Why Your Hotel's Numbers Can Look Great and Still Be Wrong

I asked Manish Gupta, a hotel CFO with more than 23 years of finance leadership across hotels, resorts, and multi-property groups in Asia and Africa, the question every new hotel owner eventually asks: why did this number move?

His answer surprised me: that’s not actually the first question he asks.

My first question is not why did it move. It is: are we sure we are looking at the same number?

— Manish Gupta

Before he looks for a business reason, he checks whether the number itself changed definition. What’s included, what’s excluded, whether the same formula was used last month, in the budget, and in whatever benchmark it’s being compared against. Only after that does he start looking for what actually happened in the hotel.

That distinction matters more than it sounds like it should. A hotel generates thousands of transactions a month, and every report you read is a translation of those transactions into a single number. Sometimes the business changed. Sometimes only the translation did. Mixing the two up is how an owner ends up reacting to a number that never needed a reaction at all.

A few terms come up throughout this piece, so in plain terms:

Check the Definition Before You Explain the Move

Manish’s method is simple to describe, even if it takes discipline to actually follow. He checks what the number includes and excludes, whether the numerator or denominator has changed, and whether he’s comparing it to the same definition of budget, last year, and benchmark.

Only then does he start looking for the operating cause: did the hotel sell more rooms, change its price, shift its channel or customer mix, work more hours, or use more product? Or did an accounting mapping or timing choice create a movement that looks real but isn’t?

He separates those two questions early, every time: did the business move, or did the reporting basis move? Skipping that step is how a hotel ends up in a long meeting about a number that was never actually wrong, or missing a real problem hiding behind a number that looked fine.

How a Resort Fee Can Inflate Your ADR Without Selling a Single Extra Room

Manish walked me through a simple illustration of how this plays out in ADR specifically. Picture a hotel charging $150 for a room, plus a $30 destination fee. If that $30 gets folded into Rooms Revenue instead of reported separately, the hotel’s reported ADR jumps to $180.

Where the fee is booked	Room charge	Destination fee	Reported ADR
Reported separately	$150	$30, on its own line	$150
Folded into Rooms Revenue	$150	$30, inside Rooms Revenue	$180

Same guest, same room, same $180 total bill either way. The only thing that moved is a 20% jump in reported ADR: ($180 - $150) / $150 = 20%.

Nothing changed operationally. Same guest. Same room. Same room price. Same cash collected. Only the classification changed.

The guest paid $0 more for the room, and the hotel didn’t get any better at selling it. What actually moved was a bookkeeping choice about where the fee gets classified, and that shouldn’t read as a scorecard for how the property is performing.

This isn’t a hypothetical risk. CBRE Hotels studied 306 US properties that reported resort-fee revenue in 2018, and measured exactly this effect at scale:

Sample	ADR inflation from folding the fee into Rooms Revenue
Overall (306 properties)	+6.0%
Resort properties	+7.2%
Non-resort properties	+4.5%

None of that 6% reflects a hotel actually getting better at pricing or selling rooms. It reflects where a fee got recorded, on 306 real properties, in one real year.

Packages create the same distortion in the other direction. If breakfast, dinner, or a spa credit stays folded into Rooms Revenue, or too much of it gets allocated away from Rooms, your ADR moves even though what you actually charge a guest hasn’t changed at all.

That’s why “our ADR is $20 higher than the hotel down the road” isn’t automatically good news. The real question is whether both hotels are putting the same things into Rooms Revenue in the first place.

When a Correct Number Still Misleads You

Definition drift isn’t only a risk in ADR. Manish told me about a real case from a hotel he worked with in Myanmar, where the restaurant’s average spend and capture rate looked healthy on paper. The math was internally consistent, and nothing about the calculation itself was wrong.

But when he asked the F&B manager to walk through exactly how covers were being counted, they found that beverage-only guests, mostly local customers coming in for weekend drinks without ordering food, weren’t being counted as covers at all. Their spending was still in the revenue total. They just weren’t in the guest count anymore.

Once the definition was corrected, the picture changed. True capture was lower than the team had assumed, food spend per guest was actually close to budget, and beverage revenue per guest turned out to be one of the stronger parts of the business.

The hotel had spent around three months debating a number that was mathematically correct under its own method, but wrong for the decision the team was trying to make with it.

A number can be correct and still lead you to the wrong action.

Comparing Your Hotel to the One Down the Street

The same caution applies to competitive-set comparisons, one of the most common ways owners try to judge their own performance.

Two hotels on the same street can be very different businesses. One might be rooms-only, the other full-service with a restaurant and event space. One might outsource housekeeping, the other employ that staff directly. Even ADR can mislead here if one property handles package pricing or fees differently than the other.

I use external benchmarks as a challenge, not as an automatic verdict.

If a nearby hotel reports a higher ADR or a stronger GOP margin, that’s worth a question, not an instruction to your team. Before ranking two hotels against each other, it’s worth checking whether the comparison is genuinely fair in the first place: would that other hotel report this same number the same way yours does?

Three Questions to Ask Before You Trust Any Number

Manish’s advice for an owner reading a monthly report comes down to three questions, asked in this order, before reacting to anything on the page.

1. What exactly is inside this number? What’s included, what’s excluded, and how was it actually calculated?
2. Am I comparing like with like? Is the definition the same as it was in the budget, last year, and whatever benchmark is being used?
3. What real business activity created the movement? Did the hotel sell more rooms, change price, shift channel or customer mix, or use more staff and product, or did a mapping or timing choice in the accounting create a movement that only looks real?

If nobody on your team can answer those three questions about a number, that’s the signal to slow down before acting on it, not to explain it away.

This is the first of three articles built with Manish around how independent hotel owners can read their own numbers with more confidence. The next looks at why most hotel budgets turn into paperwork nobody uses once the year actually starts.

Bonus: The Full Interview With Manish Gupta

Manish Gupta is a Chartered Accountant and hospitality finance executive with more than 23 years of experience across hotels, resorts, mixed-use assets, and multi-property operating groups in Asia and Africa. With Shangri-La Hotels & Resorts, he was part of the leadership team that turned a loss-making hotel in Chiang Mai into a property generating around $5 million in GOP, before going on to multi-property CFO and owner-side leadership roles. He was named among Asia’s Top 10 CFOs in 2024. He’s also the author of Hotel Financial Reporting in Practice, Hotel Budgeting and Forecasting in Practice, Beyond Accounting: From Finance Manager to CFO, and Independent Hotel Finance (affiliate links). Here are his complete answers, unedited.

Why did this number move?

Michael: When an owner asks, “Why did this number move?” what’s the first thing you check?

Manish Gupta: My first question is actually not “why did it move?” It is: are we sure we are looking at the same number?

I check what the number includes and excludes, whether its definition is the same as last month, budget and the benchmark, and whether the numerator or denominator has changed. Only after that do I start looking for the operating cause.

Hotels generate thousands of transactions and operating events, and the financial report is really a translation of those events. Sometimes the operation has changed. Sometimes only the translation has changed.

So I normally separate two things very early: did the business move, or did the reporting basis move?

Once that is clear, I start looking for the first operating driver rather than simply explaining the largest variance on the P&L. That could be volume, rate, mix, productivity, price, timing, classification or a one-off event.

A number that looked right, and wasn’t

Michael: Tell us about a real time a number looked wrong but was actually fine, or looked fine but wasn’t. A real story, not a hypothetical.

Manish Gupta: I had exactly this situation at a hotel in Myanmar.

The restaurant’s average spend and capture rate looked quite healthy. On paper, the calculations were consistent. But when I asked the F&B manager to walk me through exactly how covers were being counted, we discovered that beverage-only customers were not included in the cover count.

That mattered because on weekends we had a meaningful number of local customers coming in for drinks without ordering food. Their revenue was included, but the guests themselves had effectively disappeared from the denominator.

When we corrected the definition, the story changed. True capture was lower than we had thought, average food spend was actually quite close to budget, and beverage revenue per guest was one of the stronger parts of the business.

We had spent around three months discussing a number that was mathematically correct under its own method but wrong for the management decision we were trying to make.

That experience stayed with me. A number can be correct and still lead you to the wrong action.

How ADR gets distorted

Michael: What’s the most common way a hotel’s room rate (ADR) gets distorted without the hotel actually changing anything?

Manish Gupta: Usually it is a definition or classification problem in the Rooms Revenue numerator.

A simple example is a destination, resort or urban fee. Imagine the actual room rate is $150 and the hotel also charges a $30 destination fee. If that $30 gets included in Rooms Revenue, the reported ADR can suddenly look like $180 even though the guest did not pay one dollar more for the room itself.

Nothing changed operationally. Same guest. Same room. Same room price. Same cash collected. Only the classification changed.

Packages create a similar issue. If breakfast, dinner, spa or another inclusion is left inside Rooms Revenue - or too much is allocated away from Rooms - the ADR moves even though the commercial selling price may not have changed.

That is why I am careful when somebody tells me, “Our ADR is better than the hotel next door.” My next question is: are both hotels putting the same things into Rooms Revenue?

Three questions before you trust a number

Michael: If you had to give an owner three questions to ask before trusting any number in their monthly report, what would they be?

Manish Gupta: I would ask three very simple questions.

First: What exactly is inside this number? What is included, what is excluded, and how was it calculated?

Second: Am I comparing like with like? Is the definition the same as budget, last year and whichever benchmark we are using?

Third: What physical business activity created the movement? Did we sell more rooms, change price, change channel or customer mix, work more hours, consume more product - or did an accounting mapping or timing issue create the apparent movement?

If management cannot answer those three questions, I would hesitate before taking action on the number.

Comparing your hotel to the one next door

Michael: What’s the biggest mistake owners make when comparing their hotel to others nearby?

Manish Gupta: Comparing the headline number before comparing the business model behind the number.

Two hotels can sit on the same street and still be very different businesses. One may be rooms-only and another full-service. One may have large packages. One may outsource cleaning while another employs those people directly. One may have meeting space, restaurants, a spa or significant group business.

Even ADR can become misleading if one property has package allocations or fees treated differently.

So I use external benchmarks as a challenge, not as an automatic verdict.

If another hotel has a higher ADR, lower labour percentage or better GOP margin, that should generate a question. It should not immediately generate a management instruction.

Before ranking the hotels, I want to understand whether the comparison is genuinely fair.