en
Cloudbeds

Articles

Hotel Key Performance Indicators for 2017

Subscribe for More Content
Posted by Alex Gaggioli
October 9, 2018

Introduction

One of our top hospitality marketing trends for 2017 was a greater focus on data-driven marketing. There are hundreds of different calculations your property can use to gauge how your property is performing. From simple metrics like ADR and RevPAR to benchmarking the competition to conducting a sentiment analysis, there are a variety of data points that can help you make better decisions.

The Basics

There are a few industry-standard metrics every property can and does run on a regular basis. These basic calculations give you a high-level view of your property. It’s also useful to use these metrics to benchmark your property against industry predictions and standards for the year. For example, if STR believes that in 2017 we’ll see a 3.8% increase in RevPAR this year, you can gauge how your property compares.

Occupancy Rate

Your occupancy rate is the most basic metric you can run. You divide your occupied rooms by your total available rooms. This simple metric allows you to determine what percentage of your rooms are occupied for any given period of time.

Average Daily Rate – ADR

Average daily rate is a simple metric used to calculate the average rate per occupied room. You calculate average daily rate by dividing total room revenue by total rooms occupied. ADR is a good metric to analyze hotel performance, however, it is fairly basic and doesn’t take into account your empty/unsold rooms. Therefore, it could be deceiving in terms of overall property performance. 

Total Room Revenue

Total Rooms Occupied

RevPAR – Revenue Per Available Room

Rev per available room is similar to average daily rate but you include your empty rooms into the calculation. You calculate RevPAR by dividing total room revenue by total rooms available. You can also calculate RevPAR by multiplying your ADR by the occupancy percentage.

RevPAR gives good insights into how well a property is operating and will tell you how well your property can fill available rooms at the average rate. However, there are other factors to consider when comparing RevPAR between different properties. RevPAR doesn’t take into account number of rooms, so a large property with fewer filled rooms may still be making more money even with a lower RevPAR. It’s important to take into consideration several different variables. 

Total Room Revenue           or         ADR x Occupancy %  

Total Rooms Available

Cost Per Occupied Room – CPOR

Cost per occupied room helps you determine how efficient your property is per sold room. To determine CPOR you divide total gross operating profit by total rooms available. Gross operating profit is your Net Sales minus Cost of Goods Sold minus Operating Expense, which includes selling, general and administrative expenses. CPOR gives you the ability to see how profitable each room is while taking into consideration your expenses, both variable and fixed (labor, rent/mortgage, etc.)

Managers and owners should use this metric to track how efficient their properties are over time. RevPAR and ADR help you determine if you’re selling enough rooms at the best price, and CPOR will help you maximize property’s efficiency.

Total Gross Operating Profit

Total Rooms Available

Customer Satisfaction

Guest satisfaction is often a huge indicator to how your property is performing from a guest’s perspective. Using guest satisfaction to dictate your business will allow you to take a long-term approach that will pay off in the end. For example, when just looking at financial data like ADR or RevPAR, qualitative data is not always taken into consideration. 

When you take a look at customer satisfaction and quantify the results, you have the opportunity to make changes that will have a large impact on your property.

Customer Surveys

Use post-stay guest surveys to identify what matters most to your guests. Sliding scale questions can be used to quantitatively track your guests’ sentiment over time. Regularly surveying guests and keeping track of their responses will help you identify what you do well and need to work on. It will also help you identify problem areas before they get out of hand.

We also suggest asking open-ended questions that allow the guests to express their sentiments. We suggest keeping track of common comments made by your guests and following them over time for the same reasons listed above.

Online Review Sites

Your online reviews are also an invaluable resource. While your opinion of online reviews may not be positive, there is always a way to use them to your advantage. We’ve previously written about how guests will often turn to online channels to air their grievances. Guests will leave all types of reviews about your property and we suggest your conduct a sentiment analysis for your reviews to determine their true feelings. A sentiment analysis allows you to quantify your guests’ opinions on their stay. We created a guide on how to do create a very basic sentiment analysis, which you can find here.

While there are no specific key performance indicator formulas for customer satisfaction, other than a net promoter score, we suggest you create your own aggregate data based on your surveys and third-party site reviews.  

Competition Benchmarking

Competition benchmarking will help you compare your property’s performance to your competitors. There are several different benchmarks you can use and below you will find a few of the most popular to get you started.

Competitive Set

In order to calculate these benchmarks, you’ll need to first create a competitive set to base them off of. Your comp set should include properties who you directly compete against in your immediate geographical area. Include properties who compete based on size, type, price, etc. The number of properties in your comp set will depend on your market. Choose as many or as little as you think makes sense.

Average Rate Index – ARI

This metric uses your average daily rate (ADR) and compares it to your competitive set during the same period. ARI = Hotel ADR / Comp Set’s ADR. This metric requires that you do a bit of market research beforehand to calculate what the various ADRs within your comp set.

Once you’ve identified your comp set’s data, you will generate a number within the 0 to 1 range, but it’s possible to have a number greater than 1 if your ADR is higher than your comp set. If your ARI is above 1, your average daily rate is higher than your competitors, and if your ARI is lower than 1, your average daily rate is lower than your competitors.

Hotel ADR

Comp Set ADR

ARI allows you to gauge your performance against your competitors with a standardized number. 

Marketing Penetration Index – MPI

The marketing penetration compares your property’s occupancy percentage to your comp set’s occupancy. It will allow you to see how much (or little) your property dominates your market. But, a high occupancy percentage isn’t always the best indicator of success. For example, if your property lowers your rate to raise occupancy percentages, you may lose money due to diminished margins. Monitoring MPI over time will help you identify your property’s occupancy sweet spot and how to get there. 

You calculate MPI by dividing Hotel Occupancy % / Comp Set Occupancy %.

Hotel Occupancy %

Market Occupancy %