A key performance indicator can provide revenue managers and hotel owners with valuable information about the performance of their business. This subsequently has the benefit of allowing them to implement a revenue management strategy, so that they can maximise financial business results. In this post, we look at some of the most widely utilised revenue management KPI’s and how they can help you.
What are Revenue Management KPI’s?
Within the hotel industry, revenue management is the practice of selling the right room, to the right guest, at the moment, for the right price, via the right distribution channel, with the best cost efficiency.
Essentially, revenue management KPI’s can be described as performance metrics, which help business owners to assess the current state of their business and make informed adjustments to things like pricing and strategy. As a result, these KPI’s can enable hotel owners to optimise their business practices and maximise revenue.
Most Used Revenue Revenue Management KPI’s:
Occupancy rate refers to the number of available rooms in a hotel that are occupied at any given time. It can be used to assess how efficient a hotel is at making use of the space available and can be used on conjunction with other metrics to maximise revenue. The occupancy rate is expressed as a percentage and calculated by dividing the number of occupied rooms by the total number of rooms.
Find more detailed information about occupancy rates in the article “What is an occupancy rate?”.
Average daily rate, or ADR, is a KPI which tells hotel owners the average rental income per paid occupied room. It is not concerned with revenue that is generated from other sources, such as room service, and is calculated by dividing rooms revenue earned by the number of rooms sold. It is one of the most useful revenue management KPI’s, allowing for comparisons with other hotels in the nearby area, or with similar characteristics.
Find more detailed information about ADR in the article “What is an average daily rate (ADR)?”.
Revenue per available room, or RevPAR, deals with the average amount of revenue being generated per available room in the hotel, regardless of whether they are occupied or not. It can be calculated by either dividing rooms revenue by the number of rooms available, or by multiplying the average daily rate by the occupancy rate. This KPI is especially useful for measuring the overall revenue generating performance of all of the rooms in a hotel.
Find more detailed information about RevPAR in the article “What is RevPAR?”.
Like average daily rate, revenue per occupied room, or RevPOR, is only concerned with revenue generated by rooms that are actually in use. However, it differs from that KPI because RevPOR takes into account all of the revenue stemming from an occupied room, so things like room service and laundry service would be included. It can be calculated by dividing the total revenue generated by occupied rooms by the number of occupied rooms.
Find more detailed information about RevPOR in the article “What is RevPOR?”.
Finally, gross operating profit per available room, or GOPPAR as it is often known, is one of the most important revenue management key performance indicators, because it looks at gross operating profit across all rooms, regardless of whether they are occupied or not. It can be calculated by dividing gross operating profit by the total number of rooms available and is a solid indicator of overall business performance across all revenue streams.
Find more detailed information about GOPPAR in the article “What is GOPPAR?”.
Each of the most used revenue management KPI’s have their own value, although they are more useful when viewed in context, alongside one another. By using key performance indicators, hotel owners can get a clearer idea about the performance of their business and make informed, data-driven adjustments to pricing and strategy.
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