Every variance against budget falls into one of three categories: rate variance, volume variance, mix variance. Knowing which one you are looking at determines which lever you pull next. A practitioner-level analyst names the variance type by the second sentence of the commentary.
Rate variance
Rate variance is when the average rate per unit (per roomnight, per F&B cover, per spa treatment) is different from budget while volume is on plan. Example: rooms revenue is below budget by 3%; occupancy is at 100% of plan, ADR is 3% below plan. The volume was there; the rate was not realized.
Rate variance has specific causes: channel mix shifted toward lower-rate channels (more OTA-Genius bookings, fewer direct-corporate), rate restrictions that were supposed to drive rate up did not (BAR-LOS opened too aggressively), comp-set rate movement pulled the property's realization down. Each has a different remedy.
Volume variance
Volume variance is when the number of units sold is different from budget while rate is on plan. Example: rooms revenue is below budget by 5%; ADR is at 100% of plan, occupancy is 5% below plan. The price discipline held; the demand was not there.
Volume variance points at demand-generation issues: weak channel investment, soft pickup in a feeder market, brand-standard slippage that hurt reputation, new supply nearby. Or it points at over-aggressive rate discipline that priced out volume the market was willing to pay for at a slightly lower rate.
Mix variance
Mix variance is when the composition of business shifted in a way that produces a different blended outcome even if rate and volume on each individual segment are on plan. Example: rooms revenue is below budget by 2%; transient leisure ADR is on plan, group ADR is on plan, but the mix is 8% more group and 8% less transient leisure than planned. Group ADR is lower than transient, so the blended ADR drops.
Mix variance is the hardest to spot because every individual segment looks on-plan. It only shows up at the consolidated level. The remedy is segment-by-segment strategy adjustment — usually re-balancing the channel investment or restructuring the group sales pipeline.
Why the type matters
Wrong diagnosis produces wrong action. A property that has volume variance and treats it as rate variance by dropping rates makes the problem worse — they get the volume but lose more rate, ending up further from budget. A property that has mix variance and treats it as rate variance ends up pushing the wrong levers in the wrong segments. Naming the type correctly is half the analytical work.