Lost revenue is the revenue a business misses out on due to various reasons. This can be unsold rooms, unbooked tables, cancellations or missed upsell opportunities. It's the difference between what a business could have earned and what it actually earned.
In hospitality, lost revenue is a key metric that impacts profitability and overall business performance. By tracking and analysing lost revenue, managers can identify areas to improve, optimise pricing and implement measures to maximise occupancy and sales. Knowing lost revenue helps businesses make informed decisions on resource allocation, marketing and operational efficiency.
Let’s say you're a restaurant manager and you notice your restaurant is only half full on weeknights. You calculate if all tables were full you'd earn an extra £1,000 per night. That £1,000 is your lost revenue. To fix this, you might introduce a weekday happy hour to attract more customers or partner with local businesses to offer dinner promotions. By focusing on reducing lost revenue, you can increase your restaurant’s profitability and make the most of your resources.'