Get the know-how to harness your accommodation’s historical data for your revenue forecasts. Plus, use our Excel template to collect the necessary data without relying on a PMS for seamless reservations history analysis.
NB: This is an article from Smartpricing
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Understanding Historical Data and Its Impact on Revenue Strategy
At the heart of a thriving hospitality enterprise lies a treasure trove of data − your historical performance records. Offering insights into guest behaviours, booking patterns, and revenue streams, they are a critical asset for understanding the market dynamics and carving out a future-proof strategy.
Why should you care about historical data? It’s simple: knowledge is power. The insights derived from past performance are invaluable for predicting market behaviors and positioning your establishment ahead of the curve.
Getting Started with Data Collection
Your journey begins with earnings data, a reflection of your revenue generation. Dissecting earnings on a granular level − daily, if possible − allows for a nuanced understanding of revenue flows and occupancy patterns. Remember to record the revenue based on the date of service delivery, not the billing date, and report earnings separately for each room or apartment type.
For instance, a week-long stay booked at a daily rate generates revenue each day of the stay, not just at checkout. This daily tracking allows for a detailed analysis, essential for adjusting strategies in real-time.
Next, occupancy metrics. The occupancy rate, a straightforward yet crucial KPI, is the ratio of rooms sold to rooms available. It serves as a barometer for demand and is essential for gauging the success of your sales strategies.
KPIs: Transforming Raw Data into Actionable Insights
With the basic data on record, analyzing it by turning these figures into key performance indicators (KPIs) is your next move. These indices − Occupancy Rate, Average Daily Rate (ADR), and Revenue Per Available Room (RevPAR) − are the compass that guides your revenue management decisions.
The ADR reflects the average price at which rooms are sold, offering a benchmark against competitors. RevPAR, perhaps the most informative of all metrics, combines occupancy and ADR to provide a holistic view of your revenue efficiency. Both are calculated using straightforward formulas:
- ADR = Total Revenue / Number of Rooms Sold
- RevPAR = ADR x Occupancy Rate or Total Revenue / Total Available Rooms
Together, they enable a dynamic and responsive pricing strategy that can adapt to market demands.
Profitability: Beyond Revenue Metrics
However, profitability isn’t solely about revenue; it’s also about cost management. By tracking expenses alongside revenue, you get a more nuanced view of your hotel’s financial health. This is where metrics like CostPAR (Cost Per Available Room) and GopPAR (Gross Operating Profit Per Available Room) come into play.
CostPAR: Measuring Operational Efficiency
CostPAR, or Cost Per Available Room, offers insight into the average cost associated with each room per night. It’s calculated by dividing the total operational costs by the number of rooms available, regardless of whether they were sold. This metric highlights the financial burden each room carries, guiding you to make cost-effective operational decisions.
Calculating CostPAR is straightforward:
CostPAR = Total Operational Costs/ Number of Available Rooms
GopPAR: The Ultimate Profitability Index
GopPAR, or Gross Operating Profit Per Available Room, is the definitive gauge of your hotel’s financial performance. It represents the balance between revenue generation and cost management, reflecting the true profitability of your establishment.
To derive GopPAR, you subtract the CostPAR from your RevPAR, or you can calculate it by dividing the net operating income by the number of available rooms:
GopPAR = RevPAR − CostPAR
or GopPAR = Net Operating Income / Number of Available Rooms
This index is particularly powerful as it accounts for both the ability to generate revenue and the success in controlling costs, providing a comprehensive view of your hotel’s operational success.
By aiming to increase your GopPAR, you focus on what truly matters—maximizing profit.
Navigating Data Collection Without a PMS
Collecting this data manually can be complex, but it’s critical for the effective management of your hotel. To support you in this endeavor, we’ve developed an Excel template that simplifies the calculation of your hotel’s historical data. This tool makes it easy to transform raw data into actionable strategies.
Conclusion: Your Data, Your Future
With this guide and the accompanying Excel sheet, you have the power to turn historical data into predictive insights. You’ll not only enhance your hotel’s performance during peak seasons but also uncover opportunities to thrive during slower periods.
Download the Excel tool now and begin your journey toward data-driven decision-making that ensures enduring success for your hotel.