What revenue management KPIs should I look at?

Everything you need to know for successful revenue management at your hotel.

With so many factors impacting revenue management, the key is understanding how you can optimise and leverage them.

These are the revenue management KPIs you need to look at in order to inform your pricing strategy:

 

Occupancy rate:

ota-insight-occupancy-rate-formula

Best practice dictates that in order to increase your occupancy rate, you should:

  • Apply a minimum length of stay when you know that there will be a period of high demand followed by low demand. This will help you increase occupancy during the low period.
  • Apply a maximum length of stay when you know that you’ll be able to sell your rooms at higher rates. If a guest wants to stay beyond that period, you can charge them rack rates for the following nights, instead of allowing them to pay discounted rates.
  • Apply closed to arrival dates when demand is at its absolute peak because you expect to reach maximum occupancy through your guests who are staying over, rather than new arrivals.

Average daily rate (ADR):

Your ADR refers to the average income a paid room earns over a period of time, and it’s another key performance indicator that is regularly used to measure the success of a hotel. If you notice that your ADR is dipping, you need to experiment with pricing strategies and ways to upsell to boost this up. Try upselling guests extras, like a shuttle to the airport, or a ‘champagne breakfast’ package. You can also partner with local tour and activity operators and car rental businesses, and earn commission on each sale.

average-daily-rate-adr-formula-ota-insight

Revenue per available room (RevPAR):

Your RevPAR is another metric that’s key to indicating how well your hotel is performing. Without measuring it, you won’t have a benchmark from which to improve.

revpar-formula-ota-insight

If you see a decrease in RevPAR, here are some ways to get that number going in the right direction:

  • Reduce your reliance on OTAs. The commissions cut into your RevPAR and your occupancy might be up, but your revenue will be down in the long run.
  • Don’t heavily discount your rooms to get bookings. Instead, offer extras so that guests feel that they’re getting more value for money.
  • See if you can add more room types based on room attributes.

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