The Goal

Let’s start with the goal of revenue management. The classic definition is: Selling the right product to the right customer at the right time, for the right price, through the right channel in order to maximize revenue over time. The first part tells us the what, and the end tells us the why. That why is critical to understand —distinction matters. Everything we do, every decision we make, is driven by the goal of maximizing revenue. Not just for one night, or even one busy weekend, but consistently over time. With that in mind, let’s peek inside the black box and explore a few areas of revenue management to better understand the why behind the what.

Why We Care So Much About RevPAR

If revenue managers sound obsessed with revenue available room (RevPAR), that’s because it’s the one metric that tells the whole story. Occupancy shows how full you were, and average daily rate (ADR)shows how much you charged, but RevPAR blends both into one measure. It captures not just how many rooms you sold, but how well you sold them. RevPAR also levels the playing field. It lets us compare performance across different time periods and between hotels of different sizes. A 100-room inn and a 500-room resort can’t be measured in absolute dollars, but with RevPAR, we can see who’s really making the most of the inventory they have. At the end of the day, our job isn’t to maximize occupancy or price — it’s to maximize revenue, and RevPAR is the metric that keeps us honest.

Why We Offer Discounts

Why would a revenue manager ever offer a discount on a room? The reason is simple: Discounts aren’t about giving money away, they’re about bringing in incremental revenue that wouldn’t otherwise exist. Think of pricing as a curve. At one price point, some guests will happily book, but others will walk away. By offering discounts strategically — based on when, how, or even who is booking — we can capture those extra guests who wouldn’t have purchased at the higher rate. That’s pure upside.

But here’s the catch: Discounts only work if they’re carefully targeted. If we discount too broadly, we risk“trade down” (guests who would have paid full price put paid the lower rate instead). That’s why revenue managers build rate fences, like advance purchase offers, member-only rates, or packages that add value without slashing price.

These strategies encourage incremental bookings without eroding the base business. Discounts aren’t meant to undercut our rates, they’re meant to optimize them. Every discounted booking should add revenue we wouldn’t have captured otherwise, helping us maximize the total return over time.

Why We Oversell

Overselling sounds like a disaster waiting to happen, but in for revenue managers, it’s a calculated risk. They know that not every reservation shows up. Some guests cancel, others change dates, and a few simply never arrive. If we only sold exactly the number of rooms we have, we’d end up with empty beds and lost revenue, thanks to those bookings that never materialize.

By carefully forecasting demand and studying historical patterns, revenue managers can estimate how many extra reservations they need to cover expected cancellations. Done right, this practice ensures that we finish the night as close to full as possible. The goal isn’t to leave guests stranded; it’s to match actual occupied rooms with our true inventory. Yes, there are rare occasions when everyone shows up and the hotel has to “walk” a guest to another property. But that’s the exception, not the rule. Most of the time, overselling is simply a behind-the-scenes safeguard to make sure we don’t leave money, in the form of empty rooms, on the table.

Why We Use Restrictions

Restrictions are one of the least understood tools in revenue management. They don’t force guests to do anything; they simply prevent bookings that don’t fit our long-term strategy. Think of them as guardrails that protect revenue.

Take length-of-stay (LOS) restrictions. If demand is sky-high on Saturday but weak on Friday and Sunday, we may require a two-night minimum. That way, the Saturday rooms are reserved for guests who also would stay on the softer surrounding nights, helping us smooth demand across the weekend.

Restrictions also help weed out less valuable business. When applied to discounted rates, restrictions ensure that only guests with the most desirable patterns, like early bookers or longer stays, get access to those lower prices.

Why We Can’t Give You an Accurate Forecast

One of the hardest truths in revenue management is this: An accurate future forecast doesn’t really exist. Forecasting isn’t fortune-telling — it’s a best guess based on the information we have at the time. We look at current booking pace, compare it to the same time last year, adjust for things like group blocks, cancellations, and no-shows, then factor in pricing strategy and market conditions. It’s a mix of art and science, constantly evolving as new data comes in. Here’s the challenge: demand changes. A group cancels. A competitor launches a flash sale. Weather shifts travel plans. So, reality doesn’t match the forecast. That doesn’t mean forecasts are useless. They help us schedule staff, manage cash flow, and make smarter pricing decisions. But they’re directional, not absolute. Think of them as a compass pointing us toward the best decisions, not a GPS with turn-by-turn instructions.

Bringing It All Together

Revenue management’s goal is to use all the tools available to maximize a hotel’s revenue over time. It isn’t about filling every room at any cost, nor is it about charging the highest rate possible on a single night. It’s about finding the balance between occupancy and ADR to drive the most revenue across the calendar. That balance requires strategy. Discounts aren’t used to undercut rates but to capture incremental business. Overselling offsets cancellations and no-shows to ensure rooms don’t sit empty. Restrictions protect peak nights so they can support weaker ones. Forecasts guide decisions, even if they can’t be accurate in the crystal ball sense. In short, revenue management aligns pricing, inventory, and demand to make every room night work as hard as possible. The ultimate goal isn’t just to sell rooms, it’s to create sustained profitability and long-term success for the hotel.