooms you have available, any events, seasonality, length of stay and how much demand you still expect to come in. The rate is also only one part of the decision. A lower ADR may still be worthwhile if the booking fills a need period, stays several nights and comes through a low-cost channel. A higher ADR may be less attractive if it displaces more valuable demand or carries a high acquisition cost.

Dynamic pricing and revenue management systems can help bring those signals together and update pricing as demand changes.

Look at the cost of each booking channel

Where a booking comes from affects how much of the room revenue the hotel keeps. An OTA booking may bring demand the hotel would not have captured directly, but commission and transaction fees reduce its value. Direct bookings avoid OTA commission, but they are not necessarily free to acquire. Depending on how the guest books, there may still be booking engine fees, payment costs, paid search or metasearch spend, and loyalty costs.

That means acquisition cost should be judged alongside how much demand the channel is actually adding. A commissionable booking on a soft Sunday may be exactly the business the hotel needs. On a night that is already likely to sell out, the same commission may simply reduce the revenue you keep from a booking you could have captured through a lower-cost channel.

Check what a group could displace

When you evaluate a group, do not stop at the group rate. You also need to think about what you could sell those rooms for if you kept them available.

Say a group wants 40 rooms at $160.

On a quiet night, that could be very good business. If you were only expecting to sell some of those rooms anyway, the group brings in room revenue you might otherwise miss. It may also add meeting-room hire, food and beverage or other spend.

Now take the same request for a busy night during a major citywide event. If you expect those 40 rooms to sell to transient guests at around $230, accepting the group could mean replacing $9,200 in potential transient room revenue with $6,400 in group room revenue.

That does not automatically mean you should reject the group. The group may bring food and beverage revenue, have a longer stay pattern or cost less to acquire than the transient business. But those benefits need to make up for the revenue you expect to displace.

A displacement analysis usually looks at:

• group room revenue

• food and beverage and other ancillary revenue

• stay pattern and length of stay

• expected transient demand and ADR

• how many rooms you expect the group to displace

• acquisition costs

• any operational constraints

Compare the total value of the group with the value of the business you are likely to give up by taking it.

Increase total guest value

Once a room is sold, there may still be opportunities to increase the value of the stay.

That could mean a room upgrade, breakfast, parking, spa, early check-in, late checkout, pet fees or other add-ons. For hotels with several revenue streams, those extras can lift TRevPAR without requiring another room to be sold.

CBRE’s 2025 sample shows how some of those revenue streams can grow faster than rooms. Revenue from other operated departments, including parking, retail, spa and golf, increased 7.8%. Miscellaneous income rose 10.9%, compared with 1.1% growth in rooms revenue.

The extra revenue still needs to make sense once the cost of delivering it is considered.

A late checkout can be good incremental revenue, but if the room is needed again that day, housekeeping may need to adjust the schedule or add labor to get it ready in time. A package can increase total guest spend while also adding food, labor or fulfilment costs.

The best opportunities are the ones that increase guest spend without adding more cost or operational pressure than the extra revenue can support.

Give operations a better view of demand

The forecast also helps operations plan staffing, housekeeping and purchasing.

Teams need a clear idea of what the hotel is likely to look like over the next few days and weeks. How many arrivals and departures are expected? How many rooms will be occupied? Are groups picking up as expected? Is transient pickup ahead of or behind pace?

Those changes affect how departments plan. A heavy departure day means more rooms for housekeeping to turn. If a group washes, staffing or food and beverage purchasing may need to be adjusted. If weekend pickup slows, schedules can sometimes be changed before the labor is committed.

The PMS provides much of the stay data, while revenue management systems add information such as pickup, pace and market demand. The Revenue Manager brings those signals together into a forecast the rest of the hotel can use.

When labor is expensive or staffing is tight, an early change in the forecast gives teams time to adjust schedules, housekeeping coverage or purchasing rather than reacting once the business has already changed.

A revenue manager’s profitability check

A profitability review should help you decide what to do next.

Decision	What to review
Do we need more demand, or should we protect rate?	Pickup, pace, occupancy, rooms remaining, ADR, RevPAR and expected demand
Which business should we take more or less of?	Segment mix, channel mix, length of stay, booking pattern, net revenue and need periods
Is this channel worth the acquisition cost?	Commission and acquisition cost, net revenue, incrementality and demand by date
Should we accept this group?	Total group value, displacement, expected transient demand, stay pattern and ancillary revenue
Is revenue growth translating into profit?	GOP, GOP margin, GOPPAR and flow-through
Do we need to change the forecast or operating plan?	Pickup versus forecast, group wash, arrivals, departures, occupancy outlook and length of stay
Where did we miss plan, and what caused it?	Budget, forecast, prior year, business mix, acquisition cost and operating-cost variance

You will not need every measure for every decision. Start with what has changed, then use the numbers that help explain it.

The review should leave you knowing what needs attention next: price, business mix, distribution, forecast or the operating plan.

Connect revenue decisions with their profit impact

Working through these questions can mean pulling together pricing, performance, demand and other commercial data before you can get to the decision.

Ernest is Lighthouse’s AI teammate for hotel commercial teams. He brings together the commercial data available through Lighthouse and connected systems, so revenue managers can work through those questions without moving between separate reports and dashboards.

You could use Ernest to test pricing scenarios as demand changes, investigate a shift in performance or run Group Displacement Analysis before responding to a group request. If the same analysis needs to happen every week, he can also set it up as a Routine.

That gives the Revenue Manager the context to decide which business to take, what to charge and what that decision is likely to mean for profit.

Frequently asked questionsWhat is the average hotel profit margin?

US hotels recorded an average GOP margin of 34.8% and an EBITDA margin of 22.8% in CBRE’s 2025 Trends in the Hotel Industry sample.

These figures provide broad industry benchmarks. Hotel type, market, service level and revenue mix affect the comparison.

What is a good hotel profit margin?

There is no single good hotel profit margin. Compare your result with similar hotels, your own history and your budget or forecast.

How do you calculate hotel profit margin?

Divide the profit figure you want to measure by total revenue and multiply by 100.

Hotel profit margin = selected profit figure ÷ total revenue × 100

What is the difference between GOP margin and net profit margin?

GOP margin measures profit from hotel operations before costs below GOP.

Net profit margin goes further and includes ownership, financing and tax costs.

Revenue managers have more influence over GOP because pricing, occupancy, distribution and business mix feed directly into operating performance.

What is hotel profit margin per room?

Hotels commonly use GOPPAR to measure operating profit against available room capacity.

GOPPAR = GOP ÷ available room nights

Joe Hanly

Joe Hanly is a writer and content creator at Lighthouse, helping hoteliers navigate industry trends with clear, engaging storytelling. He believes the best insights come from real experiences – that’s why when he’s not writing about travel and hospitality, he’s out exploring it firsthand. It’s all research. Sort of.

About Lighthouse

Lighthouse (formerly OTA Insight) is the leading commercial platform for the travel & hospitality industry. We transform complexity into confidence by providing actionable market insights, business intelligence, and pricing tools that maximize revenue growth. We continually innovate to deliver the best platform for hospitality professionals to price more effectively, measure performance more efficiently, and understand the market in new ways.

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