Hotel performance indicators are vital while running the hotel. If you are the owner of any hotel and want to check how your hotel is performing, then you have to check a few of the parameters.
Evaluating hotel performance defines how your hotel is performing and how much benefit you have. These hotel performance indicators show how much your hotel sale is or how much percent benefit you are gaining.
Performance management in hotel industry is not dependent only on a few parameters. There are many other parameters too that define the growth of the hotel.
Let us discuss each hotel performance indicators separately:
Average Daily Rate
The average daily rate is the ratio of room revenue to the room sold. The room sold only includes the number of rooms that are occupied. It does not include those rooms that are under maintenance and occupied by the staff.
ADR is evaluated for a certain period. This parameter is useful to compare the growth from the last year for the same month.
It is the most used hotel performance indicators
Average Daily Rate = Room Revenue/ Total number of occupied rooms
Revenue Per Available Room
Revenue per available room or RevPAR is the ratio of total room revenue to the total rooms available.
RevPAR = Total Room Revenue Generated/ Total Number of Available Rooms
By calculating, the RevPAR hotelier can conclude the operational performance of the hotel room. High RevPAR means higher profitability and a high ADR.
It also reflects how much the hotel can put on the selling price of the hotel room and how much profit you can gain after it.
The occupancy rate is the ratio of occupied rooms to the total number of available rooms for a certain time.
It will tell you how your hotel is performing. And you can also compare how your hotel performs in the same season as last year.
This vital parameter is useful in managing the operations of the hotel industry. It will tell how much percentage of a hotel is occupied and how much is free.
To improve the booking in the hotel, the hotelier can have the Free hotel booking software. It will increase the booking and also the occupancy rate of the hotel.
Average Length of Stay
When any person plans a trip, it can be for one day or one month. The period for which the person wants to stay in the hotel is the length of stay.
The average length of stay means the sum of total room nights guests stayed in a hotel room to the total number of bookings.
The growth of the hotel is directly proportional to the average length of stay. Meaning the higher the average length of stay, the higher the growth of the hotel.
Positive online reviews are necessary nowadays. It is the most vital parameter in the hotel industry.
Before booking, people see the review posted by the customer for the hotel. They post the video, photos, and comments in the hotel review section.
Customers view the online review and make a decision accordingly. If the review is positive, the sales conversion will be more. And if the negative review is more, it results in fewer sales of hotel rooms.
Hence we can say that a positive online review will increase the sale of the hotel. If any negative is there, reply politely to the customer and fill the void. Try to make good relations with a guest.
Gross Operating Profit Per Available Room
Gross operating profit per available room indicates how much each room generates profit after all the operational expenses are done.
GOOPAR includes many parameters like all the room’s operational costs (housekeeping, electricity, etc). Also, furniture depreciation and the internet cost.
When all these expenses get subtracted from the hotel’s operational cost to the total number of booked rooms we will get the gross operating profit per available room.
Total Room Revenue = Gross Operating Expenses / Number Of Available Rooms
Cost Per Occupied Room
Cost per occupied room is the ratio of the total cost per department room to the total room sold.
It tells how much each room is profitable.
Cost Per Occupied Room= Total Room Department Cost/Total Room sold.
RevPAR Room Type Index (ReRTI)
A new hotel performance indicator evolved to assist revenue managers in determining whether the sale of higher-value rooms contributes proportionately to the inventory of each room type to the RevPAR due to changes in the hospitality industry over the past year.
ReRTI’s objective is to examine which room kinds are the most lucrative and determine whether offers like free room upgrades can benefit or harm a hotel.
If a room type receives a score higher than 1, it suggests that, to the quantity of that type of room you have, it contributes proportionally more than it should.
Room type is providing proportionally less than you’d anticipate if the score is less than 1, according to the scoring system.
ReRTI = % total RevPAR x number of specific room type ÷ % inventory x number of specific room type
So, these are the few discussed parameters that help in the evaluation of hotel industry.
That’s all for the parameters that help in performance management in hotel industry. I hope you like our article.
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