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Numbers tell everything: key hospitality metrics
Which indicators of the hotel industry should be monitored? What do these figures mean and how to operate them, making profitability grow from year to year?
The main hotel performance ratios are just six. They are used to measure efficiency and manage sales. These figures give a comprehensive indication of how effective your strategy is, in other words, whether you actually run the property.

What are these numbers and why are they so important?

Regular assessment of this data gives a full picture of the current situation in your company. And in conjunction with the study of competitors, it allows you to assess the position in the market as well as the need to adjust positioning and selling strategies.

Key Performance Indicators (or KPIs) for accommodation facilities:

  • Room Revenue — income from rooms sold.
  • Occupancy — a real number of rooms occupied.
  • ADR (Average Daily Rate) — the average room rate per night.
  • RevPAR — revenue per available room. 
  • Double Occupancy — the average number of guests staying in one room.\
  • RevPAC — revenue from each guest per day/week/month/year. Includes earnings from accommodation and other services sold.

Each metric is important in hospitality, but taken separately doesn’t reflect the whole picture. These ratios should be viewed only in dynamics, in comparison with other figures, taking into account seasonality, market situation, and other factors.

Successful hoteliers are constantly looking for tools to optimize costs and increase cash flow. The secret to revenue management success is a pricing strategy for selling the inventory, driving revenue growth. But don't limit your strategy by accommodations only — other services play a huge role in generating income.

Let's consider each indicator in more detail: what it means, how to calculate it, its role in the overall statistics, and how to influence it.


Room Revenue — income from rooms sold

The first metric is Room Revenue or gross rental income for the billing period. This is the total proceeds from accommodations sold, excluding no-show fees, cancellation fees, all taxes, and incidental expenses.

OCC —a real number of rooms occupied

The indicator reflects how the property is loaded. Expressed as a percentage.

The formula:

ОСС = (Rooms Sold / Rooms Available) x100%

The indicator is influenced by many factors: seasonality, room rate, promotions, discounts, the segment of the audience you work for. This index allows you to conduct a retrospective analysis, identify the long-term effect of marketing activities on loading, adjusting your strategy, and draw conclusions for the future.


ADR — Average Daily Rate

The room rate is important, but actually, accommodation is rarely sold at a rate. There are always special offers, promotions, ups and downs in demand that affect the price.

ADR (Average Daily Rate) — the average daily cost of one room.  Calculated as the revenue from rooms sold over a certain period divided by the quantity of bookings sold for the period.

Calculation:

ADR = Room Revenue/Rooms Sold

What affects average daily rate:

  • Competitive environment. Few can afford to dictate prices in the market. You always have to focus on competitors and demand.
  • Seasonality. There are periods of high and low demand in any region, and the price of accommodation just can’t be the same throughout the year.
  • Marketing Activity. Special offers and promotions, work with loyalty, direct and prior bookings can affect the price both upward and downward.
  • Dynamic tariffs - price changes depending on the time of day / days of the week. Usually,  hotels use automatic pricing algorithms, but in retrospect, this is not always beneficial. Keep tracking how your rates form.
  • Inflation. The reason that speaks for itself.

In an ideal world, the ADR value should always rise over the same period in the past. If your occupancy doesn’t decrease, and your ADR is low, then you begin to sell accommodations cheaper and, most likely, work for a less solvent audience. Such tendencies must be noticed and neutralized at the earliest stages. The frequency of room selling and the depth of the booking affect the amount of the running cost. Don't let operating costs bankrupt you.


RevPAR — revenue per available room

RevPAR is the average revenue per one room. This metric shows proceeds from one room sale. RevPAR is calculated by dividing revenue from rooms sold to the general quantity of rooms in the property.

RevPar = Rooms Revenue / Rooms Available
The indicator can be increased in several classical ways: liquidity growth or marginality growth.<>br In other words:
  1. To sell a lot and cheap.
  2. To sell a few, but at a high price.

With the same RevPAR (revenue per available room), the profit is different in each case.

The first strategy is usually chosen by small accommodation facilities: hostels, guest houses, mini-hotels. More expensive ones try to operate according to the second strategy. 

However, the most successful of them can take the best of both strategies and sell a lot and at a higher price.

Double Occupancy — the average number of guests staying in one room

Shows the medium number of people per room. The rate is usually higher in family country hotels and lower in city ones serving business travelers.

This is an important index for predicting the number of services sold and operating costs. You can also rely on this indicator when planning the expansion — it allows you to understand rooms of which categories are currently lacking.

When analyzing, it’s important to remember that Double Occupancy decrease only shows changes in the segment of the target audience. Linking the reduction of the medium number of people living in a room directly with economic metrics is not correct.

RevPAC — revenue per guest

The next metric of the industry is revenue per guest. The indicator depends on the performance of each department because it includes income both from accommodations and all other services. That is how much money each guest brings to the hotel

Calculated as follows: the total earnings from the inventory sales (Room Revenue) and all additional services divided by the number of guests staying at the hotel for the period. 

This ratio is one of the main, a kind of a litmus test of your performance. It's not hard to guess that the higher the RevPAC, the better. And the better your staff knows how to show guests all the services of the hotel, the more developed the hotel's infrastructure, the more you can sell to each guest.

There are different types of accommodation: some of them get large benefits from additional services, while others don’t. But in any case, the sale of services is an important source of proceeds. By developing such service promotion, you increase profits regardless of the property type. That is why this indicator is most often used to assess the employees’ performance. But this is perhaps the most difficult indicator to work with.

Often the services marketing in the hotel is represented by poorly designed administrator script at the reception and printed catalogs, which are expensive, poorly updated, dubious, and rarely viewed by guests. And to sell services, you need to tell guests about them.

How to boost RevPAC

First of all, you need to clearly understand your target audience and what type of services it may require.

If your typical guest is a businessman, you can offer dry cleaning, express ironing of suits, food delivery, taxi services, rent of conference halls, and extended Internet access.

In the city hotel located in a tourist region, in addition to the hotel amenities, you can sell excursions, distribute tickets to popular tourist places: parks and attractions, local theaters, museums, etc. 

Country family hotels have an almost endless list of amenities offered. The main thing is to encourage guests to order your services.

According to statistics, only every fourth guest knows what services he can get at the hotel. While the remaining three out of four — do not. And in most cases, guests are too shy or just not interested in going or calling the front desk. Moreover, in some countries, the language barrier is traditionally added to these difficulties.

Satisfy Travel meets each of these challenges

A full list of paid and free services is accessible in the guest app. It’s very convenient to view & order any service and make payment for it online.

In a multilingual chat, the guest can contact the administration. The message will be automatically translated into the user's language and understood by both the guest and the staff.

In the application, the receptionist can contact any guest: write in a chat or send a push notification. Push notifications can be scheduled and sent to all guests. Use this opportunity to inform customers about promotions and news. So, you can, for example, manage the loading of the SPA or make an announcement of a new dish from the chef. 

In the web version of our tool, the administration sees all ordered services and controls their implementation.

These are not all Satisfy Travel features. Our solution is also able to manage staff tasks, work with guest loyalty, and has an in-app payment option.

More details about our product: How does Satisfy Travel work?

Increase your hotel's RevPAC

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