Revenue Management is the most important way to success in hospitality industry. Effectively managing the rates and availabilities will drive to success your property and revenue and reports will be most valuable resources for managing your rates while increasing your revenue.
Small accommodation properties don’t have much time and manpower while bigger ones have. And branded hotel’s knowledge is coming from well understanding these reports and interpret that. That reports will help you to make your decisions for positive outcomes.
What is the KPI?
Key Performance Indicator is defined how effectively a company achieving key business objectives.
1st – Occupancy Rate
This indicator defines the ratio of the number of occupied rooms to the total number of available rooms.
Occupancy Rate = Occupied Room / Available Room
With this ratio, you can create your own revenue management strategy.
2nd – Revenue Per Available Room (RevPar)
RevPar ratio defines the ratio of the room revenue to total available room count.
RevPar = Total Room Revenue / Available Room
Revpar does not include other revenues like restaurant, spa, etc. This ratio can be used for comparing your room revenue performance to equal other properties.
3rd – Average Daily Rate (ADR)
ADR defines average daily revenue per paid room.
ADR = Room Revenue / Rooms Sold
While calculating the ADR you should not include the available room count. With this ratio, you can get the how much money was brought in per room.
4th – Gross Operating Profit Per Available Room (GopPar)
GopPAR is one of the most commonly used KPIs for Revenue Management. And it is one of the most effective ways to measure hotel performance and make adjustments that best suit your goals.
GopPar = Gross Operation Profit / Available Room Count
5th – Net Revenuer Per Available Room (NrevPar)
NRevPar is similar to RevPar except that it distrubition costs, transaction fees, travel agency commissions etc. But this metric has a problem to calculate which is this commission and fees can be changed from a travel agency to another one. So, NRevPar is not an apple to apple comparison.
NRevPar = (Total Room Revenue – Distribution Costs) / Available Rooms
What should you do?
- Adopt long-term approaches rather than short-term approaches. Like quarters, seasons etc.
- Check your local tourism websites for information about your competitors.
- Don’t panic and decrease the rates when you have less demand of historically busy season. More guests don’t mean more revenue always. When you are decreasing the rates, you have to make sure your profit still greater according to demand.
- Make your own reports after a low demanded month and figure out what is causing that.
- Get your room reports every end of the day and compare it to your arrivals, departures and revenue for identifying the potential problems.
- Make your own reports for guest happiness. It should be not forgotten that, happy guests give high points to your online profiles.
You should always remember that none of big properties did not come to this point without these critiques and their knowledge comes from information. Make you own reports and use them smartly.