Running a lodging property, you look into Profits and Sales and strive to increase them. To run the business even more successfully, track some more metrics from this blog. They will help you understand what improvements you can make to achieve impressive results.
- Occupancy rate
- Average daily rate (ADR)
- Revenue per available room (RevPAR)
- Average length of stay (LOS)
- Gross operating profit (GOP)
- Gross operating profit per available room (GOP PAR)
- Market penetration index (MPI)
The number of rooms occupied by guests
Why calculate a hotel’s occupancy rate:
- It shows your hotel’s performance throughout the seasons
- It is a good KPI for the hotel’s marketing campaigns and promotions
- You can plan your future budgets and sales strategies based on the history of occupancy rates
How often to calculate a hotel’s occupancy rate: For statistics, calculate it as many times as you need: daily, weekly, monthly, or yearly. Don’t forget to measure the occupancy rates during the promotion periods and after starting advertising campaigns.
How to improve a hotel’s occupancy rate:
- Apply the length of stay (LOS) restrictions
- Run special offers and advertising campaigns
- Take part in OTA promotions to increase the visibility of your listings
The average price that guests pay for your rooms
Why calculate a hotel’s ADR:
- It identifies your property’s financial performance in different periods
- You can implement dynamic pricing based on how your ADR changes at different times: during low and peak seasons, weekends and weekdays, and local events
How often to calculate a hotel’s ADR: On any night or a period like a month or a year.
What decreases a hotel’s ADR:
- Lowering your room rates to stimulate demand or pricing below competitors
How to improve a hotel’s ADR:
- Offer room upgrades to guests
- Charge more for rooms with extra value like a better view or a larger area
Average room revenue per available room
Why calculate a hotel’s RevPAR: RevPAR shows if you charge too little or too much.
How often to calculate a hotel’s RevPAR: On any night or a period like a month or a year.
What decreases a hotel’s RevPAR:
- Cancelations as they decrease the occupancy rate
- High commission on online bookings as it reduces the ADR
- Overly low rates as they reduce the ADR
How to improve a hotel’s RevPAR:
- Adjust your price rates to demand: raise them when the demand is high and lower them when it goes down; use tools like Price Optimizer to automate the process
- Analyze the pricing strategies of your competitors to get many bookings at high rates
- Offer non-refundable rates to decrease the cancelation rate
The average number of nights that guests stay at your hotel
Why calculate a hotel’s LOS: The labor cost of a week-long stay rises significantly if guests check in and out every night. LOS helps you see if you can save on the room servicing and booking acquiring costs.
How often to calculate a hotel’s LOS: Usually, once a month or a year.
How to improve a hotel’s LOS:
- Set minimum length of stay restrictions
- Increase room rates for shorter stays
- Offer gifts or discounts for booking longer stays than they initially planned
Hotel revenue less operating cost
Why calculate a hotel’s GOP: It shows if your hotel earns more than it spends.
How often to calculate a hotel’s GOP: Usually, once a month or year.
What decreases a hotel’s GOP: High operating expenses.
Hotel revenue less operating cost divided by the total number of rooms
Why calculate a hotel’s GOP PAR:
- It considers all the hotel revenue streams: restaurant, extra services, etc.
- It shows how well you manage the revenue and operating costs
How often to calculate a hotel’s GOP PAR: Usually, once a month or year.
How to improve a hotel’s GOP PAR: Offer add-ons and packages to increase revenue per booking.
Hotel’s market share of occupancy when compared to competitors
Why calculate a hotel’s MPI:
- It gives an overview of your market position
- It allows you to evaluate how effective your marketing and pricing strategies are
How often to calculate a hotel’s MPI: Usually, once a month or a year.
What decreases a hotel’s MPI: Everything that decreases demand:
- Bad online reputation
- Ineffective pricing
- Poor hotel marketing
How to improve a hotel’s MPI:
- Offer better deals than your competitors
- Drive more bookings by promoting your offers
- Work on customer loyalty
How to interpret a hotel’s MPI:
- MPI less than 100 — your competitors got the most of the bookings
- MPI over 100 — your hotel has a fair share of the market
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