Hotel KPIs: Key Metrics for Measuring and Improving Hotel Performance

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It doesn’t matter if you have just stepped into the field of business or have been here for quite a long time, every sort of business needs to watch its performance regularly. This helps them to evaluate their success. Even the hotel industry is not unknown to the fact.

Hotel Key performance indicators are therefore used to determine the overall success levels of the business. They help hotels recognize their weak points and turn them into strong ones.

This article is all about Hotel KPIs and how these KPIs can help hotels measure and improve their overall performance.

What Are Key Performance Indicators (KPIs)?

A key performance indicator or KPI is a quantifiable measuring tool that is used to evaluate the performance of a business. Assessing and gauging KPIs in a business helps them keep a record of the business goals and helps them determine if they are following the right path towards their goals. It helps businesses achieve business goals.

These factors help them analyze their manufacturing processes which are then utilized to measure the success relative to a set of already decided goals or objectives of the organization.

KPIs are also important because they help you understand where you as an organization stands. It helps you set goals and gives you a deep insight into if you are making progress or not, if you are achieving your goals or not, and if you’re headed in the direction you want.

What Are Hotel Key Performance Indicators?

Key performance indicators for the hotel industry are tools or metrics that gauge the overall performance of a hotel. They monitor a particular area of hotel operations – or the property as a whole. These KPIs help them analyze the overall performance and help them achieve whatever goals they have designed for the hotel. They also provide them insights into the process and progress of the workers and tell if they are working according to the goals of the hotel or not. It tracks all those areas where improvement is required.

These KPIs assure clear visibility of the functionality and sustainability of your business within the hospitality landscape.

Important Hotel KPIs

We shall now divert our attention to the most important part of this article, the most important and the most common hotel KPIs used. We have mentioned the 5 most commonly used hotel KPIs that you need to focus on. These KPIs measure your hotel’s performance at various levels.

Hotel Occupancy Rate

Hotel occupancy rate is the most basic hotel KPI used for gauging hotel performance. This metric depicts the total number of rooms occupied out of the total rooms that are available in your hotel. You can analyze and measure this KPI daily, weekly, monthly, or yearly but it needs to be done regularly. This shows how well your hotel is performing and how often customers visit your hotel to stay.

Average Daily Rate (Hotel ADR)

ADR is another very useful KPI that measures the average price paid by a guest per room to stay on a specific day. This hotel KPI helps you evaluate the total revenue you generate from one room as compared to the total revenue you generate from all the rooms within the same timeframe.

Revenue Per Available Room (RevPAR)

Hotel RevPAR is a metric used to measure the hotel revenue that the rooms of your hotel have generated over some time. This hotel metric includes all the revenue generated from a room except for the revenue that comes from other sources like food and beverages, spa, laundry, room service, and tours.

EBITDA

This KPI is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization.

As the name implies, it is an essential KPI to monitor a company’s profitability of the operating business only.

It is calculated by subtracting the total expenses of your hotel before interest, tax, amortization, and depreciation, from the total revenue generated by your hotel including all the other services as well.

Total revenue and total bookings

Total revenue and total booking are a combination of two things. Total revenue is the estimate of the total earnings that have been made from reliable items and services. These include the rooms of your hotel, laundry, transportation, gym, spa, etc.

Whereas total bookings are the revenue you have generated from the number of bookings your hotel has received over some time from all your business channels.

Why are Hotel Key Performance Indicators important?

If you don’t measure it, you can’t improve it. This is the fundamental idea that applies to KPIs. The same goes for the hotel KPIs as well. No business wishes to be stuck in the same position for years and years. They wish to succeed and reach new heights over time. The KPIs for hotels help such businesses measure their performance to see if they are profiting from their activities or are incurring an irreversible loss. This helps them analyze if they need to improve and change their strategies.

Additionally, your business and your team will also get to know what areas need more improvement. You get to identify your strengths and weaknesses with the help of these hotel KPIs.

How to Choose the Right Hotel KPIs

When selecting the right hotel KPIs, consider the following factors:

Relevance:

Choose hotel KPIs that are relevant to your business goals.

Measurability:

Ensure that the hotel KPIs you choose can be accurately measured and tracked. Never go for KPIs that are intractable.

Actionability:

Pick hotel KPIs that can be acted upon, and that drive positive changes in the customer experience.

Alignment with business goals:

Make sure that the hotel KPIs align with the overall goals of the business.

Trending:

Select hotel KPIs that can be tracked over time, to understand trends and identify areas wherever more improvement is required.

You can follow the SMART criteria to select the right KPI for your hotel. You should choose the hotel management KPIs most suitable for your business. The ones that are specific, measurable, achievable, relevant, and timely (SMART) to your business.

How Can You Make Sure That Your Hotel Tracks Hotel KPIs?

When you introduce hotel KPI into your hotel business, you might face a few challenges with many different projects. Not everyone in your hotel management may know what hotel KPIs are, how to use them, and what benefits they provide.

For this purpose, you need to ensure that everyone on your team is on the same page. Everyone knows what hotel KPIs are. Arrange some educational sessions for your team to help them understand the basic concept and why hotels are very important for your hotel to move ahead in this field and how these KPIs when used efficiently can increase the overall productivity of your hotel.

You must use KPIs to get insights into what is required in your business and determine which areas need further improvement. You have to share this data with everyone on your team to enlighten them about the usefulness of these KPIs.

How To Improve Hotel KPIs

Whenever you imply some hotel KPIs in your business, you first need to examine what your weak points are. Identifying Real points will give you a benefit because this way, you know what areas need to be improved. So you can start by either asking yourselves a few questions or formulating a list of questions like

Is any of your hotel operations inefficient?
Are rate disparity cases costing your bookings?
Is inaccurate positioning in the demand and market of hotels scaring off potential guests?

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But by answering these questions, you will be able to know where the issues lie. This way, you will be able to work more closely with the concerned department. You can discuss the challenges or problems with your entire team and discuss everything to find the solution to your problems. ‍

How to Track Hotel KPIs with Dynamics 365?

To track hotel KPIs with Dynamics 365, you need to follow these simple steps:

Specify the required KPIs
Set up data collection
Create hotel KPIs in Dynamics 365
Visualize the hotel KPIs you wish to use
Monitor and adjust accordingly

FAQs

What are Key Performance Indicators?

Key Performance Indicators are estimates used to assess the performance of a business. KPIs can be quantitative or qualitative and are targets that can help you estimate your overall progress against your most strategic objectives. The main purpose of KPIs is to help businesses keep an eye on the overall performance and make amendments accordingly. These KPIs tell a business if they are performing well enough to achieve its goals tell them what its weak points are and how it can optimize its performance.

Why are key performance indicators so important?

KPIs are important because they help you understand where you as an organization stand. It helps you set goals and gives you a deep insight into if you are making progress or not, if you are achieving your goals or not, and if you’re headed in the direction you want.

What are the examples of Hotel KPIs?

Here are a few examples of hotel KPIs commonly used by hotels: