Hotel Revenue Glossary · Metrics

Flow-Through

The percentage of incremental revenue that converts to incremental profit. If A$10,000 of incremental revenue is accompanied by A$3,000 of incremental cost, A$7,000 reaches incremental profit and flow-through is 70%. Compare departments and initiatives using the property's actual cost bridge rather than a universal rooms-versus-F&B ranking.

Why it matters: Flow-through explains why room revenue is so valuable — once fixed costs are covered, each additional room sold at even a modest rate contributes heavily to profit. It also justifies why revenue managers fight for every room night.

Worked example: March room revenue is A$412,000 against A$388,000 last March — A$24,000 up. Departmental costs rose A$6,800 over the same month, so incremental profit is A$17,200 and flow-through is 17,200 / 24,000 = 71.7%. Now suppose the extra revenue came entirely from an OTA promotion carrying A$4,300 of commission on top: costs rise to A$11,100, profit falls to A$12,900, flow-through to 53.8%. Same revenue gain, very different result at GOP.

Common mistake: Calculating flow-through on revenue only, ignoring the acquisition cost attached to that revenue. A discounted OTA push and a direct-booking push can deliver identical top-line growth and land in very different places at GOP. Pull the commission, transaction and loyalty cost into the incremental cost side before you quote the percentage.

All glossary terms GOPPAR (Gross Operating Profit Per Available Room) Room Revenue CPOR (Cost Per Occupied Room)