Understanding your current and past performance is key to ensuring your property’s long-term success. Measuring and tracking hotel KPIs is the most straightforward way to do that.
KPIs reveal how a property's revenue develops over time and how effectively you’re using your own resources — think marketing spend and operational efficiency.
This, in turn, shows you where meaningful changes can improve the guest experience, help you more drive revenue and increase profitability.
In short, keeping a close eye on your KPIs will help you continuously find ways to improve your processes and consistently drive better results.
Wondering which KPIs to monitor? Below, we’ll look at the hotel KPIs you should be tracking and what you can do to improve them.
What Are Hotel KPIs?
“KPIs” is an abbreviation for “key performance indicators”. A KPI is a measurable value that shows how your business is doing in a particular area. The data needed to calculate internal hotel KPIs comes from systems such as your PMS, RMS and business intelligence tools. For KPIs that highlight your performance relative to the compset or overall market, you’ll need data which you can’t collect on your own (e.g., your compset’s occupancy or ADR). These insights come from outside partners like STR or other benchmarking services.
KPIs also serve as benchmarks that are used across the hospitality industry and universally understood. This means that looking at the same hotel KPIs for different properties will give you a solid understanding of how each of them is performing and how they compare to one another. On top of that, these benchmarks are helpful to monitor the industry’s health and development in a specific market or worldwide. Check reliable sources like STR to stay on top of current numbers and put your performance into perspective.
Finally, KPIs exist for all departments. That includes the front desk, F&B, finance, housekeeping and marketing, among others. Depending on your type and style of hotel, some KPIs might be more relevant than others.
What Is the Importance of Hotel KPIs?
Hotel KPIs have several purposes. First, they help you see your performance in relation to your goals. This shows if you’re on the right track or if you need to correct your course. They also make it easier to compare your current performance to past results.
Keep in mind though that internal KPIs don’t take outside circumstances into consideration. This includes events that are beyond your control such as natural disasters, a pandemic or a recession. In these cases you have little to no control over people’s willingness or ability to travel. Unsurprisingly, it also makes it harder for you to repeat past successes. Knowing this, always take your results’ context into consideration when making comparisons.
All told, analyzing your KPIs helps you understand your hotel’s current strengths, weaknesses and opportunities. This gives you the knowledge needed for sound decision-making in areas ranging from pricing to improving the guest experience. For example, you may discover that a slight adjustment to your rates could improve your positioning and help you attract more bookings. Or you may find ways to better schedule your staff throughout peak and slow periods to reduce costs while providing optimal service.
What Are the Most Important Hotel KPIs?
Let’s look at the hotel KPIs that will tell you everything about your property’s performance.
Occupancy Rate
One of the most fundamental metrics in hospitality, the occupancy rate tells you what percentage of your rooms you were able to sell during a given period (e.g., one day, month or year). The ‘available rooms’ do not include any rooms you’ve currently taken out of inventory for deep cleaning, renovation or any other reason (i.e., rooms that are marked out of order or out of service).
The equation:
Occupancy rate = total number of occupied rooms / total number of available rooms x 100
Average Daily Rate (ADR)
Your ADR tells you how much revenue you generated per occupied room. Unsold rooms are excluded from the calculation. ADR plays an important role in measuring your hotel’s financial performance, forecasting revenue and pricing strategies.
The equation:
ADR = room revenue / number of rooms sold
Revenue per Available Room (RevPAR)
Another one of the top metrics, RevPAR looks at your total revenue in relation to available rooms. It can fluctuate a lot depending on seasonality and your dominant guest segment. However, it’s one of the pillars revenue managers use in budgeting, demand forecasting and pricing.
The equation:
RevPAR = average daily rate x occupancy rate
or
RevPAR = room revenue / total number of rooms available
The second calculation gives a more accurate picture as it takes all physically available rooms into consideration. The first calculation can give a slightly embellished result as the occupancy rate does not take out-of-service rooms into account.
TRevPAR = total hotel net revenue / total available rooms
Gross Operating Profit per Available Room (GOPPAR)
GOPPAR takes an even closer look at a hotel’s actual performance by taking into consideration all revenues and costs. This means GOPPAR goes deeper than other metrics such as RevPAR or TRevPAR and provides a better look at overall profitability.
The equation:
GOPPAR = gross operating profit (GOP) / total number of available rooms
RevPAR Room Type Index (ReRTI)
ReRTI is one of the newest KPIs to emerge in the hospitality industry. It’s supposed to help analyze which room types are most profitable. It can also show if each category contributes to RevPAR proportionally based on how much of the total room inventory it makes up. If the value is below 1, a room type is contributing less than its fair share.
The equation:
RevPAR room type index = % total RevPAR x number of specific room type / % inventory x number of specific room type
Average Length of Stay (ALOS)
Knowing how long guests stay on average is important when budgeting, forecasting and planning staff schedules. Boosting your ALOS can help drive down distribution costs since you’ll fill more rooms with fewer bookings.
The equation:
ALOS = total occupied room nights / number of bookings
Market Penetration Index (MPI)
Your MPI looks outward and helps you compare your property’s occupancy during a given period to your compset’s. If you score above 100, you’re outperforming the others. If you’re below 100, you’re attracting less than your fair share of guests. Sign up with a benchmarking service such as STR or Fairmas to share your data and receive masked competitor data in return.
The equation:
MPI = hotel occupancy % / market occupancy % x 100
Revenue Generation Index (RGI)
Similarly to the MPI, the RGI also serves to compare your performance to your compset’s. But this time it’s about revenue. Again, if you score above 100, you’re doing well. If not, there’s room for improvement. To determine your RGI and MPI, you need an outside partner like STR to provide compset data. Again, a benchmarking service such as STR or Fairmas will provide you with masked competitor data once you sign up and share your hotel’s information.
The equation:
RGI = hotel RevPAR / market RevPAR
Revenue per Available Seating Hour (RevPASH)
RevPASH is the result of applying the principles of revenue management in the F&B department. This metric tells you how much revenue you generate per hour and can help you optimize operations to maximize your venues’ profitability.
The equation:
RevPASH = total restaurant revenue / restaurant opening hours
Online Reviews
Online reviews are the perfect barometer for guest satisfaction. It’s important to monitor your scores across various channels (e.g., TripAdvisor, Google, Booking.com, etc.) and track how changes in staffing levels or extra training impact them. Score aggregators like TrustYou can also provide a good overview of your reviews and help you manage your online reputation effectively.
Net Promoter Score (NPS)
An NPS score indicates how likely a guest is to recommend your property. Ask guests about this during or after check-out and use a scale of 1-10 to answer. Travelers who give 9 or 10 points are considered promoters. Those who award 7-8 points are ‘passives’ and anyone giving 6 or less points is referred to as a detractor. Scores can range from -100 to 100, with positive scores being considered good. In hospitality, the current industry average is 39. 50 and above is seen as excellent.
The equation:
NPS = % of promoters - % of detractors
Employee Performance & Productivity
Measuring your staff productivity can show you which teams are the most powerful revenue drivers. It also reveals where you may have some inefficiencies to optimize. In cases in which a department doesn’t actively generate revenue (e.g. engineering, IT), you can replace “revenue generated” with metrics like “tickets cleared.” Of course, you can also use this to track your hotel’s overall productivity by looking at total revenue generated per total hours worked.
How To Improve Hotel KPIs
What you must do to improve depends on the KPI you’re working on. In any case, start by examining where your weaknesses are.
Do you have inefficiencies in your operations?
Are rate disparity cases costing your bookings?
Is inaccurate positioning in the market scaring off potential guests?
Wherever your issues lie, work with the department concerned, discuss their challenges or problems and try to find solutions or new approaches together. When you do, keep an eye on your KPIs to see how they change. In many cases, new tech solutions can help you solve problems or reduce their impact.
Using Technology To Improve Your KPIs
Modern hotel tech solutions can help you address a variety of challenges. For example, modern PMS, RMS and BI tools can provide accurate, real-time data in an easy-to-read format. That saves you time on collecting information and helps you make more educated decisions. But you can take things another step further by using technology to further streamline or even automate your processes.
Here are three examples of how that could look in practice:
Guest management solutions that integrate with your PMS —Services like automated check-in and check-out saves time for staff and guests alike. Consequently, they increase your employee productivity and improve the guest experience because travelers can avoid lines at reception both during arrival and departure.
RMS with automated rate updates — Automated rate updates ensure you always keep room prices in line with demand shifts and market trends. That way you stop leaving money on the table and maximize your revenue under all circumstances. Plus, your revenue manager saves valuable time they can reinvest in developing and refining your hotel’s long-term strategy.
Check-out tools that capture online reviews —Asking guests for reviews during checkout can feel awkward for your staff and, often, there isn’t even time for it. Of course, even when prompted, guests might still put off or forget to share feedback. Automating the checkout process with a web-based solution can help hoteliers address both of these issues. Take Canary’s contactless check-out as an example. It gives hoteliers the ability to request reviews from all guests who checked out via their mobile device. Then it guides the happiest customers to Google or TripAdvisor where they can share their praise publicly. The Ali’i Resort in Maui recently used Canary’s Contactless Checkout to boost their online review score from 3.5 to 4.6 stars.
Conclusion
Now that you have an overview of the top hotel KPIs to track, nothing stands in the way of monitoring your performance and making targeted improvements.
Just keep in mind that even if you implement modern hotel technologies, your KPIs won’t skyrocket overnight. This is a long game, and it requires consistency and dedication to win. But if you can stick with it and keep pushing for better results, you’ll see your KPIs steadily move in the right direction over time.
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