Setting KPI’s
Setting KPI's in the Accommodation Industry
It is not only important for hotel and motel managers to set KPI’s, it is also important that the KPI’s set are attainable and relevant to your property’s goals.
In this article, we’ll go through the KPI’s you should be measuring against your property performance, as well as, how to calculate them.
Nicholas Albertini
Marketing
What is a Key Performance Indicator (KPI)?
A key performance indicator (KPI) in the accommodation industry is a value or measure of your property’s performance in a particular section of your business. A well defined and attainable KPI gives your property a clear vision as well as allows you to compare your performance to similar properties in the industry. KPI’s identify the strengths and areas of improvement for your property.
Important KPI's in the Accommodation Industry
Average Daily Rate (ADR)
ADR = Room Revenue ➗ Occupied Rooms
ADR is a crucial KPI for financial performance. This calculation tells you the average daily rate of each occupied room. Finding the average revenue for your accommodation is important to assist with pricing and marketing for the future.
Occupancy Rate
Occupancy Rate = Total Number of Rooms Occupied ➗ Total Number of Rooms available ✖ 100
This calculation is a percentage of rooms occupied at any given time, whether it be daily, weekly, monthly or yearly. Occupancy rates are important for anticipated cash flow. The closer your occupancy rate is to 100%, the more efficient your property is operating.
Revenue Per Available Room (RevPAR)
RevPAR = Average Daily Rate ✖ Occupancy Rate or Total Revenue From Night ➗ Total Number of Rooms Available
This KPI determines the property’s ability to fill rooms available at an average rate. An increase in RevPAR usually indicates the average room rate or occupancy is increasing. This KPI determines how efficiently your properties fills rooms and in turn, determines your most busy season of the year.
Average Length of Stay (ALOS)
ALOS = Total Room Nights Occupied ➗ Number of Bookings
The calculation of a guest’s average length of stay is a measurement of the average nights stayed at your property per booking. This calculation is important to determine your most valuable guests as well as personalisation for future bookings. Furthermore, this calculation can be used to help determine pricing decisions.
Market Penetration Index (MPI)
MPI = Occupancy Rate % ➗ Market Occupancy % ✖ 100
MPI is a crucial KPI as it directly compares your property’s performance against industry competitors. If your property’s score is less than 100, your property is performing below average, whereas, if your score is above 100, your property is performing above the average. This is an important KPI to keep track of and ensure your property is competitive.
Online Reviews
Finally, reading and reviewing your own online reviews is crucial to property performance. Many guests trust online ratings and view them as a measure of your property’s performance. Thus, managing negative reviews and praising positive reviews regularly is critical to maintaining a good rating and maximising customer satisfaction.
Summary of Setting KPI's in the Accommodation Industry
In summary, KPI’s such as Average Daily Rates, Occupancy Rates, Revenue Per Available Room, Average Length of Stay, Market Penetration Index, and Online Reviews are important KPI’s your property should be reviewing regularly. Successful property managers will use these KPI results to assist them with crucial financial decisions, as well as, understanding where their property is positioned in the accommodation industry. These KPI’s will give you a foundation based on performance to make better financial and strategic decisions.
- Nicholas Albertini
- Accommodation Industry, accommodation management, Hotel marketing, Management Tips, Motel marketing, Setting KPI's
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