Frequently Asked Questions

FAQ

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.
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
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.
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.
RevPATM: Spa Revenue per Available Treatment Period
Calculation:
Spa Treatment Revenue / (Number of Treatment Periods per day x Number of Treatment Rooms)
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).
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.
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.
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.
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.
Service Charges and Government or Regional taxes and levies should always be excluded from all calculations.
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.
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.