The Important Hotel Performance Metrics and Industry Benchmarks

Think… what hotel performance metrics do you use? Once you dive below the

image of beautiful rooms, guest services and great experiences, hotels exist to

achieve operating profits and capital gains for their owners. It’s easy for independent

hoteliers and owner-operator hoteliers to get sucked into a daily operational vortex,

versus strategy by data.

Life morphs from working ‘on the business’ to working ‘in the business’.You must

never forget about hotel performance metrics. Here’s hotel performance metrics you

can use.

You can also download the Hotel Performance Metrics E-Book.

Occupancy (OCC)

It’s the simplest hotel performance metric. Occupancy is a percentage of the

available rooms occupied for a specific period (i.e. annual, quarterly, monthly, daily

or summer).

Occupancy % = Paid Rooms Occupied / Rooms Available

OR

Occupancy % =    Revenue per Available Room      /    ADR

EG.

Occupancy % =      50,000   /   100,000      =     50%    OCC

 

Revenue per Available Room (RevPar)

The Hotel Performance Metric of ‘RevPar’ measures hotel utilisation or the average

daily rooms revenue generated per available room. This metric doesn’t account for

other revenue centres such as F&B, retail, conferencing and many ore. Hoteliers

who use RevPar often compare their results with other hotels, but the authenticity

and accuracy of comparative data may be questionable. As a hotel performance

metric, it differs by market, segment and timing and is a time-based snapshot of your

hotel performance.

RevPar = Total Room Revenue / Total Rooms Available

OR

RevPar = Occupancy %    X   Average Daily Rate (ADR)

EG.

RevPar  =   $ 5,000,000  /  100,000    =   $50   RevPar

 

 Average Daily Rate (ADR)

Hotel ADR simply measures the average price paid per room. This hotel

performance metric assesses the total guest room revenue for a specific period

versus the total amount of room revenue paid and occupied hotel rooms within the

same timeframe. It solely focuses on paid rooms and might sometimes be labelled

the Average Room Rate.

ADR = Rooms Revenue / Paid Rooms Occupied

OR

ADR = Revenue per Available Room     /    OCC %

EG.

ADR =         50   /   0.50      =        $100 ADR

 

Hotel Supply & Demand

These hotel performance metric figures identify the average number of room nights

available and used in a specific market. A resort hotelier in Saas Fee, Switzerland

may research (via online research and tourism office statistics) the total number of

rooms available in town and the total rooms used over a period. Depending on data

available, a hotelier can then measure their performance against local

market average supply and demand, and benchmark direct competitors (eg. other 3

star hotels within a 10km radius).

Market OCC = Rooms Night Demand / Available Room Nights

  

Services like HotStats offer hotel performance metrics data

Where available, serious hotel performance metrics data can help hoteliers compare

their performance to their competitive market set. Depending on the segment, that

might be the local, regional or even national market. Many tourism offices and

government bodies require reporting of room nights (for tourism related taxes and

market insights), which allows hoteliers to determine market levels. Finding

competitor RevPar and ADR hotel performance metrics is difficult, but services like

HotStats exist.

Market Penetration Index (MPI)

This hotel performance metric measures how your hotel’s occupancy compares to a

competitive set. This measures your ‘piece of the pie’. Naturally, every hotelier wants

to increase their market share and win more business. Ensure you have accurately

determined the competitive set. Results above 1 indicate above market performance.

MPI =  Hotel Occupancy %  /  Market Occupancy %

EG.

MPI =         50%   /   40%      =    1.25    MPI

 

Average Rate Index (ARI)

This hotel performance metric measures how your hotel’s average daily rate

compares to a competitive set. An ADR Index of 100 means you have a fair share of

the competitive set’s ADR performance. Like MPI but depending on your hotel’s

business goals, you would typically aim for ARI above 1. For our hypothetical hotel,

the total room revenue by market is unknown. Without data, you can’t calculate the

ARI measures.

ARI = Your Hotel’s ADR    /    Hotel Market ADR

 

Revenue Generation Index (RGI)

This hotel performance metric measures how your hotel’s RevPar compares to their

competitive set. Most of the international and branded hotel operators use the RGI

hotel performance metric obsessively. Enhancing the RGI is often a great way to

maximise hotel profitability. RGI results should exceed 1 (a 100 base index)

otherwise hotels in your competitive set are converting more business than you. If

so, look at your daily RGI results and analyse trends, benchmark competitors and

revenue management tactics.

 RGI = Your Hotel’s RevPar  /  Hotel Market RevPar