Week 5 Hotel Revenue Management -Hotel External Metrics

hotel EXternal metrics

index

Map

introduction

STR Reports

Revenue Generation Index (RGI)

Choose the Appropriate Compset

Vs

interpret your STR Report

Market Penetration Index (MPI)

TEAM

conclusion

Average Rate Index (ARI)

NUMBERS

01

introduction

introduction

It is more critical than ever that hotels closely track their KPIs and use that knowledge to improve their operations and maximize profitability as emerging innovations give the hospitality industry new ways to quantify and optimize its performance.

introduction

On the one side, emerging innovations allow hotel efficiency to be calculated in ways that were previously beyond our reach. On the other hand, a number of essential KPIs exist, which are also key measures of how lucrative a property really is.

02

Revenue Generation Index (RGI)

Revenue Generation Index (RGI)

RGI is an acronym for Revenue Generation Index. Another name for it is RevPAR Index and is one of the various key performance indicators (KPI) used by hoteliers to monitor progress. An RGI greater than 100 reflects more than the predicted share of the RevPAR output of the aggregated group. Conversely, an RGI below 100 represents less than the predicted share of the RevPAR success of the aggregate group.

Revenue Generation Index (RGI)

How to measure the RGI for your hotel To measure the RGI of your hotel, here's what you need to do. 1. Make a decision on the period that you will be analyzing which can be weekly, monthly or yearly. 2. Calculate the RevPAR for your own hotel. 3. Calculate the RevPAR of the local market. For this reason, you can use a rate shopper's help. 4. Divide the RevPAR for your hotel with the RevPAR for the local market. 5. The multiply this number by 100. RGI = (Your Hotel RevPAR / Local market RevPAR) * 100

Revenue Generation Index (RGI) example

Hotel La Mada has a REVPAR of $50, and the competitive set RevPAR is $50, Therefore, to calculate RGI; RGI = (Your Hotel RevPAR / Local market RevPAR) * 100 RGI= (50/50)*100= 100 Hotel La Mada’s RGI is 100 Assuming the hotel’s REVPAR is $60 and the competitive set REVPAR is $50, The RGI will be; (60/50)*100 RGI= 120. That means that the hotel is doing well as it has more than its expected share. Assuming that the REVPAR is $40 and the competitive set REVPAR is $50, The RGI will be; (40/50)*100 RGI= 80 That means that the hotel is not doing well as it has less than its expected share.

03

Market Penetration Index(MPI)

Market Penetration Index (MPI)

The MPI, also referred to as an Occupancy Index, is a key comparative metric from the Smith Travel Accommodations Report, one of the industry's most important reports. The majority of hoteliers refer to is the "STR Report." MPI gives a comparison of the market share of your hotel in your market to that of your competition, showing you an overview of your share of the total occupancy rate of the market.

Market Penetration Index (MPI)

This is calculated by dividing your hotel’s occupancy rate by that of your competitor set and multiplying the result with 100. Any number below 100 would indicate that you are not getting your fair share of the demand of your market and any number over 100 implies that you are doing an exceptional job and potentially stealing business from your competition. MPI= Hotel Occupancy % / Market Occupancy %

Market Penetration Index (MPI) example

A hotel’s occupancy is 80% and that of competitive set is also 80%. To calculate MPI of the hotel; MPI= Hotel Occupancy % / Market Occupancy % (80%/80%)*100 MPI= 100 Assuming the hotel’s occupancy is 96% and competitive set is also 80%. To calculate MPI of the hotel; MPI= Hotel Occupancy % / Market Occupancy % (96%/80%)*100 MPI=120 That means that the hotel is doing well as it has more than its expected share. Assuming the hotel’s occupancy is 64% and competitive set is also 80%. MPI= Hotel Occupancy % / Market Occupancy % (64%/80%)*100 MPI=80 That means that the hotel is not doing well as it has less than its expected share.

04

Average Rate index (ARi)

Average Rate Index (ARI)

This performance metric for a hotel calculates how the average daily rate for a hotel compares to a competitive set. ARI is calculated by dividing your hotel's ADR by the ADR of your competitive set and multiplying the outcome by 100.

Average Rate Index (ARI)

The principle of fair share analysis is just like MPI, where any number below 100 implies bad results and anything over 100 is exceptional. This metric can also be used on STR reports that are daily, weekly and monthly. ARI = Your ADR ÷ Your Comp Set’s ADR

Average Daily Rate (ADR) example

A hotel’s ADR is $50 and the competitive set ADR is $50. To calculate ARI= ARI = (Your ADR ÷ Your Comp Set’s ADR)*100 ($50/$50)*100 ARI=100 Assuming the hotel’s ADR is $60 and competitive set is also $50; ARI= ($60/$50)*100 ARI=120 That means that the hotel is doing well as it has more than its expected share. Assuming the hotel’s ADR is $40 and competitive set is also $50; ARI= ($40/$50)*100 ARI=80 That means that the hotel is not doing well as it has less than its expected share. Also, ARI can be calculated by the formula is: ARI = Your ADR / Competitors average ADR A rate greater than 1 means that the overall price of your hotel is higher than that of your competitors. While a rate below 1 means you're priced cheaper. This helps in knowing how to price your hotel in comparison to your competitors.

05

STR Reports

STR Reports

• The STR report, created by the hotel management analytics company Smith Travel Analysis, is a benchmarking tool that measures the efficiency of your hotel against a series of similar hotels.
• STR reports should not be mistaken for hotel star ratings, since they enable us to consider an asset's financial performance rather than guest opinion.

STR Reports

If you have read a STR report, you will apply the understanding of the compset hotel markets and market trends to the strategy of your own hotel, which will assist you reach your revenue and occupancy targets. The report is normally issued every Tuesday and is presented in a digital format, although reports can also be obtained weekly or annually. Hoteliers must send performance data (such as daily occupancy and ADR) to Smith Travel Research in order to obtain the STR report, which then compiles all of the data they receive into the professionally summarized STR reports.

STR Reports

To present performance data, the STR report uses a number of metrics. Here are a couple of the key words you can use in the report: • Occupancy = Rooms Occupied / Total Number of Rooms. • RevPAR (Revenue per Available Room) = Total Revenue / Total Number of Rooms. • ADR (Average Daily Rate) = Total Revenue / Number of Rooms Sold.

Choose the Appropriate Compset

A compset that most closely resembles your type of hotel should be picked. 3 to 5 hotels with the following features should be used in a good compset: • Situated in the same geographical region (hotels located in very remote areas or certain airport hotels dealing with different markets may be exceptions) • Selling related rates • Providing related amenities • Targeting the same kind of customers (an extended-stay hotel, for example, would prefer to have other extended-stay hotels)

How to interpret your STR Report

Check for trends The report will show REVPAR, ADR and Occupancy of your hotel and that of your competitors for the specified period. Compare it to last year and attempt to draw conclusions Compared to last year, looking at the percent change will also offer insight into your results. In the study, take thorough notes and track patterns over time. It is recommended that you write a lot of notes about your thoughts and explanations while you review your STR report.

The "what" is shown by STR and the "why" is shown by business intelligence.

STR reports are so common for a reason, but it's important to note that they don't always say the whole story. In order to better understand the details generated by a STR report, a revenue manager should have more resources in his or her toolbox to analyze results, such as the business intelligence system and rate shoppers.

questions

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Resources

• https://xotelsmarketing.wordpress.com/2016/05/12/874/
• http://whiteskyhospitality.co.uk/top-10-revenue-management-metrics-for-your-hotel/
• https://guidingmetrics.com/content/hotel-industrys-14-most-critical-metrics/

THANK YOU!