Capacity-oriented KPIs have become the norm for performance evaluation in the hotel industry. These metrics are straightforward to measure, and the assumption that there is a direct link to revenue makes them appealing to hotel managers and asset owners.
NB: This is an article from Demand Calendar
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However, we examine how this focus can compromise customer service, strain staff, and lead to financial short-sightedness. Additionally, we will discuss the benefits of adopting a more balanced approach that includes customer-centric KPIs, ultimately fostering sustainable success in the hotel industry.
Ease of Measurement
One of the primary reasons hotels focus on capacity-driven KPIs is their simplicity. Metrics like occupancy percentage are straightforward to calculate and provide precise, quantifiable data. This simplicity allows for quick assessments of performance, facilitating decision-making processes. The numerical nature of these KPIs also makes it easy to communicate to stakeholders, such as investors and board members, who may not be intimately familiar with the hotel’s day-to-day operations. Any stakeholder assumes that it is better to have higher occupancy.
No Direct Revenue Correlation
Capacity-driven KPIs do not directly correlate with revenue. Hotel rooms are occupied, but nothing indicates the rate the hotel charged for the rooms. However, hoteliers assume that higher occupancy indicates better financial performance.
Adverse Effects on Customer Service
Prioritizing Quantity Over Quality
An obsession with occupancy rates often leads hotels to prioritize quantity over quality, with significant repercussions for customer service. To maximize occupancy, hotels may resort to overbooking, a common practice intended to compensate for expected cancellations and no-shows. While this strategy might boost short-term revenue, it can lead to several adverse outcomes:
- Overbooking and Rushed Services: When hotels overbook, they often face situations where they don’t have enough rooms to accommodate all guests. This results in last-minute relocations, causing inconvenience and frustration for guests. Additionally, staff may rush through services to handle the increased number of check-ins and check-outs, leading to errors and reduced service quality.
- Guest Experiences: The impact on guest experiences can be profound. Long check-in times due to overbooked rooms can cause irritation and dissatisfaction. Overextended staff, trying to manage the higher volume of guests, may become less attentive and more prone to mistakes. This diminishes the personal touch that is crucial in the hospitality industry. For instance, guests may overlook their special requests or delay receiving room service and other amenities.
Compromised Guest Experience
A relentless focus on room turnover can also lead to neglect in maintaining the quality and personalization that guests expect. When the primary goal is to fill rooms as quickly as possible, several aspects of the guest experience can suffer:
