Measurement is key to continuous improvement. Here are the key metrics that you should consider measuring and working on.

1 – Occupancy (OCC)

Occupancy is a metric that indicates whether hotel rooms are being sold efficiently. Used with other metrics and not stand alone. Percentage of available rooms sold during a specified time period.

How to calculate: Divide occupied rooms by total available rooms to determine occupancy as a percentage.

Example:

  • Total rooms available = 200
  • Rooms occupied on a particular day = 190
  • Occupancy % = (190 / 200) x 100 = 95 %

2 – Average Daily Rate (ADR)

Incorporates both room rates and occupancy providing a good snapshot of performance. The average rate paid for the rooms sold for the day.

How to calculate: Divide total room revenue by the number of rooms sold.

Example:

  • Total room revenue for September = $2,500,000
  • Total room nights sold for September = 9000
  • ADR for September = $2,500,000/9000 = $277.77

3 – Revenue per Available Room (RevPAR)

An increase in RevPAR indicates that either occupancy and rates or both are rising. Compared to a similar time frame as it is a snapshot in time.

How to calculate: Divide total room revenue by the total number of rooms available.

Example:

  • Total room revenue for September = $2,500,000
  • Total room nights sold for September = 9,000
  • Total room nights available = 12,000
  • RevPAR for September = $2,500,000/12,000 = $208.33

4 – Total Revenue Per Available Room (TrevPAR)

A measure of total operating revenue per available room. Provides an overview of profitability of hotel taking all revenue centres into consideration.

How to calculate: Divide total revenue by total available rooms.

Example:

  • Total rooms available = 200 x 365 = 73,000
  • Total revenue of hotel = $ 9,000,000
  • TrevPAR = $ 9,000,000 / 73,000 = $ 123.29

5 – Gross Operating Profit per Available Room (GOP PAR)

Provides greater insight into actual performance of a hotel as it also factors in operational costs related with such revenues.

How to calculate: Divide Gross Operating Profit (GOP) by the number of available rooms in the hotel. (GOP is equal to total revenue less the total departmental and operating expenses).

Example:

  • Total rooms available = 200 x 365 = 73,000
  • Total revenue of hotel = $9,000,000
  • Total expenses of hotel = $6,450,000
  • GOP = $2,550,000
  • GOP PAR = $2,550,000 / 73,000 = $34.93

6 – RevPAR Index (RPI) or Revenue Generation Index (RGI)

Measures hotel’s RevPAR performance relative to competitor set. All being equal, a hotel’s RGI is 100, compared to competitor set. Also known as “fair share.”

How to calculate: Divide hotel RevPAR by its competitor set RevPAR and multiply by 100.

Example:

  • Subject hotel’s RevPAR = $75
  • Competitive set’s RevPAR = $60
  • RGI = 125 (ie. hotel has captured more than expected share)

7 – Average Rate Index (ARI)

Measures hotel’s ADR performance compared to competitor set. Helps decide whether to adjust rates to increase bookings or focus on lower occupancy but higher revenue.

How to calculate: Divide the subject hotel’s ADR by its competitor set ADR and multiply by 100.

Example:

  • Subject hotel’s ADR = $75
  • Competitive set’s ADR = $65
  • ARI = 115 (ie.hotel is performing better than comp set)

8 – Market Penetration Index (MPI)

Compares the hotel’s occupancy with that of the average occupancy of the hotel’s competitor set.

How to calculate: Divide subject hotel occupancy by its competitor set occupancy and multiply by 100.

Example:

  • Subject hotel’s Occupancy = 60%
  • Competitive set’s Occupancy = 65%
  • MPI = 92 (the hotel has captured less than potential)

9 – Average Length of Stay (ALOS)

Identifies the average length of stay of your guests. A higher ALOS is better for profitability as it reduces costs.

How to calculate: Divide the total occupied room nights by the total number of bookings.

Example:

  • Total rooms available = 200 x 365 = 73,000
  • Occupied rooms = 43,800
  • Number of bookings = 15,600
  • ALOS = 43,800/15,600 = 2.8

10 – Net revenue per available room (NRevPAR)

Measures net revenue generated per available room after deducting costs of distribution channels like OTAs, GDS etc Helps monitor distribution costs and channel mix.

How to calculate: Subtract the total distribution cost of rooms sold from total room revenue and divide by the total number of available rooms.

Example:

  • Total rooms available = 200 x 365 = 73,000
  • Total room revenue of hotel = $5,000,000
  • Total cost of distribution channels = $ 1,000,000
  • Net revenue after distribution costs = $ 4,000,000
  • NRevPAR = $4,000,000/ 73,000 = $54.79

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