Every business has its metrics which helps organizations to measure their performance and help them to improve their sales. Same goes for the hotel industry. Hotel metrics are an important component which make it possible to keep track of the revenue stream and understand the performance of a hotel.
Following is the list of most important metrics that will help you to analyze your hotel’s market performance and create the suitable market strategies:
ADR or average daily rate is one of the most critical and important metrics in the hotel industry. It is simply the representation of average rate paid by guests per rooms for a specific day or any specific period of time. To calculate it you need to divide the total room revenue earned by the total number of rooms sold at the hotel.
RevPAR is a performance metrics used in the hotel industry to measure the profit and success of a hotel. It is calculated by dividing the total revenue of hotel divided by the total number of available rooms during the time period being measured.
Another useful metric is the average occupancy rate that helps you understand the occupancy rates during different time periods e.g. yearly, monthly, daily or during peak seasons. It is calculated by dividing the number of rooms sold by the number of available rooms.
The ALOS metrics makes it easy to identify the length of stay of guests at your hotel. This is calculated by dividing the occupied rooms by a number of bookings. It is said that a higher number means an improved profit as less labor is required. On the other hand, a lower ALOS results in reduced profit. The concept is that if a guest stays for a long period of time then it requires less labor. Whereas if several guests book rooms for one-nights for the same period of time then it requires more labor.
To stay ahead of the competition you need to know how your hotel is performing in the local market. The MPI metrics can be used as a tool to compare your hotel’s market share with your competitors. It helps you to know how many guests are choosing your hotel as compared to other hotels in your location. It can be calculated by dividing your hotel’s occupancy by market occupancy and multiplying by 100. If the result is more than 100 that means you have a very good hold on the market. Else if it is less than 100 then it indicates your hotel isn’t performing well and losing a lot of bookings to your competitors.
RGI stands for Revenue Generated Index is a metric that compares your hotel’s RevPAR to the average RevPAR in the market.
The formula for RGI: Your hotel’s RevPAR / Total Market RevPAR
After dividing, if the result is equal to or greater than one, that means you are in a good position in the market.
In case it’s less than one then you need to devise strategies to gain more share of the market.
GOP PAR is a key performance indicator for your hotel’s success. It lets you know not only the most earning part of your hotel but also the operational costs involved to generate the revenue from those areas. It is calculated by dividing Gross Operating Profit by Rooms available.
Using these hotel metrics you will be able to analyze and create a detailed performance report of your hotel. Thus, by tracking these metrics you will discover the factors affecting your hotel’s performance and significantly improve the results.