All data tells us something. What is yours telling you?
For hotel revenue managers, it’s one thing to know that gathering data is important, but it’s another thing entirely to know which data is the most important.
When you’re part of an industry worth more than 4 trillion dollars worldwide, tracking the data that informs your piece of the pie is essential, but challenging — how do you determine where to focus your limited time and resources?
By learning about which hotel revenue management KPIs are most important to your target audience and the ways to track them can increase your revenue. Read on to learn more.
What are table stakes KPIs for the hospitality industry?
Key performance indicator, better known as KPI, is a revenue management term for touchstones used to measure progress toward a desired outcome at one or all of your properties.
Later on we’ll discuss the importance of emerging hotel revenue management KPIs, but before we get there let’s start with the basics.
The following four KPIs are most commonly tracked by revenue managers seeking strategic insight (often tracked manually via unwieldy spreadsheets):
- Revenue available per available room (RevPAR) — This KPI measures a property’s ability to fill its rooms based on industry and historical averages. It can be calculated by dividing total revenue per room by the total number of available rooms during a specific time period.
- Average daily rate (ADR) — This KPI measures the average rate for rooms sold on a designated date (or date range).
- Occupancy rate (by day, week and month) — This KPI looks at the percentage of occupied rooms at your property during a specific time period and can be compared against historical data to determine behavioral trends.
- Average length of stay (ALOS) — This KPI measures the average length of a visitor’s stay at your hotel. It’s calculated by dividing the number of nights per booking from the total number of bookings during a selected time period.
The data inferred from tracking these KPIs is vast, especially if you’re using an automated system that helps translate the information into profitability.
It’s not the only helpful data out there, however. There are more KPIs than ever to look at when crafting your hotel’s ideal revenue management strategy. Let’s check out a few.
Average Room Upgrade
Determining average room upgrade is done by taking a property’s total room upgrade revenue and dividing it by the number of room upgrades that were sold to guests. Measuring this KPI is a great way to highlight how much revenue a property may be missing out on, which is important to track.
Room upgrades are based largely on established rates and occupancy levels, but tracking when they happen will give you unique performance insight into why they happen.
For example, if you see that 65% of your room upgrades come from families that underestimated space needs, you can take pre-emptive steps to make sure they know what’s available to them at check-in.
Late Departure Upgrades Sold
The benefit of tracking late departure upgrades sold is similar to the benefit of tracking average number of room upgrades. Namely, making note of a decision that positively impacted your hotel’s revenue and tracking the behaviors that led to it happening in the hopes of replicating them.
An example of this KPI impacting strategy could be noticing that you have a marked increase in late departure upgrades sold after big concerts come to town. You can use that insight to adjust your marketing to target event-goers in the hopes of improving those margins.
Total Available Rooms
Total available rooms is an incredibly basic KPI, but that doesn’t mean it’s without merit.
Sometimes focusing on simplicity instead of complexity can lead to clearer next steps. Your total available rooms is not only a foundational part of many other revenue calculations, it also helps you determine macro trends.
Looking at when you have the most (and least) rooms available makes it a lot easier for you to determine what times of year deserve your strategic focus first.
Gross operating profit, also known as GOP, is a KPI that measures a hotel’s total revenue minus the expenses of operation, including taxes. Essentially, it provides a very big picture look at your hotel’s revenue forecast.
This data is helpful when looked at in collusion with your other, more specific metrics. By tracking GOP over time, you’re tracking the overall success (or need for adjustment) of any revenue management strategies you’ve put into place.
CPOR, also known as cost per occupied room, is a hotel revenue management KPI that looks at the total operating costs of a hotel divided by the number of rooms occupied during a specified time frame.
Like GOP, this offers a higher level look at what each room is costing you on average — and if there are related trends that can help reduce those numbers.
If you notice your CPOR rising over time, it’s a sign that operating costs are increasing faster than revenue is. That signals to you, as a revenue manager, that it’s critical to focus on reducing operating costs through actions like vendor contract renegotiation, staffing adjustments or other specific-to-you strategies.
Marketing Email Open Rate
This KPI tracks the percentage of upsell offer emails sent to prospective guests that have been opened. Often supported by marketing automation, email open rates of 17% or higher are tied to a defined increase in upsell conversion opportunities (in turn making way for new hotel revenue).
By looking at open rates, you can determine what type of messaging leads to more opens and tweak your communique accordingly.
Since you are sending offers to guests who already have confirmed reservations, conversion rates are often quite high. It’s important to note that your established rate and occupancy level will affect what upgrades you’re able to offer via email — and how interested guests will be in turn.
How can I get started tracking new hotel revenue management KPIs?
Determining which KPIs you’re going to track will always be challenging, but you can make it easier.
IDeaS’ G3 RMS has the advanced analytics capabilities you need to automate and accelerate your establishment’s revenue success. Book a demo today to see for yourself.