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KPIs (Key Performance Indicators) allow the performance of companies to be measured. A KPI is a variable whose value reflects the performance of a company. Based on KPIs, management assesses results and compares them over time. New objectives can then be set based on these results in any form.
Most commonly used hotel KPIs
A number of standard KPIs are well-established in the hotel industry. They are essential components for revenue management in guest accommodations. The below indicators should be recognized by every hotel.
Occupancy Rate
The occupancy rate indicates the percentage of booked rooms over a specific period. We are talking about occupied rooms, and therefore, there is limited connection to financial data. Rooms occupied by 'giveaways' are also counted.
Average Daily Rate (ADR)
The Average Daily Rate is the average room price per night for an accommodation over a certain period. Generally, daily revenue is divided by the number of booked rooms.
RevPAR
The previous KPIs (ADR and occupancy rate) are in many ways opposites. A high ADR can be achieved by raising prices, which could reduce occupancy. Conversely, a lower price may lead to a higher occupancy but a lower average revenue per booked room.
RevPAR stands for Revenue Per Available Room and essentially combines these two earlier KPIs. It can be calculated in two ways:
- RevPAR = ADR * Occupancy Rate
- RevPAR = Total Available Rooms / Daily Revenue
Other KPIs
In addition to these three standard KPIs, other performance indicators can be used to record the results of an accommodation. Consider:
- Review Score
- Service Costs per Room
- Time Spent per Guest
- etc.
What should a KPI meet?
An overload of information can be counterproductive; it is essential to monitor a select amount of data and set corresponding goals. Strategically and visionarily, KPIs must align. Additionally, an action should be able to be tied to them: if data is at risk of going red, you need to know immediately what to do and how to turn it back to a more positive result. Check if a KPI meets the following requirements:
- Feasible and realistic
- Immediate intervention possible
- Reliable and accurate measurement
Regularly evaluate
If something changes in the market or your business vision, KPIs will also change. It is common to periodically review and adjust them as necessary.
