Hoteliers track numerous metrics to understand the health of their properties in both the short and long term. Top-line revenue metrics are foundational to understanding hotel performance—but they’re only the beginning. When those metrics shift, the question isn’t just what changed, but how those changes ultimately impact profitability.
Two metrics help answer that question: Flow Through and Flex.
Together, they show how efficiently a hotel converts revenue growth into profit (Flow Through) and how well profits are protected when revenue declines (Flex).
What is Flow Through?
Flow Through measures how effectively incremental revenue is retained as profit after operating costs.
Flow Through % = (Change in GOP ÷ Change in Total Revenue) * 100
A high Flow Through indicates that a hotel is converting revenue growth into profit efficiently. In practical terms, a larger share of each incremental revenue dollar reaches the bottom line, rather than being absorbed by labor, utilities, or other operating costs. This suggests a hotel is scaling its operation without eroding profit margins—reflecting disciplined cost control, operational leverage, and a strong mix of demand. In these cases, performance isn’t driven simply by selling more rooms, but by selling more profitable rooms.
A negative Flow Through indicates that gross operating profit (GOP) declined despite revenue growth.
What is Flex?
Flex represents a hotel’s ability to manage expenses and protect profit margins when revenue decreases. It measures how much of the lost revenue does not translate into a corresponding decline in profit.
Flex % = (1 − (Change in GOP ÷ Change in Total Revenue)) × 100
When revenue falls, a high Flex indicates that the operation can scale down effectively, with costs adjusting as demand and pricing power soften. Hotels with high Flex are better positioned to withstand short‑term market pressures, demonstrating an operating structure that supports not only growth during strong periods, but stability during slower ones.
Examples of Flow Through and Flex
From this chart within the STR Benchmark section of CoStar:
December 2024
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Revenue decreased 2%, with Flex of –211%. In addition to the revenue decline, the hotel incurred an additional $1.11 loss in GOP for every $1 of lost revenue.
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Interpretation: Revenue pressure was compounded by rising costs, leading to a disproportionate decline in GOP and significant margin deterioration.
May 2025
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Revenue increased 9%, but Flow Through was negative (7%). For every incremental dollar of revenue earned, GOP declined by approximately $0.07.‑6.5%). For every incremental dollar of revenue earned, GOP declined by approximately $0.07.
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Interpretation: While top-line growth was achieved, expenses grew faster than revenue, resulting in margin erosion and a net decline in profitability.
July 2025
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Revenue declined 6%, while Flex reached 115%. The hotel fully offset the revenue decline through cost savings and generated an additional $0.15 increase in GOP for every $1 of lost revenue.
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Interpretation: Cost controls more than compensated for the top‑line decline, resulting in improved profitability despite lower revenue.
August 2025
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Revenue increased 16%, with 97% Flow Through. Nearly every incremental revenue dollar converted to profit, with $0.97 flowing through to GOP for each $1 of additional revenue.
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Interpretation: Revenue growth was highly efficient, indicating strong operating leverage and minimal incremental cost associated with the increase.
When to Use Flow Through and Flex
The examples above compare the current reporting period to a comparable prior period, focusing on changes in GOP. While this year-over-year view is common, Flow Through and Flex are versatile metrics with multiple practical applications.
Beyond comparing total revenue and GOP year over year, these metrics can be used to:
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Evaluate performance at the department level
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Analyze results across different timeframes
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Assess how operational decisions impact profitability as conditions change
Used this way, Flow Through and Flex help explain not just what changed—but why profitability moved the way it did. Viewed alongside market and Comp Set benchmarks, Flow Through and Flex reveal whether profitability changes are property‑specific or market‑driven.
Conclusion
Understanding what drives Flow Through and Flex elevates the conversation beyond simple statements like “revenue was up” or “we had a tough comp.” Instead, it shifts the focus to a more fundamental question: Did your strategy strengthen the business?
On their own, Flow Through and Flex are just numbers. But when viewed in context—benchmarked against market peers—they become powerful indicators of operational efficiency, cost discipline, and financial resilience.
About CoStar Group, Inc.
CoStar Group (NASDAQ: CSGP) is a leading provider of online real estate marketplaces, information, and analytics in the property markets. Founded in 1987, CoStar Group conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of real estate information. CoStar is the global leader in commercial real estate information, analytics, and news, enabling clients to analyze, interpret and gain unmatched insight on property values, market conditions and availabilities. Apartments.com is the leading online marketplace for renters seeking great apartment homes, providing property managers and owners a proven platform for marketing their properties. LoopNet is the most heavily trafficked online commercial real estate marketplace with thirteen million average monthly global unique visitors. STR provides premium data benchmarking, analytics, and marketplace insights for the global hospitality industry. Ten-X offers a leading platform for conducting commercial real estate online auctions and negotiated bids. Homes.com is the fastest growing online residential marketplace that connects agents, buyers, and sellers. OnTheMarket is a leading residential property portal in the United Kingdom. BureauxLocaux is one of the largest specialized property portals for buying and leasing commercial real estate in France. Business Immo is France’s leading commercial real estate news service. Thomas Daily is Germany’s largest online data pool in the real estate industry. Belbex is the premier source of commercial space available to let and for sale in Spain. CoStar Group’s websites attracted over 163 million average monthly unique visitors in the third quarter of 2024. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S., Europe, Canada, and Asia. From time to time, we plan to utilize our corporate website, CoStarGroup.com, as a channel of distribution for material company information. For more information, visit CoStarGroup.com.
This news release includes “forward-looking statements” including, without limitation, statements regarding CoStar’s expectations or beliefs regarding the future. These statements are based upon current beliefs and are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. The following factors, among others, could cause or contribute to such differences: the risk that future media events will not sustain an increase in future occupancy rates. More information about potential factors that could cause results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, those stated in CoStar’s filings from time to time with the Securities and Exchange Commission, including in CoStar’s Annual Report on Form 10-K for the year ended December 31, 2023 and Forms 10-Q for the quarterly periods ended March 31, 2024, June 30, 2024, and September 30, 2023, each of which is filed with the SEC, including in the “Risk Factors” section of those filings, as well as CoStar’s other filings with the SEC available at the SEC’s website (www.sec.gov). All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.