KPIs in the Hotel Industry

Few industries are as fast-paced and demanding as hospitality, and maintaining a competitive advantage for your hotel business requires a keen understanding of the metrics that matter most. Key Performance Indicators, or KPIs, play a pivotal role in guiding any hotel or chain of hotels to succeed.

This blog will outline some of the most important KPIs for leaders of these organisations, helping you enhance guest experiences, boost revenue, and ensure long term profitability and growth.

Occupancy Rate

For hotels, occupancy rate is a critical metric. The occupancy rate of a hotel, bed and breakfast, or other overnight hospitality business, measures the percentage of available rooms which are booked during a period. Occupancy rate helps managers understand supply and demand for their rooms, allowing them to make informed decisions about pricing, marketing strategy and other essential aspects of running the business.

Occupancy rate = (Number of occupied rooms) ÷ (Total number of available rooms)

Revenue per Available Room (RevPAR)

Revenue per Available Room, usually abbreviated as RevPAR, helps leaders measure the efficiency of their establishment’s revenue generation. This KPI considers both the Occupancy Rate and Average Daily Rate (ADR) and provides a measure of revenue generated per available room, whether they are occupied or not. This is an essential KPI that helps businesses understand a hotel’s ability to fill its rooms, and how much revenue they are generating.

RevPAR = (Average Income per night) ÷ (Total number of rooms)

Average Daily Rate (ADR)

Average Daily Rate, or ADR, is a simple but essential metric that records the average price that a guest pays for a room in a hotel or establishment. This KPI is an important indicator of the value offered by a hotel’s pricing strategy. Making your ADR as high as possible, however, is not the only goal – this KPI must be balanced with high guest satisfaction to maintain competitiveness.

Average Daily Rate = (Room revenue earned) ÷ (Number of rooms sold)

Total Revenue per Available Room (TRevPAR)

Total Revenue per Available Room, or TRevPAR, measures overall revenue generated from all sources per available room. Whereas RevPAR focuses on room revenue, TRevPAR expands this to include food and drink, spa services, entertainment, etc. This metric, therefore, provides a more comprehensive view of a hotel’s revenue generation.

TRevPAR = (Total Revenue) ÷ (Total Available Rooms)

Gross Operating Profit Per Available Room (GOPPAR)

A holistic view of a hotel’s profitability is important, and Gross Operating Profit Per Available Room provides insights into both the revenue generated per room, as well as the costs involved in generating this revenue.

Gross Operating Profit Per Available Room = (Gross operating profit) ÷ (Total available rooms)

Customer Satisfaction Score (CSAT)

Customer satisfaction is essential for long term success in all hospitality, and the CSAT score can help you measure how satisfied your guests are with their experience. To calculate CSAT, you will need to issue customer satisfaction surveys that can generate scores on a scale (such as 1-10, with 1 being poorest and 10 being best). This can be used to create an average score, which can then be applied to the below formula.

CSAT SCORE (%) = ((Sum of all scores ÷ Sum of maximum possible scores) x 100)

How to select the right KPIs

This article is not an exhaustive list of KPIs relevant to the hotel industry; there are several others that can be tracked to measure performance, profitability, reputation, customer relationships and other important elements of running a hotel or chain of hotels.

If you are unsure which KPIs to track to get the most out of your business and the information within it, get in touch with the Genus team for advice on what to track in order to enable smarter business decisions.