Busy Season Vs Low Season Profits: A Guide to Seasonal Hotel Revenue

Busy times in Summer where you wish you had more hours in the day just to catch your breath and check-in those last few rooms, and slow times in the winter, where you’d do anything for a booking to break the monotony. 

And then there’s the in-between where we often find ourselves spending most of our time - carefully adjusting our rate and offering discounts to ensure that we remain profitable while also attracting enough guests to staff properly, and reliably predict costs. In this guide, we’ll explore why seasonality is so crucial to understand as a hotelier, actions we should take in each respective ‘season’ and how the seasons affect our profitability. 

Hotel seasonality: Understanding the 3 seasons

Seasonality is the natural fluctuation of demand and occupancy a hotel experiences throughout the course of a year. Off-season represents the slowest time of the year, peak season the busiest time of year, and shoulder season the intermediate period in between.

Below is an illustration that shows an example demand pattern a hotelier might experience with each season labeled for clarity.

Seasonality is dictated by many factors, but a few of the most important include: weather, events/holidays, perennial demand drivers and other unexpected factors (one-off concerts, social media trends).

 Seasonality may be somewhat jagged - notice that for our example pattern above, there is a peak season in the Summer, but also a brief resurgence of the peak season in October - seasons aren’t always perfectly consecutive. Let’s now explore each season in depth to understand more.

Peak season

Also known as: high season, busy season

Hoteliers live for peak season; this time of the year is our highest occupancy, highest demand and most profitable time of the year. It’s no surprise that it’s often the most stressful. Typically, peak season occurs when your market experiences favorable weather, an active event calendar and overlapping demand drivers (i.e. corporate conventions combined with strong leisure-tourist demand). 

During peak season you may find that you are able to push your flexible rate to very high levels, perhaps 3-5 times higher (or more!) than you can in the lower seasons. Also, you may notice that there is less variability in demand and occupancy across the week - even shoulder nights like Thursday and Sunday may sell with ease, and occupancy may exceed 80%-90% for extended periods of time.

The main challenges that hoteliers face in peak season include:

• Commercial Strategy Challenges: Missed revenue opportunities, typically under-pricing, not yielding less-desirable stays, and not optimizing length of stay patterns.

• Operational challenges: staffing shortages, and inventory management, being too busy to offer the optimal guest experience.

Here’s a perfect example of what peak season looks like within Market Insight, with an emphasis on demand. Using the color-coded demand levels, you can see that this particular hotel has a peak season beginning the second week of June. 

Shoulder season: Navigating the in-between

Shoulder season is the ‘in-between’ that bridges the lows and the highs. Shoulder season is a time of year marked by moderate demand levels, and sporadic opportunities to maximize rate. Shoulder season may feature only a few high demand events, a slower convention calendar and less-than-ideal weather.

During  shoulder season you may average 50% - 80% occupancy, but with much more variability between the individual days of the week. You might still sell out on Tuesday and Saturday night, but struggle to reach 50% occupancy on Sunday or Thursday nights (not coincidentally, these softer days of week are known as “shoulder nights”).

The main challenges that hoteliers face in shoulder season include:

• Commercial strategy challenges: Trouble boosting occupancy on stubborn shoulder-nights, implementing and modifying promotional strategies to capture the limited demand in your market, optimizing marketing efforts.

• Operational challenges: Staffing becomes more difficult when there are wild swings in checkouts across the week

Using Lighthouse Business Intelligence, you can see a real-world example hotel, and its ‘shoulder’ months. Notice that the hotel spends about half of the year in what could be considered the shoulder season, with a peak season in Spring, and making a brief resurgence in October. The three seasons have been labeled below for visual emphasis:

Off-season

Also known as: off-peak, low season, slow season

The off-season is your lowest demand, lowest occupancy and least profitable time of the year. Off-season typically corresponds to that time of year when weather is least favorable, the local event calendar is most barren, and not even your most loyal customers are interested in traveling. 

Unfortunately, off-season is typically not profitable for hoteliers, and therefore should be seen as an opportunity to prepare oneself for the upcoming busier seasons. The off-season is characterized by low to very-low occupancy rates, sometimes less than 50%, or even lower if you operate a hotel that is truly ‘seasonal’ and closes for certain times of the year.

The main challenges that hoteliers face in off-season include:

• Commercial strategy challenges: Rock-bottom pricing and a lack of demand/bookings

• Operational challenges: Overstaffing, remaining profitable

How do you plan for the inevitable off-season so you aren’t caught off guard? Thankfully the low season (or any of the three seasons, for that matter) can be identified using the Heatmap within Business Intelligence. By breaking historical performance down by statistical quartiles, we can see hot and cold spots across the year. This hotel is particularly soft over Thanksgiving week, the second half of December through the first week of January.

Peak season vs. low season profits: How much do they vary?

Profit margins are the difference between revenue earned and dollars spent. The higher the margin the better, meaning that you keep more money for every dollar generated. Profitability will vary greatly depending on your hotel’s unique circumstances, but generally Peak season will have the highest profit margins, Shoulder season somewhat less profitable and Off-peak either barely, or not at all profitable. 

Now, let’s compare peak season to off-peak and see how variable profitability might be.

During peak season, hoteliers will need to hire more staff, order more supplies, and pay high energy costs.  While demand is higher and a hotel can command a higher ADR, it doesn't always translate to easy cash-flow. Increasingly, pressures like inflation are driving up costs, and while hotels are able to charge higher rates than ever before, being profitable isn’t necessarily automatic.  

For many truly seasonal hotels (that close or offer limited accommodations in off-peak season), you have to make up for your "low season" losses during this time too. That said, profit margins in peak season tend to be the highest of all.

By comparison, during the off-peak season, hotels often run on skeleton staff, or even close completely when justifiable. This can happen when the revenue generated isn't enough to cover operating costs, meaning that the hotel is actually better off closing, and waiting for a more favorable time of year.  

Most frequently you see this in locations affected by very specific and predictable patterns (for example, a small coastal hotel in Maine in January). For hotels that run the numbers and determine that remaining open over off-peak season is worth it, ADR and occupancy will both be noticeably lower than other seasons, and the goal may be to simply “break even”. 

Later in the guide we’ll offer some tips for capturing additional revenue in the low-season, but if you can’t wait, the blog can be found here.

How to weather seasonal fluctuations in demand

Now that you understand how different seasons affect your profits throughout the year, let's explore actionable strategies to protect your business and maximize profitability year-round.

Understand your hotel's unique seasonality pattern

First, identify exactly when peak, shoulder, and off-season periods occur for your property. Use tools like Market Insight and Business Intelligence to quickly visualize exactly where demand and occupancy are strongest and weakest. Utilize both historical and forward-looking data to have the best understanding possible. 

Test your knowledge by asking a colleague to name a random date throughout the year (for example, March 13th). You should be able to identify which season (peak, shoulder, off-peak) the date falls in, and offer a clear explanation why. If you’re stumped by a date, be sure to brush up on your seasonality calendar.

Having a deeper understanding of your hotel’s seasonality will allow you to take action more quickly and effectively when receiving group RFPs, or learning of event announcements.

Strengthen revenue management to buffer seasonal dips in profit

To enhance profitability across all three seasons, effective revenue management tactics are key. While this list is not exhaustive, these 3 actions are universally helpful no matter what time of year you find yourself.

Review room-type pricing as you transition from each season to the next.

In strong leisure destinations, you may be able to charge a high premium for a room with 2 queen beds in your peak season, but you may also be able to offer an incentive that will cause guests to book in the off-peak season by pricing these room types the same as your base room type. Review all of your hotels’ room types periodically throughout the year to make sure that your upcharge strategy aligns with each season.

Focus on driving longer length of stay in off-peak and shoulder season

It’s no secret that guests who stay longer are more profitable. Consider what you can do now to increase the average length of stay for the need-times of the year. Length of stay based promotions, and targeted marketing to international feeder markets are both methods that may increase the amount of time that guests stay at your property.

Use the off-season to set yourself up for success in the peak season

Commercial strategy calls happen year-round, so the next time you find yourself in off-peak season, use the opportunity to perform all of those commercial strategy actions you won’t have time for when you’re at your busiest.

Run system audits, re-align email marketing strategies, negotiate more favorable terms with OTA partnerships, or even update your website and booking engine. Always try to be proactive rather than reactive, especially when your hotel’s profitability is on the line!

If you’d like to dig deeper into additional revenue strategies you can take, be sure to read our guide on 10 tried-and-true strategies.

Support your seasonal pricing strategy with a dynamic pricing tool

Your pricing strategy will fluctuate greatly throughout the year due to the effects of seasonality - but even the most well thought out pricing strategy still needs refining, in the final days and weeks leading up to arrival based on trends like pickup and pace, and competitor pricing. If you aren’t currently utilizing a dynamic pricing strategy, it’s highly recommended that you implement one, as this will make sure that you are maximizing every opportunity to make a profit. 

To learn more about what a dynamic pricing system looks like in action, take a look at Lighthouse’s Pricing Manager to see if it might be a fit for your property.

Learn how data-backed insights set you up for year-round success

Now more than ever, hotels (your competitive set included) are utilizing real-time data to make strategy decisions - with external pressures like volatile consumer demand and inflation, it becomes increasingly important to understand guest booking patterns, market demand, and competitor pricing behavior. 

With a solid tech stack, and in-depth knowledge of your hotel’s seasonality, you can expect to avoid any unpleasant surprises, and better maximize your opportunities to be profitable throughout the year. If you think you might still have room to incrementally boost your profits, learn more about the Lighthouse platform here.