Hoteliers the world over predict another year of solid demand and increased occupancy. Despite moderate growth in supply, the industry appears to be in rude health. But it remains a highly competitive market, and, in a sector as cyclical as ours, the good times don’t last forever.
NB: This is an article from OTAInsight
We’re ever optimistic. But there’s no room for complacency. To weather any future storms – and just to do as well as you possibly can – is it time for an audit of your KPIs?
We talk to revenue managers day in, day out, and many OTA staffers have academic and professional backgrounds in hoteliership. So we’ve put our heads together to come up with this list of crucial KPIs for success.
Starting with your actual results and moving through to the highly analytical environment of forward-looking trends, we outline the WHAT, the specifics you should LOOK FOR and the WHY of each cluster of related KPIs.
Many will be familiar to you but are they all in your playbook?
Actual results
Reviewing your actual results is all about decrypting the past to assess your momentum and identify opportunities for improvement.
# Core indicators
WHAT: Tactics change but the fundamental metrics by which you measure your success don’t. Let’s remind ourselves what these are:
- Occupancy
- ADR (average daily rate)
- RevPAR (revenue per available room) or room revenue, equal to ADR x occupancy
- Net RevPAR, i.e. RevPAR net of distribution costs (OTA commissions, distribution fees, etc.)
- F&B (food and beverages) revenue
- Total revenue
LOOK FOR: Variation compared to budget and to last year for each metric
WHY: To identify the “top” and “flop” contributors in your hotel portfolio by property, brand, market, city etc. so you can implement support and optimisation strategies accordingly
# Competitive environment
WHAT: Available through industry-specific bureaux, review market share index information for your hotel against your compset, specifically:
- Occupancy, according to the MPI (market penetration index)
- ADR, according to the ARI (average rate index)
- RevPAR, according to RGI (revenue generation index)
LOOK FOR: Variation compared to last year for aggregated results for each measure and whether you’re above or below the 100% mark
WHY: To identify the “top” and “flop” contributors in your regional hotels so you can implement support and optimisation strategies accordingly
ALSO REVIEW: Industry trends, not just of your compset but of the market or sub-segment on a chain-scale, looking at occupancy, ADR, RevPAR and variation to last year and changes to hotel supply (openings, conversions, renovations, etc.)
Getting granular…
# Segmentation details
WHAT: Review the dominant segments in your mix of room nights, such as contracted individuals, business groups, etc.
LOOK FOR: Variation in revenue vs target and last year’s performance for each segment. To go a step further, explore how much of this variation is linked with changes in:
- Volume – overall number of rooms sold
- Price – increases or decreases applied in your price grid
- Segment mix – business shifting from one segment to another
WHY: To identify the key segments in your business mix as well as those currently driving your revenue change; also to assess the impact of price changes vs segment mix adjustments and understand what is most profitable for your properties
# Channel details
WHAT: Review the dominant channels in the mix of room nights, such as brand.com, booking.com, GDS, etc.
LOOK FOR: As with segmentation but instead for channel; also compare direct and indirect web traffic for relative share and revenue trends
WHY: To identify the key channels driving revenue change
# Guest details
WHAT: Retrievable from your PMS, guest information provides a rich source of actionable insight if well presented and accurate
LOOK FOR: Data on your feeder market, also known as point of sale; also consider your loyalty programme contribution to revenue and variation to last year
WHY: To identify dominant source markets in the mix and the key markets driving revenue change
Forward-looking trends
By reviewing the future, you can alert yourself early enough to prioritise action, provide support or push for further optimisation.
# Full-year outlook
WHAT: Key considerations at the start of the year
LOOK FOR: Information on:
- Events and your calendar – assess the impact on the market in terms of number of full business weeks, and key citywide conferences and events etc.
- Seasonality – business or leisure months, traditional need periods
- Expected trends by month based on budget estimates and rooms OTB (on-the-books) pace
WHY: To help shape your general plans before you refine them later down the line
# Three-month forecast
WHAT: Your forecast for the next three months, focusing on:
- Occupancy
- ADR
- RevPAR
- Other revenues
LOOK FOR: Variation compared to budget, to last year’s actual results and forecast and to last year’s forecast for each metric
WHY: To identify the “top” and “flop” contributors in your hotel portfolio by property, brand, market, city etc. so you can refine your support and optimisation strategies accordingly
Getting granular…
# On-the-books by segment
WHAT: As above, review the dominant segments in your mix of room nights
LOOK FOR: These metrics:
- OTB/delay vs same point in time last year in volume and revenue, split by key segments
- Split of advance/delay coming from volume, price and change in segment mix
- Compared forecast and OTB analysis – is your forecast too conservative or ambitious? By percentage of forecast already OTB by segment; and business left to pick-up vs pick-up achieved last year
WHY: To refine your efforts by segment
# On-the-books by channel
WHAT: As above, review the dominant channels in the mix of room nights
LOOK FOR: These metrics:
- OTB advance/delay vs same point in time last year in volume and revenue, split by key channels
- Comparison of direct and indirect web traffic for OTB trends – share of mix and advance/delay vs last year
- POS – advance/delay in key feeder markets
WHY: To refine your efforts by channel
ALSO REVIEW: Whether you’re in parity
# Price positioning
WHAT: A view of your price positioning vs competitors on public segments and channels for future dates using a rate shopper
LOOK FOR: Whether your advertised BAR prices are above, below or on a par with the median price of your compset; drill down for more data on specific competitors
WHY: To adjust your strategy, marketing offers and – if necessary – prices (up or down)
