What are the keys to revenue management in hotel management?

Key performance indicators provide revenue managers and hotel owners with valuable information about the performance of their businesses and are a strategy for maximising revenue and financial results.

We know that Revenue Management in hotel management is the most efficient way of selling the right room to the right guest, at the right time, at the right price, through the right distribution channel.

Revenue management has 9 important keys. We call them KPI (Key Performance Indicator). The actual meaning is Key Performance Indicator. In fact, the word KPI is not only used for revenue management; Although it is also used in Marketing, Finance, Human Resources, IT, Guest experiences, it is mostly mentioned in Revenue issues.

KPIs in Revenue Management are as follows;

1. Occupancy

Occupancy rate refers to the number of occupied rooms in a hotel at any given time. It can be used to assess how efficiently a hotel is using the available space and can be used in combination with other metrics to maximize revenue. The occupancy rate is expressed as a percentage and is calculated as the number of rooms divided by the occupancy rate.

2. ADR (Average daily rate)

The average daily rate (Avarage Daily Rate) is an indicator that shows hotel management the average revenue per occupied paid room. It is calculated as room revenue divided by the number of rooms sold. It is one of the most useful revenue management KPIs and allows for comparison with other hotels in the immediate area or with similar properties.

3. RevPAR (Revenue per available room)

Revenue per available room (RevPAR) relates to the average amount of revenue generated per available room in a hotel, regardless of whether they are occupied or not. It can be calculated by dividing room revenue by the number of rooms available or by multiplying the average daily rate by the occupancy rate. This KPI is particularly useful for measuring the overall revenue generating performance of all rooms in a hotel.

4. RevPOR (All revenue from a full room)

Like the average daily rate, revenue per occupied room or RevPOR (Revenue per occupied room) only relates to revenue from rooms that are actually in use. RevPOR takes into account all the revenue from an occupied room, so things like room service and laundry service will also be included. It can be calculated by dividing the total revenue from occupied rooms by the number of occupied rooms…

5. GOPPAR (Gross operating profit in all rooms)

It looks at the gross operating profit on all rooms, regardless of whether they are occupied or not. GOPPAR (Gross operating profit per available room) can be calculated as gross operating profit divided by the total number of rooms available and is a solid indicator of overall operating performance across all revenue streams.

6. TRevPAR (Revenue per available room for the entire hotel)

Total revenue per available room or TRevPAR (Total revenue per available room) is a KPI that focuses on the amount of revenue generated per available room, regardless of whether the rooms are actually occupied. But unlike RevPAR, it includes all revenue generated from rooms, including money spent in the restaurant, bar or on room service. It can be calculated by dividing the total revenue by the number of rooms in the hotel.

7. NRevPAR (Revenue per available room)

Net revenue per available room or NRevPAR (Net Revenue Per Available Room) is another revenue management KPI that looks at the amount of revenue generated per available room. However, NRevPAR focuses on net revenue, meaning that the distribution costs associated with the sale of a room are first deducted from the room revenue, then this figure is divided by the number of rooms in the hotel. It can provide a more accurate picture of the actual revenue from rooms sold.

8. ARPA (Average revenue per account)

Average revenue per account or ARPA (Average Revenue Per Account) is a revenue management key performance indicator used to show the average amount of revenue generated per customer account over a given period. It is usually calculated on a monthly or annual basis, and the selected time period can easily show hotel owners the average revenue value of existing customers or the value of new customers. ARPA is calculated as monthly recurring revenue divided by the total number of accounts.

9. EBITDA (Earnings before interest, taxes, depreciation and amortization)

Earnings Before Interest, Tax, Depreciation and Amortization EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) is an increasingly important KPI. It is used to show the day-to-day operating profitability of a hotel after subtracting variables such as interest rates on financing, tax rates set by the government and different acquisition histories, as these factors can distort the results. It is therefore particularly useful when comparing the financial performance of businesses in different regions or sectors. It is calculated as total revenue minus all other expenses.

If requested, I will explain how all these indicators are calculated, what they do and how they work one by one in future articles.

May your indicators show high…

Here is the Turkish Version of the article which had publised on 26.11.2023 in Turizm Aktuel internet pages.



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