By John Shortall on March 8, 2017 at 10:00 AM
Today, independent hotels have access to more revenue and reporting tools than ever.
However, a certain amount of know-how is needed to truly leverage revenue opportunities with your reporting suite. It starts with the KPIs (Key Performance Indicators) hotels need to monitor. We've selected 9 of them, explained the first four hotel KPIs already, and are now focusing on the five remaining.
5. Booking Revenue or Production by Source
Managers need to know where their reservations are coming from:
- to make pertinent marketing and sales investments.
This information can be combined with the general guest information, to make sure the right channels are used to attract the right guests.
- to improve margins by capturing more direct bookings whenever possible.
OTAs are an initial promotion and acquisition tool to capture reservations from guests that would otherwise never have booked with a certain hotel. Once the billboard effect, brand recognition and guest loyalty are strong enough, managers should reduce their invesment in indirect channels, and protect rooms for direct bookings, whether they come from the hotel's website, email marketing or walkins.
4. Comp Set
Every manager needs to be aware and knowledgeable on their competitors, and obviously aiming for the best ratings, on TripAdvisor and different booking sites. A comp set gathers direct competitors, defined as the same type of properties targeting the same type of guests in the hotel's area.
Revenue managers or the staff in charge of rates usually take a deeper and more regular look at this comp set in order to set up rates and adapt them on a daily/weekly basis. Analyzing your comp set and their online distribution strategy can also help decide which booking channels to use to improve your room sale strategy.
3. Revenue Per Available Room
RevPar = Total Room Revenue /Total Rooms Available
RevPar measures the average room revenue per available room. This metric doesn’t take other revenue streams like spas or food & beverage into account. It gives you a quick overview of how your hotel is doing. Managers often compare RevPAR month per month, over a year.
ADR = Total Room Revenue / Total Occupied Rooms
Average Daily Rate (ADR) is the average price paid per room. Unlike RevPar, the hotel's occupancy level doesn't impact ADR.
Occupancy is the easiest and first hotel metric to get a handle on. It’s the number of occupied rooms compared to the total number of rooms available, expressed as a percentage.
Occupancy rate (%) = number of occupied rooms / total available rooms
Managers are always aiming for what we call the "perfect sell": a 100% occupancy rate. This is the optimal number every hotelier is dreaming of. However, to get there, managers will need to oversell, so that cancellations are compensated by the overbookings. This requires a good understanding of your cancellations (in general, a hotel of 100 rooms can allow to oversell 2 to 5 rooms), as well as a backup plan in case you do have overbookings. Many hotels have implicit partnerships with properties in their comp set, offering each other competitive rates in this situation.