The Important Hotel Performance Metrics and Industry Benchmarks

Think what hotel performance metrics do you use? Once you dive below the
image of beautiful rooms, guest services and great experiences, hotels exist to
achieve operating profits and capital gains for their owners. Its easy for independent
hoteliers and owner-operator hoteliers to get sucked into a daily operational vortex,
versus strategy by data.

Life morphs from working on the business to working in the business.You must
never forget about hotel performance metrics. Heres hotel performance metrics you
can use.
You can also download the Hotel Performance Metrics E-Book.
Occupancy (OCC)
Its the simplest hotel performance metric. Occupancy is a percentage of the
available rooms occupied for a specific period (i.e. annual, quarterly, monthly, daily or
summer).
Occupancy % = Paid Rooms Occupied / Rooms Available
OR
Occupancy % =

Revenue per Available Room

ADR

EG.
Occupancy % =

50,000 / 100,000

50%

OCC

Revenue per Available Room (RevPar)

The Hotel Performance Metric of RevPar measures hotel utilisation or the average
daily rooms revenue generated per available room. This metric doesnt account for
other revenue centres such as F&B, retail, conferencing and many ore. Hoteliers
who use RevPar often compare their results with other hotels, but the authenticity
and accuracy of comparative data may be questionable. As a hotel performance
metric, it differs by market, segment and timing and is a time-based snapshot of your
hotel performance.
RevPar = Total Room Revenue / Total Rooms Available
OR
RevPar = Occupancy %

X Average Daily Rate (ADR)

EG.

RevPar = $ 5,000,000 / 100,000

= $50 RevPar

Average Daily Rate (ADR)

Hotel ADR simply measures the average price paid per room. This hotel
performance metric assesses the total guest room revenue for a specific period
versus the total amount of room revenue paid and occupied hotel rooms within the
same timeframe. It solely focuses on paid rooms and might sometimes be labelled
the Average Room Rate.
ADR = Rooms Revenue / Paid Rooms Occupied
OR
ADR = Revenue per Available Room

OCC %

EG.
ADR =

Hotel Supply & Demand

50 / 0.50

$100 ADR

These hotel performance metric figures identify the average number of room nights
available and used in a specific market. A resort hotelier in Saas Fee, Switzerland
may research (via online research and tourism office statistics) the total number of
rooms available in town and the total rooms used over a period. Depending on data
available, a hotelier can then measure their performance against local
market average supply and demand, and benchmark direct competitors (eg. other 3
star hotels within a 10km radius).
Market OCC = Rooms Night Demand / Available Room Nights

Services like HotStats offer hotel performance metrics data

Where available, serious hotel performance metrics data can help hoteliers compare
their performance to their competitive market set. Depending on the segment, that
might be the local, regional or even national market. Many tourism offices and
government bodies require reporting of room nights (for tourism related taxes and
market insights), which allows hoteliers to determine market levels. Finding
competitor RevPar and ADR hotel performance metrics is difficult, but services like
HotStats exist.
Market Penetration Index (MPI)
This hotel performance metric measures how your hotels occupancy compares to a
competitive set. This measures your piece of the pie. Naturally, every hotelier wants

to increase their market share and win more business. Ensure you have accurately
determined the competitive set. Results above 1 indicate above market performance.
MPI = Hotel Occupancy % / Market Occupancy %
EG.
MPI =

50% / 40%

1.25

MPI

Average Rate Index (ARI)

This hotel performance metric measures how your hotels average daily rate
compares to a competitive set. An ADR Index of 100 means you have a fair share of
the competitive sets ADR performance. Like MPI but depending on your hotels
business goals, you would typically aim for ARI above 1. For our hypothetical hotel,
the total room revenue by market is unknown. Without data, you cant calculate the
ARI measures.
ARI = Your Hotels ADR

Hotel Market ADR

Revenue Generation Index (RGI)

This hotel performance metric measures how your hotels RevPar compares to their
competitive set. Most of the international and branded hotel operators use the RGI
hotel performance metric obsessively. Enhancing the RGI is often a great way to
maximise hotel profitability. RGI results should exceed 1 (a 100 base index)
otherwise hotels in your competitive set are converting more business than you. If
so, look at your daily RGI results and analyse trends, benchmark competitors and
revenue management tactics.
RGI = Your Hotels RevPar / Hotel Market RevPar