RevPAR is up 12% this quarter. Great news, right? Maybe. Or maybe you have no idea why it happened, which means you can’t replicate it. And when it drops next quarter, you won’t know how to fix it.
NB: This is an article from Direct Your Bookings
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Revenue, RevPAR, ADR, occupancy rates: these tell you if you’re winning or losing. They don’t tell you why. They’re lagging indicators. The scoreboard. The consequence, not the cause.
If a doctor only measured your fever without diagnosing the infection, you’d find another doctor. Yet most hotels manage their business exactly this way: obsessing over results while ignoring the factors that create those results.
This guide focuses on three leading indicators that directly influence revenue but rarely get measured. Not because they’re unimportant, but because they’re harder to track and less glamorous than the metrics you learned in hotel school.
Track these. Improve these. Watch your scoreboard change.
Why Hotels Focus on the Wrong Revenue Metrics
Traditional hotel performance metrics are everywhere. PMS systems calculate them automatically. Corporate demands them in weekly reports. Investors want to see them in quarterly reviews.
This creates a dangerous feedback loop: we measure what’s easy to measure, then convince ourselves those are the only revenue metrics that matter.
The problem compounds when hotels try to “improve RevPAR” directly. You can’t. RevPAR is an output. You can only improve the inputs that create RevPAR: how quickly you respond to inquiries, how many guests return, how well you convert interest into bookings.
Leading indicators require more work. They demand honest assessment. They force you to confront operational weaknesses you might prefer to ignore.
That’s exactly why they matter.
1. Returning Guest Rate
What it measures: The percentage of guests who book with you more than once.
How to calculate:
Returning Guest Rate = (Number of Repeat Guests / Total Guests) × 100
For a more sophisticated view, segment by time period:
12-Month Return Rate = (Guests who returned within 12 months / Total guests from 12 months ago) × 100
Why It Matters
Acquiring a new guest costs 5-7x more than converting someone who’s already stayed with you. This isn’t marketing theory. It’s operational reality.
Consider the full acquisition cost:
- Paid advertising (Google Ads, Meta, OTA commissions)
- Website hosting and optimization
- Content creation and SEO
- Email marketing platforms
- Sales team time and effort
Now consider the retention cost:
- Personalized email (essentially free)
- CRM system (already paying for it)
- Occasional targeted offer
For independent properties without loyalty programs to lean on, returning guest rate is your real loyalty metric. Corporate chains can mask poor guest relationships with points programs. You can’t. Your guests return because they actually want to, not because they’re chasing rewards.
This is your real LOYALTY, especially if you’re an independent property that can’t leverage those “discount” programs masked by loyalty programs.
