4 performance indicators (metrics) for a more profitable hotel

How do you know which data to look for to see if your hotel is successful? In this article, we discuss four performance indicators (metrics) that you can use to increase your profitability and make impactful changes.   

Data is mighty interesting and useful for any entrepreneur if you know what to look for and how to interpret it. If you aren't comfortable with data and metrics, some standard calculations can tell you more about the success of your hotel. You want to make sure that your distribution channels and marketing activities are paying off. Please note: these calculations are based on the room price only and do not take other revenue-generating facets into account. 

Also interesting: Two reasons to convince you to load hotel allotment

 

1. Average Daily Rate (ADR) 

The Average Daily Rate shows the average price your guests pay for a room on a specific day or period. You calculate the ADR by dividing your total room revenue by the number of rooms you have sold (in the period you want to measure). This enables you to compare how your hotel is doing in comparison to previous years, or during specific periods. 

Calculation ADR =  
Total room revenue / Total number of rooms sold 

 

2. Occupancy rate 

Simple, but effective: the occupancy rate shows your room occupancy in a percentage at any given time. This reliable metric shows the difference in your occupancy in different peak periods or seasons. By calculating the occupancy, you can see in which periods you might need to step up your marketing efforts, or when you might need to adjust your prices. 

Calculation occupancy =  
Total number of occupied rooms / Total number of available rooms × 100, giving you a % 

 

Must read: 5 tips to drive more Direct bookings at your hotel website

 

3. Revenue Per Available Room (RevPAR) 

By calculating RevPAR you can plan room prices more efficiently and increase your revenue. Is your RevPAR high in a certain period? Then there is probably room to increase your room rates. Is the outcome lower than desired? Then it could indicate that (in that period) you might be asking for a little too much money for your rooms, but that doesn't always have to be the case. Before you lower your price, take a critical look at what the competition is doing and what the trends in the market are.    

Calculation RevPAR =  
Average Daily Rate × Occupancy  

 

4. Average Length of Stay (ALOS) 

The Average Length of Stay shows the average number of days guests stay in your hotel within a specified period. A higher ALOS is always better. The longer your guests occupy a room, the fewer costs you have and the less time you lose (on, for example, reception services). Also, guests who stay longer often spend more on the facilities the hotels offers. With a low ALOS, it is worth experimenting with deals or packages based on a minimum number of days (Minimum Length of Stay).  

Calculation ALOS =  

Number of nights booked / Total number of bookings 

 

You don't need a RMS or PMS to use the four metrics we've discussed in this article. Every hotel should look to use these metrics to help grow their business. These metrics not only give you insight in how your hotel is doing now compared to the past; they can also tell you if there is a positive trend going on. Compare, for example, a period of 30 days where the pandemic crisis had the most impact in your country versus the last 30 days. Do you see a trend? 

More info: What is a hotel RMS (Revenue Management)?

 

Our consultants have revenue management experience and have a lot of knowledge ooptimising your room sales. Would you like to talk about how you can boost your revenue or occupancy based on your data? SmartHOTEL customer or not, feel free to contact us to schedule an appointment with one of our consultants via support@smarthotel.nl! 

 

SmartHOTEL Channel Manager

 

About SmartHOTEL

For more than 16 years, SmartHOTEL has been helping hoteliers navigate the exciting world of online distribution. From our office based in the Netherlands, our team serves independent hotels, hostels and chains worldwide by providing channel management and tailored online distribution solutions. A lot has changed over the last years, but our goal remains the same: simply connect hotels to the world. For any questions regarding our services, please contact us at sales@smarthotel.nl or call +31 (0)182 75 11 18. 

 

By Marijke Remmelzwaan | June 11, 2020

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