How Do I Know If My Hotel Is Underperforming?
By Tom Baker, AHA Hotel Consulting
One of the most common conversations I have with hotel owners starts something like this:
‘Tom, occupancy is decent, guest reviews are okay, and we’re making money. But it feels like we should be doing better.’
More often than not, they’re right. After more than three decades leading hotels, resorts, and hospitality organizations, I’ve learned that underperformance is rarely obvious. Most hotels do not wake up one morning and suddenly find themselves in trouble. Instead, performance slowly drifts. Expenses creep up, guest satisfaction slips, leadership becomes reactive, and opportunities are missed.
The challenge is that many owners judge performance based on a handful of metrics. Occupancy may be strong. Revenue may be growing. Yet the property may still be significantly underperforming its true potential.
What Does Hotel Underperformance Really Mean?
During my career, I’ve seen hotels operating at 85% occupancy that were significantly underperforming, while others with lower occupancy delivered exceptional profitability and asset value. A hotel is underperforming when it consistently falls short of what comparable market conditions, competitive positioning, and operational execution should allow it to achieve.
1. Occupancy Is Strong but Profits Are Disappointing
One of the biggest mistakes owners make is assuming strong occupancy equals strong performance. In reality, profitability tells a much more complete story. Distribution costs, labor expenses, departmental efficiency, and revenue mix all play critical roles.
2. Your Competitors Are Achieving Higher Rates
If your competitors consistently command higher ADR while maintaining similar occupancy levels, it is often a sign that market positioning, guest experience, revenue strategy, or perceived value requires attention.
3. Guest Reviews Tell the Same Story Repeatedly
Every hotel receives occasional criticism. What concerns me is when the same issues appear repeatedly. Recurring comments about cleanliness, maintenance, service consistency, or staff responsiveness often reveal operational weaknesses.
4. Employee Turnover Continues to Increase
Over the years, I’ve found that guest satisfaction and employee satisfaction are closely connected. High turnover creates disruption, increases costs, and often impacts the guest experience long before ownership notices it in financial statements.
5. Revenue Is Growing but Market Share Is Declining
Revenue growth can be misleading. If your market is growing faster than your hotel, you may actually be losing ground despite reporting higher revenues.
6. Renovations Are Not Producing Expected Results
I’ve seen owners invest significant capital into renovations only to find that performance remains largely unchanged. Renovations alone rarely solve operational or strategic issues.
7. Costs Continue to Rise Faster Than Revenue
When labor, purchasing, maintenance, and operating expenses consistently outpace revenue growth, operational inefficiencies are often present.
8. Ownership Lacks Meaningful Reporting
One lesson I’ve learned is that many hotels generate plenty of reports but very little actionable information. Ownership should clearly understand where profits are being made and where opportunities exist.
9. Management Is Constantly Fighting Fires
When leadership spends all of its time reacting to problems, strategic planning usually suffers. Successful hotels have a clear plan and measurable objectives.
10. The Hotel Has Never Received an Independent Review
Sometimes the most valuable thing an owner can receive is an objective perspective. Internal teams often become accustomed to existing practices and may overlook opportunities that an outside review quickly identifies.
What I’ve Learned Over the Years
Most underperforming hotels do not have one major problem. They have dozens of small issues that quietly erode profitability and guest satisfaction. Individually, each issue appears manageable. Collectively, they create meaningful performance gaps.
Frequently Asked Questions
What is a hotel operational assessment?
A comprehensive evaluation of operations, financial performance, guest experience, leadership structure, revenue strategy, competitive positioning, and asset condition.
Can a profitable hotel still be underperforming?
Absolutely. Many profitable hotels operate well below their potential. Profitability and optimization are not the same thing.
How often should a hotel conduct an operational assessment?
In my experience, most independent hotels and resorts benefit from a comprehensive assessment every two to three years, or whenever significant operational concerns arise.
Final Thoughts
The question is not whether your hotel is making money today. The question is whether it is performing as well as it should. The most successful owners continuously challenge assumptions, evaluate performance objectively, and look for opportunities to improve. In nearly every assessment I’ve conducted, there have been opportunities to strengthen operations, improve profitability, and enhance long-term asset value.
At AHA Hotel Consulting, we help independent hotels, boutique inns, resorts, and hospitality ownership groups identify opportunities to improve operational performance, increase profitability, and enhance long-term asset value through comprehensive operational assessments and strategic advisory services.
The AHA Takeaway
At AHA Hotel Consulting client satisfaction is a critical component to our success. Building strong relationships and producing positive results are core principles for our business. The owners of the Modernist Hotel recently shared a positive review on the AHA online business listing that reflects the importance of building these core principles.
Let’s talk about your vision. Use the quick form below and I’ll personally reach out.
– Tom Baker, Managing Principal