Revenue Management is a systematic approach to identifying the drivers and impediments to revenue, rigorously measuring them, and then pulling the economic levers that will optimize marketing ROI and top line growth.
What are the Primary Key Performance Indicators (KPI's) for Revenue Management?
Internal KPIs (Rooms) RevPAR: Revenue per Available Room: Rooms Revenue / Total Rooms in Hotel Occupancy %: Occupied Rooms / Total Rooms in Hotel Average Daily Rate: Rooms Revenue / Total Sold Rooms External KPIs (Rooms) RGI: Revenue Generation Index: Hotel RevPAR / Competitive Set RevPAR MPI: Market Penetration Index: Hotel Occupancy % / Competitive Set Occupancy % ARI: Average Rate Index: Hotel Average Rate / Competitive Set Average Rate
What metrics are used to measure Food & Beverage (F&B) Revenue Management?
RevPASH: Revenue per Available Seating Hour
Calculation: F&B Revenue / (No. of Restaurant Seats x No. of Opening Hours)*
*Assumes average mealtime of one hour. This should be modified according to guest dining patterns and trends.
This metric can be used in Bars.
A secondary metric of space utilisation and Average Spend per Guest are also used.
What metrics are used to measure Events/Conferencing Revenue Management?
RevPASM: Revenue per Available square metre of sellable Events/Conferencing space.
Calculation: Events/Conference Revenue / (number of square meters of sellable space x 3)
*This assumes three "sellable" periods per day, i.e. morning, afternoon and evening.
What metrics are used to measure Spa Revenue Management?
RevPATM: Spa Revenue per Available Treatment Period
Calculation: Spa Treatment Revenue / (Number of Treatment Periods per day x Number of Treatment Rooms)
What does the term "Distribution" refer to?
Distribution is the term used to describe Where pricing and inventory are made available for guests to book, as well as the channel by which the booking is made. Examples of channels are Voice Channel (Hotel Reservations office or Centralised Reservations Office handling telephone calls), Hotel Internet Booking Engine (Hotel website booking tool), GDS (Global Distribution System, such as Sabre, Galileo, Worldspan and Amadeus), OTA (Online Travel Agent, such as expedia.com , hotels.com and booking.com).
What is the GDS?
The GDS is the collective term given to the four Global Distribution System's which were originally created by the airline industry. These systems are now independent of the airline industry and are the primary booking tool by travel agents around the world. Travel Agents use the GDS to book air, hotel, train, cruise and car rental.
What is the difference between RevPAR and RevPOR?
RevPAR relates to Room Revenue only, whereas RevPOR (Revenue per Occupied Room) includes Room and other revenues.
RevPAR is subject to seasonality, whereas RevPOR should remain largely static over time if guest send is being maximised. This can be seen by removing the Rooms revenue element.
How should Complimentary Rooms be treated when analysing Revenue Management metrics?
Usually, complimentary rooms are excluded from calculations, however Best Practice suggests that complimentary rooms should be counted as an occupied room at a daily rate of zero. This ensures that other cost associated metrics are not distorted by complimentary rooms.
How should house Use Rooms be treated when analysing Revenue Management metrics?
House Use rooms are bedrooms occupied by hotel employees for operational reasons. Examples of this could be a bedroom occupied by Hotel IT employees whilst performing overnight systems maintenance.
How are Service Charges and Taxes handled when analysing Revenue Management metrics?
Service Charges and Government or Regional taxes and levies should always be excluded from all calculations.
When should Minimum Length of Stay tactics be used?
Minimum Length of Stay (MLS) tactics are used to filter reservations searches. Imposing a MLS2 means that the hotel only wishes to accept reservations of at least two nights in duration. This prevents individual nights from selling out too quickly over high demand periods. It is a more efficient tactic than simply waiting for the night to sell out before imposing a "House Closed" tactic; this typically has a detrimental effect on should nights before and after peak nights.
How should a hotel select a "Competitive Set"?
The Competitive Set is used as a collective benchmark against which a hotel can measure historical performance. The set should comprise of 5 - 7 hotels that generally appeal to the same target audience. The set very often share a similar geographical location, but this is not always the case particularly when selecting a set for Conference/Events facilities or resort destinations.