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What a Revenue Diagnostic can look like
This is a fictional teaching example. The hotel, figures and proposed actions below are invented to demonstrate the format and reasoning. They are not client results, market benchmarks or a forecast. This is one finding from a sample report; an actual diagnostic follows your agreed scope and available evidence.
The owner's question
“Our rooms are selling, but the revenue is not translating into the contribution we expected. Should we spend more to attract direct bookings?”
In this example, an independent 60-room hotel compares direct and online travel agency bookings for the same room type, stay dates and cancellation terms. The first task is to compare the amount retained per occupied room night after the costs included below.
Finding 01 · Examine channel contribution before increasing marketing spend
At an assumed room rate of $200 before taxes, the direct booking retains $30 more per room night before additional acquisition spending. That difference supports a controlled test. It does not establish that enough guests can be won directly, or that direct demand will replace rather than duplicate existing bookings.
| Measure | Direct | Online travel agency |
|---|---|---|
| Room revenue before tax | $200 | $200 |
| Distribution / transaction cost assumed | $6 | $36 (18%) |
| Revenue after those costs | $194 | $164 |
| Variable room servicing cost assumed | $45 | $45 |
| Contribution before fixed costs and extra acquisition spending | $149 | $119 |
Calculation: $200 − $6 − $45 = $149 direct contribution; $200 − $36 − $45 = $119 agency contribution. This is a simplified contribution comparison, not gross operating profit. Fixed payroll, overhead, capital costs and taxes are excluded. The $6 direct cost is a fictional combined transaction/distribution allowance; actual costs must be checked.
Evidence, confidence and unanswered questions
Evidence required in a real engagement: reservations by channel and stay date, realised rates, cancellations and refunds, channel invoices, payment and booking-engine costs, marketing spend and variable servicing costs. Reconcile the records to the financial statements before relying on the result.
Confidence: the arithmetic is certain under the stated assumptions. The commercial opportunity remains unproven. Seasonal mix, room type, cancellations, length of stay, booking lead time and demand supplied by each channel could change the comparison.
Working hypothesis: a limited direct-booking trial may improve contribution if acquisition costs stay below the retained margin advantage and the trial does not reduce profitable demand elsewhere.
A decision scenario, with the assumptions visible
If 40 room nights move from agency to direct at the same $200 rate and incur $10 each in additional acquisition spending, the illustrative contribution difference is 40 × ($30 − $10) = $800 for the test period.
At $30 additional acquisition cost per shifted room night, the model breaks even. Above $30, it loses contribution. This scenario assumes all 40 nights genuinely shift channels with no change in total demand, rate, servicing cost or cancellation behaviour. Do not annualise the result or treat it as expected savings.
Proposed 90-day action plan
| Period | Action and proposed owner | Review / decision |
|---|---|---|
| Days 1–15 | Finance lead and revenue manager reconcile channel costs and comparable stays. | Agree the baseline and flag missing records. Revise the model before spending if actual costs differ. |
| Days 16–30 | Revenue and marketing leads propose a limited trial, budget and comparable control period or segment. | Owner approves scope, spend cap and stop rules. Keep rate and booking terms comparable. |
| Days 31–60 | Revenue manager tracks realised contribution, acquisition cost, total demand and cancellations weekly. | Pause if extra acquisition cost reaches the $30 break-even assumption, or total contribution deteriorates. |
| Days 61–90 | Owner, finance and revenue leads review the evidence and implementation effort. | Continue, revise or stop. Scale only where the measured gain survives the agreed checks. |
Guest and team checks: monitor booking friction, booking-related complaints and reservations workload. Agree acceptable limits before the trial. A channel change should be assessed alongside its effect on guests and colleagues.
What you take into the executive session
A finding you can challenge, calculations you can follow, assumptions you can test, and actions with proposed owners and review dates. We discuss what the evidence supports, what remains uncertain and which decisions deserve priority.
Review the CA$750 Revenue Diagnostic and current terms →
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