Rethinking budget season: From room revenue to total profitability
Insights from Dragonfly Strategists’ CRO, Alise Deeb
Budget season in hospitality often arrives with a sense of inevitability: dozens of spreadsheet versions, a narrow focus on room revenue, and ambitious targets set against an uncertain market. In a recent Industry Chats webinar, Alise Deeb, Chief Revenue Officer at Dragonfly Strategists, made a compelling case for a smarter, more holistic approach. One that prioritizes total profitability, not just the top line.
The 2025 reality: Plan for uncertainty-profit anyway
Industry forecasts for 2025 point to modest growth and a lot of unknowns. Deeb’s message: uncertainty isn’t a reason to default to “raise rates and hope.” It’s a signal to get more precise about demand patterns, day-of-week shifts, and what truly moves the needle for each asset.
“Budgeting shouldn’t be a long, painful ritual. It should be a meaningful plan you can execute and forecast from.”
Look beyond room revenue: Optimize total guest value
Not every additional night is equally profitable. For resorts and full-service properties especially, spend fatigue can set in after day four or five. If the fifth, sixth, and seventh nights don’t include F&B, spa, golf, or other ancillary spending, that extended stay may dilute margin.
What to do:
Identify optimal length of stay by segment and season.
Build offers that maximize high-margin ancillary revenue within that window.
When incremental nights underperform, turn the house and bring in the next profitable guest.
Repeat ≠ Loyal: Channel strategy is the difference
A guest who books through an OTA twice is a repeat guest, not a loyal one. Loyalty begins when you can communicate directly, personalize offers, and influence behavior over time.
Deeb’s guidance:
Map acquisition costs by channel (including owned media and paid search).
Create conversion paths from OTA to direct, with targeted value (not just discounts).
Track lifetime value (frequency × margin), not just last-click revenue.
Drilling to the nth degree, e.g., “AAA by room type by day a year from now,” consumes time without improving outcomes. Instead, budget to behaviors and channels you can actually influence, and align marketing calendars by seasonal need periods rather than rigid segment grids.
Let tech lead the budget, not trail it
Most teams “finish the budget, then see what tech they can afford.” Deeb suggests flipping that sequence.
Identify profitability gaps first (labor modeling, scheduling, procurement, distribution, merchandising).
Evaluate technology that closes those gaps, and model ROI inside the budget.
Where feasible, adopt in Q4 to be ready for the next budget year.
She shared a vivid example from her brand-side days: saving one minute per room clean translated to roughly seven figures in annual labor savings at scale. Small operational wins compound quickly.
Employee journeys matter (and protect margin)
Dragonfly doesn’t just map guest journeys; they map employee journeys too, by interviewing frontline teams to uncover friction in daily workflows. Fixing keystroke-heavy processes, inventory loops, or communication gaps can free hours each week, reduce errors, and keep your best people engaged. That matters in a labor market where turnover is costly and preventable.
Pricing in an inflationary world: Be specific, not blanket
Across-the-board rate hikes can backfire. Instead:
Merchandise room-type differentials and attributes to grow ADR without pricing out base demand.
Adjust premiums strategically; if you’re upgrading away premium types, your differentials may be too wide.
Roll budgets down to day-level reality: if a month is already compressed, you can’t “add 5% occupancy” without overfilling Sundays or inventing rooms.
Feverish revisions, more strategy
Every additional budget revision steals time from live revenue work re-extracting from BI, RMS, accounting, and Excel. Dragonfly sets clear limits on revisions and invests that reclaimed time in weekly forecasting and commercial strategy, where performance actually moves.
Practical AI: Start where it pays back fast
Deeb recommends applying AI where impact is proven and immediate:
Labor & scheduling: forecast housekeeping/restaurant coverage from pick-up and on-the-books demand.
Procurement & inventory: anticipate usage, reduce waste, and tighten COGS.
Market/merchandising intelligence: Dragonfly uses an in-house assessment (COSi) to scrape voice-of-customer data and align product, pricing power, and positioning before budgets lock.
Distribution efficiency: automate mapping/auditing tasks that drain team capacity.
Set achievable targets or pay the turnover tax
Unreachable budgets demoralize teams and drive attrition. Calibrate targets to macro conditions and property realities. People stay where they can win, and your owner returns improve when high performers stick around.
Key takeaways:
Budget for total profitability, not just rooms.
Model guest value by stay length and ancillary spend; optimize the sweet spot.
Move guests from repeat to loyal by shifting channels OTA → direct.
Align to behaviors and need periods, not hyper-granular legacy segments.
Let tech and AI inform the budget, don’t bolt them on after.
Grow ADR intelligently via room-type merchandising and attribute selling.
Limit revisions; maximize forecasting cadence and real-time strategy.
Set achievable goals to protect culture and margin.
A note from Dragonfly Strategists
Collectively, the Dragonfly team has supported 8,000+ properties worldwide across mixed-use, residential, and hotel assets. As part of this series, the team is offering a complimentary one-hour conversation with an executive leader to discuss your biggest budgeting challenge and share practical next steps.