In the hospitality industry we have heard that “A revenue management program/system has the potential to increase revenue by 3 – 5%”. By revenue management system, we are talking about sophisticated and intelligent – and automated – software data analysis solutions.
While there has been plenty written about revenue management best practices as a discipline, very little has been written about how to measure whether specific revenue management strategies and the software tools that support them are effective revenue increasers.
Without this information and insight it becomes very difficult to identify precisely where improvements can be made and how.
In this blog post, we fill this gap by discussing various methods and approaches to figuring out if your revenue management practices (and software tools) are providing the benefit they promise.
Revenue Management Performance Measurement – Benchmarking
Typically, the key performance indicator that most hoteliers are trying to improve is RevPAR (Revenue Per Available Room). Occupancy and ADR (Average Daily Rate) are important measures to be sure, and some attention has been paid to profitability measures such as GOPPAR (Gross Operating Profit), but the primary objective is to increase RevPAR. RevPAR determines how much revenue you are generating from your primary asset, sleeping rooms.
It is relatively easy to calculate and measure RevPAR. The difficult part is tying revenue gains to a revenue management program/system. It is even more challenging to know which levers to pull (and when) to improve RevPAR.
As a start to understanding this challenge, you can look at the Smith Travel Research (STR) report, which reports on RevPAR and other metrics.
This report provides data that allows you to measure the performance of your property against your peers – that is, hotels in the same market and of similar size, quality, guest mix, and so on. Hotels in the same peer group are referred to as a “Comp Set”.
The STR report has become the de facto way to know how, historically, you stack up against your direct competitors and provides numerous important metric comparisons. A similar example exists in TravelCLICK’s “Demand360” product but the primary distinction is being able to look at future arrival dates.
