When it comes to understanding the hotel industry, there are a few key metrics that are a must in order to make the best decisions and stay competitive.
The most popular metrics among them:
- RevPAR
- Occupancy rate
- ADR (Average Daily Rate)
When used correctly these hotel metrics can help you better manage your hotel.
In order to properly use these metrics, you need to not only understand the data but how to turn this data into valuable insights. By correctly monitoring, and making the right adjustments to these insights you will be able to boost your hotel’s success and continuously meet your goals.
Here is the breakdown of each hotel metric and how to use them:
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Basic operational metrics
occupancy rate, ADR and ALOS
These metrics are broad metrics that can give you an overall view of how your hotel is performing.
Occupancy rate
Hotel occupancy rate is a measure of how many rooms are occupied at a given hotel and can give insight into a hotel’s profitability and overall performance. Occupancy rate is often used to compare different hotels, as well as to benchmark a hotel’s performance over time.
To calculate occupancy rate you simply take the number of rooms occupied divided by the total number of rooms available. For example, if a hotel has 100 rooms and 80 of them are occupied, the occupancy rate would be 80%.
Occupancy rate can be affected by a variety of factors, including seasonality, local events, and the overall economy. A hotel’s occupancy rate is a good indicator of demand, and can be used to make pricing and marketing decisions.
High occupancy rates are generally seen as positive, as they indicate that a hotel is able to meet customer demand. However, extremely high occupancy rates can also lead to problems such as overbooking, which can result in customer dissatisfaction.
Occupancy rate is just one metric that hotels use to assess their performance, but it is an important one. By tracking occupancy rate over time, hotels can get a good sense of how they are doing and where there is room for improvement.
ADR (Average Daily Rate)
ADR measures the average amount that guests pay per night to stay at a hotel. This metric can be used to compare the rates of different hotels, or to track changes in the rate at a particular hotel over time.
ADR= Total room revenue/ Total number of rooms sold
ADR is an important metric for hotels because it can give insight into how much revenue the hotel is generating per room. It can also be used to compare the rates of different hotels in the same market, or to track changes in the rate at a particular hotel over time. Additionally, ADR can be a helpful tool for evaluating hotel marketing campaigns and determining whether or not they are successful in driving bookings.
When evaluating a hotel’s ADR, it is important to consider the seasonality of the market and the type of guests that the hotel is catering to. For example, hotels in tourist destinations will typically have higher ADRs during the peak season when demand is highest. Likewise, business hotels will often have higher ADRs during the weekdays when business travelers are more likely to be in town.
ADR is just one of many hotel metrics that can be used to gauge the performance of a hotel. By tracking ADR hoteliers can get a comprehensive overview of how their hotel revenue and make necessary adjustments to improve results.
ALOS (Average Length of Stay)
ALOS is a measure of how long guests stay at a hotel, on average. This metric can be used to compare properties, identify trends, and assess overall performance.
ALOS= Total number of nights/ Total number of bookings
ALOS is important because it is a good indicator of customer satisfaction. Guests who are satisfied with their stay are more likely to come back and recommend the hotel to others. Additionally, a longer length of stay generally results in higher revenue for the hotel.
There are a few things to keep in mind when interpreting ALOS data. First, it is important to compare apples to apples. That is, make sure you are comparing properties of similar size, type, and location. Second, keep in mind that seasonal factors can impact ALOS. For example, hotels in resort locations may see a spike in ALOS during the summer months when vacationers are more likely to stay for extended periods of time.
If you are looking to increase your property’s ALOS, there are a few things you can do. First, focus on providing an excellent guest experience. This includes everything from providing a clean and comfortable room to offering outstanding customer service. Second, consider offering package deals or promotions that encourage guests to stay longer. For example, you could offer a discount for guests who stay three nights or more. Finally, make sure you are marketing your property to the right audience. If you are targeting business travelers, focus on providing amenities and services that appeal to them.
By paying attention to your ALOS, you can get a better understanding of how well your property is performing and make necessary changes
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Digging deeper into hotel metrics: RevPAR, GoPPAR, ARPAR, NOI and more
RevPAR (revenue per available room)
RevPAR is a metric used in the hospitality industry to measure hotel performance. RevPAR is a key performance indicator (KPI) that many hoteliers consider the most important measure of data.
RevPAR is calculated by multiplying a hotel’s average daily room rate (ADR) by its occupancy rate.
RevPAR is a key metric for hoteliers because it provides insight into a hotel’s overall revenue performance. By tracking RevPAR, hoteliers can see how well their hotel is performing in terms of revenue and identify areas where they may need to improve. Additionally, RevPAR can be used to benchmark a hotel’s performance against other competitors in its market.
While RevPAR is a useful metric, it is important to keep in mind that it only measures revenue and does not take into account other important factors such as expenses. As such, RevPAR should be used in conjunction with other metrics such as net operating income (NOI) to get a complete picture of a hotel’s financial performance.
GOPPAR
GOPPAR (Gross Operating Profit per Available Room) is a metric used in the hospitality industry to measure how much gross profit comes from each room. It is a useful metric for hoteliers as it goes further than just measuring revenue and also includes operational expenses. This means it can give an even better indication of the bottom line and shows an actual representation of how much a hotel is making.
GOPPAR= (Total revenue- Gross operating expenses)/ Total number of available rooms
GOPPAR also is helpful when wanting to track new changes in your hotel. When implementing something new just follow if the GOPPAR is increasing, decreasing, or staying the same. This will tell you if your new changes are positively or negatively impacting your hotel.
Why it’s important to use GOPPAR
GOPPAR is an important metric for hoteliers to track because it can give insights into how well your hotel is performing in terms of generating actual revenue. By tracking your hotel’s GOPPAR, you can get a better idea of how you are balancing revenue and expenses. As well as track new changes in the hotel and how well those changes are paying off.
ARPAR (Adjusted Revenue per Room)
ARPAR is a measure of a hotel’s overall profitability when taking variable costs and additional revenue into account.
ARPAR= (ADR- Variable costs per sold room + Additional revenue per sold room) *Occupancy
ARPAR is an important metric for hoteliers to track because it provides insight into how well a hotel is performing compared to its competitors. If a hotel’s ARPAR is lower than its competitors’, it may indicate that the hotel is not pricing its rooms correctly or that it is not generating enough revenue from other sources such as food and beverage sales.
NOI (Net Operating Income)
There are a variety of metrics that hoteliers can use to track the performance of their property. Net Operating Income (NOI) is particularly important to focus on . NOI measures if your hotel is making a profit or loss by taking into account all revenue and expenses, excluding taxes and interest payments.
To calculate NOI, simply take your hotel’s total revenue and subtract all operating expenses. This will give you a good indication of how profitable your property is.
NOI= Total revenue – Gross operating expenses
Operating expenses can include things like labor costs, utilities, and marketing expenses. It’s important to keep a close eye on these costs so that they don’t eat into your profits.
Once you have your NOI, you can start to look at ways to increase it. One way to do this is by increasing revenue. This can be done by raising room rates or increasing occupancy levels.
Another way to improve your NOI is by reducing operating expenses. This can be accomplished by cutting back on unnecessary costs or renegotiating contracts with suppliers.
By focusing on NOI, hoteliers can ensure that their property is as profitable as possible. This metric is a key indicator of a hotel’s success and should be closely monitored.
CPOR
CPOR, or Cost per Occupied Room measures the total cost of running a hotel, divided by the number of rooms that are occupied.
To calculate CPOR, simply take the total operating expenses for your property and divide it by the total number of rooms occupied.
CPOR= Gross operating expense/ Number of rooms sold
CPOR is an important metric to track because it can help you determine whether or not your hotel is operating efficiently. If your CPOR is high, it means that it is costing you more money to run your hotel than it should. This could be due to a number of factors, such as inefficient staff, high energy costs, or excessive maintenance costs.
By tracking your CPOR, you can identify areas where your hotel is not operating as efficiently as it could be. This information can then be used to make changes that will help reduce costs and improve profitability.
Takeaways
Hotel metrics are a valuable tool for hoteliers to track and improve their business performance. By understanding and tracking the key metrics that impact their business, hoteliers can make informed decisions that will help them drive revenue, improve profitability, and increase guest satisfaction.
Understanding hotel metrics gives the most accurate insights for measuring hotel performance and is a key to boosting hotel efficiency. By tracking key metrics, hoteliers can identify trends and areas of opportunity for their business. In addition through measuring, analyzing and optimizing hotels can make the right adjustments to ensure they are staying competitive and positively impact their establishment.
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About the author
Hi, I'm Tal Lavi, a hospitality enthusiast dedicated to transforming your guest experience to an unforgettable one. With a passion for crafting engaging narratives and deep insights into guest behavior, let me take you on a journey to the future of guest experience.