hotel_revenue_and_booking_analysis

HOTELS REVENUE OPTIMIZATION AND BOOKING PATTERN ANALYSIS

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Project Overview

As a hotel manager, have you ever wondered about your hotel’s average daily rate (ADR) and revenue per available room (RevPAR)? Are you curious about which market segments and distribution channels attract the highest-value customers based on ADR and length of stay? Do you want to know which countries are the top sources of guests and how their booking lead times and cancellation rates differ? Additionally, would you like to establish the typical lead time for guest bookings and determine if a longer lead time correlates with a higher likelihood of cancellations?

This data analysis helped answer such questions!

The dataset includes 119,334 booking records from the Sarova Hotels and Resorts portfolio (comprising Sarova Stanley, a city hotel, and Sarova Whitesands Beach Resort and Spa, a resort hotel). It contains information such as when the booking was made, the length of stay, the number of adults, children, and babies, and the number of available parking spaces, among other details. This rich resource is valuable for various stakeholders in the hospitality industry.

MANAGEMENT TASK

Revenue performance: What are the monthly trends for ADR and RevPAR across both hotel types, and how do these metrics correlate with overall revenue growth?
Market and channel efficiency: Which combinations of market segments and distribution channels yield the highest-value guests with the lowest cancellation risk?
Geographic and behavioral insights: How do lead times and cancellation rates vary across the top 10 source countries, and what does this reveal about guest reliability?
Operational optimization: Does a longer booking lead time significantly increase the probability of cancellation, and how often do room type mismatches (upgrades/downgrades) occur?

REVENUE PERFORMANCE

Monthly Trends For ADR

This section evaluates the performance of the Sarova Group portfolio (City Hotel and Resort Hotel) to identify key revenue drivers and seasonal volatility.

By analyzing average daily rate (ADR) across customer demographics and booking channels, the analysis identified a significant August peak and a distinct performance gap between steady, corporate-driven City revenue and highly seasonal Resort revenue.

Key Findings:

Seasonality. While the City Hotel maintains a consistent revenue floor (outperforming the ADR average {$91.11} for 9 months of the year), the Resort Hotel experienced extreme volatility:
- The August peak. Resort’s ADR reaches a high of $150.86 in August, driven by a surge in demand during the European summer holiday window.
- The Shoulder slump. A sharp decline follows in September ($95.01), hitting a low in November ($48.68).
The August Spike. A deep dive into the August performance revealed that three specific factors drive the revenue spike:
- Market segment. Direct and Online Travel Agents’ bookings are the primary drivers, paying significantly higher rates ($168.40 and $165.62, respectively) compared to negotiated Group or Corporate rates.
- Customer type. Transient guests (individual, non-contracted) paid the highest ADR at $159.72, indicating low price sensitivity for peak-season dates.
- Geography. The highest spending originates from the Iberian market - specifically Spain at $170.60 and Portugal at $156.68.
Channel profitability. Direct distribution is the most profitable channel, yielding an ADR of $168.40. This outperforms third-party TA/TO channels by $11.17 per room/night, before even accounting for the 15-25% commission savings.

Implications for Management:

Revenue instability. The Resort’s reliance on a 4-month “high season” (June to September) leaves the business vulnerable during the 8-month “low season.”
Yield displacement. Every room sold to a discounted Group or Corporate guest in August represents a missed opportunity to capture a $107.41 “Direct” Spanish guest.
The city advantage. The City Hotel’s business-centric model provides the cash flow necessary to subsidize the Resort’s high fixed costs during the winter months (September – February).

Business Recommendations:

For the Resort Hotel.

Targeted Spanish campaigns. Launch high-intent digital advertising in Spain during June and July to capture the maximum ADR “Transient” market.
Low-season MICE Pivot. Offer aggressive “residential meeting” packages from September to November to fill the family-shaped gap with corporate retreats.

For the City Hotel.

Dynamic weekend pricing. Since the City Hotel has high mid-week stability, management should implement “leisure city break” packages for weekends to push the ADR closer to the $115+ mark seen in the Resort’s shoulder months.
Corporate Loyalty. Focus on multi-year contracts with corporate partners to protect that “above-average” ADR floor throughout the year.

The August “Pain Point” Insight

The August data was analyzed further, and the results are eye-opening. While August is the highest-earning month, it is also where the Resort Hotel is losing the most potential:

Realized revenue (August): $1,820,000
Lost revenue (August): $928,860
Cancellation rate (August): 30.74%

Generally, the Group lost over $2.1 million in revenue in August alone due to cancellations. That is nearly 60% of what was actually earned. Because August has the highest ADR ($124.93), every cancellation in August hurts the Group significantly more than a cancellation in January.

Business Recommendations:

Based on the 37.74% cancellation rate in August, a non-refundable peak season policy should be put in place. If the Resort required a 50% non-refundable deposit for August bookings, for instance, they could have protected a large portion of that $928k.

MARKET & CHANNEL EFFICIENCY

Efficient Combinations:

The Online Travel Agent (OTA)/Travel Agent (TA/TO) combination is the Group’s biggest volume driver, but it is also a major source of volatility.
- Total Revenue: $12.30M (highest in the portfolio). - Average ADR: $108.33.
- Cancellation Rate: 36.4% (critical risk).
This channel provides the scale needed to fill rooms, but the high cancellation rate requires a strict overbooking or non-refundable deposit policy during peak months.
The Direct/Direct combination remains the most efficient part of the business.
- Total Revenue: $3.26M
- Average ADR: $104.55
- Cancellation Rate: 15.2%
These guests are committed and high-paying. Because they book directly, the hotel saves on commissions, making this the most profitable segment per room night.

Management Recommendations:

Incentivize direct bookings. Since Direct guests have a 15% cancellation rate compared to the 36% of OTAs, a small discount or perk (like free Wi-Fi or complimentary breakfast) for direct bookings would pay for itself by reducing lost revenue.
Group policy overhaul. The 65% cancellation rate for groups via TAs is unsustainable. Management should implement a “hard cut-off” policy where group room blocks are released 30 days out if not fully deposited or paid for.

Lead Time Analysis

The data shows that the further out a guest books via a Travel Agent or a Tour Operator, the less likely they are to arrive.
Management should implement a ‘last-minute direct special’ offer/promotion targeting the 7–14 day window.
This captures the high-certainty guests who book late, ensuring rooms are filled that were canceled by the long-lead OTA/OTO guests.

Offline TA:

Has a longer lead time (130+ days).
High lead time (135.25 days), high cancellation rate (34.73%), therefore, characterised as high risk.
These guests book far in advance on sites like Booking.com because they are “shopping around” for better deals. Since they often have “free cancellation,” they treat the hotel as a backup plan while they look for better deals. This explains their 34.73% cancellation rate.

Direct:

Has a shorter lead time (typically 30–45 days).
Low lead time (48.72 days) and low cancellation rate (14.98%), therefore, characterised as a high-value guest.
These guests are more intentional. When they book directly on your site, they have already decided on your hotel. Because they book closer to their arrival date, they are much more likely to actually show up, resulting in your 15.2% cancellation rate.

Length of Stay (LoS)

While Direct guests pay a higher daily rate ($104.1), the Offline TA segment provides more “room nights” per booking (4.3 nights vs. 3 nights).

The long stay advantage: Because Offline TAs stay 4.3 nights, they reduce the Group’s operational costs. Thus, it is cheaper to clean and reset a room once every 4.3 days (Offline TA) than every 3 days (Direct).
The reliability factor: Offline TAs are often tied to flights or pre-paid tours. This makes them much more “sticky”— once they book, they are highly likely to show up, unlike the “Online TA” guests who window-shop and cancel.

Interestingly, Aviation guests have a very high total booking value ($299.02). If these are airline crews, they represent a high-value, high-reliability segment that should be nurtured for the City Hotel.

Offline TA guests represent the “stable” side of the hotel business. They might not be the flashiest earners per day, but they are the ones who ensure the hotel doesn’t sit empty during the shoulder seasons.

The Efficiency Quadrant

By looking at the total booking value (TBV), we move beyond just seeing who pays the most per day (ADR) and start seeing who contributes the most to the bottom line per check-in.

The Aviation segment is the highest-value segment in terms of revenue generated per check-in.

The data shows that an Aviation booking is actually worth $299.02, which is higher than an Online TA booking at $229.83. Furthermore, the Offline TA segment provides the longest stay duration (4.326 nights), significantly reducing room-turnover costs compared to the 2.98-night stay of Direct guests.

Implications for Management

The yield balance: While Online TAs have a slightly higher daily rate ($108), their shorter stays and high commission costs eat into the profit. Aviation strikes the perfect balance: a high ADR ($99.48) combined with a long stay (3.74 nights).
Operational efficiency: Because Aviation guests stay nearly a full night longer than Direct guests, the Sarova Group has fewer “turns” (cleaning and resetting rooms), which drops its labor costs and increases the net profit of that $299 TBV.

Management Recommendations

To maximize profitability, the Sarova Group should prioritize Aviation contract negotiations over traditional Online TA marketing.
A single Aviation booking is worth 30% more than an Online TA booking and carries significantly lower cancellation risk and turnover cost.

GEOGRAPHIC AND BEHAVIORAL INSIGHTS

Geographic Insights

The data confirms that Portugal acts as a high-volume/high-risk anchor, while Germany and the United Kingdom provide the most reliable long-term planning horizon. Sarova Hotels and Resorts should consider tighter deposit requirements for markets with >35% cancellation rates (Brazil, Italy, Portugal) to protect its revenue stream.

Portugal: By far, is Sarova Hotels and Resorts’ biggest volume (47k bookings), but with a 57.08% cancellation rate. Even with a long lead time (116.66 days), these guests are treating the Sarova Hotels and Resorts as a “maybe.”
Germany and the United Kingdom: These are Sarova Hotels and Resorts’ safe harbors. They have the longest lead times (138 and 128 days, respectively) but very low cancellation rates (16 - 19%).

Management Recommendation

If Portugal has a 57% cancellation rate, we need to know if they are booking through Online TAs (which are notoriously easy to cancel) or Direct. If they are booking via OTA, then the “problem” isn’t the Portuguese people — it’s the channel Sarova Hotels and Resorts is using to reach them.

Cancellation Forecaster

The high cancellation rate in Portugal isn’t a ‘geographic’ problem; it’s a ‘channel’ problem. The risk is concentrated at the Travel Agents and Tour Operators channels (66.79%).
The guests are using TA/TOs as a low-commitment booking tool.
To protect Sarova Hotels and Resorts’ revenue stream, Sarova Hotels and Resorts doesn’t need to change its policy for all Portuguese guests. It only needs to introduce a non-refundable rate for the TA/TO channels during peak seasons.
Management should shift local marketing spend away from TA/TO and toward Direct booking incentives. Even if Sarova Hotels and Resorts offer a 10% discount for Direct bookings, it is cheaper than losing 66% of the booking room inventory to “phantom” TA bookings.

Seasonal Demand & Forecasting analysis