Boost Your Profits and Guest Satisfaction: The 7 Essential KPIs for Owning a Successful Floating Hotel

As a seasoned entrepreneur, I've learned that key performance indicators (KPIs) are essential for tracking a business's success. In the floating hotel industry, there are seven KPIs that every owner must track to optimize their profit and guest satisfaction.

• Occupancy Rate: This KPI measures how many rooms are occupied in a floating hotel at any given time. In a growing industry, it's important to keep this rate at a healthy level to ensure optimal revenue.
• Average Daily Rate: This metric calculates the average amount of revenue generated per room in a 24-hour period. It's essential to increase this rate to make the most out of each room's profitability.

If you want to stay competitive in the floating hotel industry, understanding the importance of the remaining five KPIs is crucial for the success of your business. From revenue per available room to return on investment, each KPI plays an essential role in optimizing profit while enhancing guest satisfaction. Keep reading to learn more about each of these metrics and how to calculate them for your business.

1. Occupancy rate

As a floating hotel owner, understanding your occupancy rate is crucial to maximising profits and providing the best possible experience for guests. Here is a breakdown of the key points:

Definition

Your occupancy rate is the measurement of the number of occupied rooms against the total number of available rooms in your floating hotel. This allows you to track your hotel's performance in terms of how effective it is at filling available rooms with guests.

Use Case

The use case for occupancy rate is that it helps managers to understand how well their floating hotel is performing in terms of revenue generation and guest experience. By tracking this metric, you're able to adjust your hotel's offerings or promotions if needed, ensuring that it caters to your guests' needs better.

How To Calculate KPI

The calculation formula for occupancy rate is quite simple:

Calculation Example

If your floating hotel has 100 rooms and 89 of them are occupied:

Therefore, your occupancy rate is 89%.

KPI Advantages

• Provides an easy way to measure your floating hotel's performance
• The metric helps to identify seasonal trends and adjust pricing/promotions accordingly
• Allows you to see the impact of new offerings or renovations on your occupancy rate

KPI Disadvantages

• Occupancy rate does not take into account how much guests are spending when they stay at the floating hotel
• It does not consider the quality of guests' experiences or reviews
• As a percentage, it is hard to quantify when compared to actual numbers

KPI Industry Benchmarks

• 70-80% for budget floating hotels
• 80-90% for standard hotels
• 90%+ for luxury hotels

2. Average daily rate

Definition

Average Daily Rate (ADR) is a KPI metric that provides an estimate of the average rate per occupied room in a hotel over a specific period.

Use Case

ADR is used to measure a hotel's revenue performance and helps in identifying the pricing strategies that can be implemented to enhance the hotel's profits. It is an essential metric for hotels as it provides insight into the average amount guests are willing to pay for a room.

How To Calculate KPI

To calculate ADR, you need to divide the total room revenue generated by the total number of rooms sold during the period.

Calculation Example

Suppose your hotel generated a total room revenue of $90,000 in a month and sold 600 rooms during the same period. Then your ADR would be:

KPI Advantages

• ADR is a highly effective metric for evaluating the revenue-generating capabilities of a hotel.
• It helps in identifying pricing strategies that can attract prospective guests and boost occupancy rates.
• ADR provides insight into the market demand for hotel rooms and helps hoteliers plan their pricing strategies.

KPI Disadvantages

• ADR does not take into account the types of rooms sold in a hotel, which can lead to inaccurate conclusions about the pricing strategy.
• ADR does not factor in the revenue generated by ancillary services like food and beverages, which is a significant source of income for many hotels.

KPI Industry Benchmarks

The ADR benchmark varies by the type and location of the hotel. In the US, the ADR benchmark for a luxury hotel in 2021 is $270, while in the economy segment, it is $58.

3. Revenue per available room

Definition

Revenue per available room (RevPAR) is a performance metric used by the hospitality industry to measure the average revenue generated by each available room within a particular timeframe. This KPI considers both occupancy rates and room rates to assess the financial performance of a hotel.

Use Case

RevPAR helps hotel owners and managers determine the profitability of their property. By tracking RevPAR, they can identify trends in customer demand and adjust prices and room inventory accordingly.

How To Calculate KPI

RevPAR can be calculated by multiplying a hotel's average room rate (ARR) by its occupancy rate (OR).

Calculation Example

For example, if a hotel has 100 rooms and an average nightly rate of $150, and 80 of those rooms were occupied on an average night, its RevPAR would be:

KPI Advantages

• RevPAR provides a clear and concise measure of a hotel's financial performance.
• It takes into account both occupancy rates and room rates, making it a useful metric for benchmarking against similar properties.
• RevPAR can help hotel managers identify when to adjust pricing and allocation strategies based on demand and market trends.

KPI Disadvantages

• RevPAR does not take into account additional revenue streams, such as food and beverage sales or other hotel amenities.
• It focuses solely on room revenue and ignores the expense side of the equation.
• RevPAR may not account for seasonal fluctuations in demand or other external factors that can affect a hotel's performance.

KPI Industry Benchmarks

According to recent industry reports, the average RevPAR for hotels in the United States is around $85 - $100. However, this can vary significantly by region and market segment.

4. Guest satisfaction score

Definition

The guest satisfaction score(KPI) is a metric that measures how satisfied customers are with their stay at a floating hotel. It is an important KPI because it helps hotel owners understand how happy their clients are with their services. It is calculated by analyzing the feedback given by customers, such as surveys, customer reviews, and social media ratings.

Use Case

The guest satisfaction score is a critical metric for floating hotels because it keeps hotel owners in touch with their guests' feedback. A high guest satisfaction score means that customers are happy with the hotel's services, amenities, and staff, and are more likely to recommend the hotel to others. A low guest satisfaction score means that there are areas that need improvement to ensure high-quality service and guest retention.

How To Calculate KPI

To calculate the guest satisfaction score KPI, many floating hotels use feedback forms, surveys, and reviews at several points of the customer journey, such as booking, check-in, check out, and stay.

Calculation Example

Let's say a floating hotel has received ten guest reviews that reflect positive experiences and five reviews that reflect negative experiences for a total of 15 reviews.

KPI Advantages

• It helps hotel owners understand customer satisfaction levels and identify areas of improvement
• It helps increase customer retention and drive business growth
• It can also help improve online reputation and customer perception of the brand

KPI Disadvantages

• It is subjective and may be based on guests' opinions that can be biased or inaccurate
• It may not be entirely representative of all guests' experiences
• It may be time-consuming and expensive to collect feedback and reviews

KPI Industry Benchmarks for the KPI: 'Guest satisfaction score'

The guest satisfaction score can vary depending on the size, type, and location of the floating hotel. According to industry benchmarks, a guest satisfaction score of 80% or higher is considered excellent.

5. Repeat Customer Rate

Definition:

Repeat customer rate is one of the most important KPI metrics for a floating hotel as it measures the number of customers who return and book a room again.

Use Case:

The repeat customer rate is a strong indicator of customer satisfaction, loyalty, and retention. It is also a critical factor for a floating hotel's profitability because it is cheaper to retain existing customers than to attract new ones.

How To Calculate KPI:

To calculate the repeat customer rate, divide the number of repeat customers by the total number of customers, and multiply the result by 100:

Calculation Example:

Suppose your floating hotel had 500 customers last year, and 200 of them were repeat customers. The repeat customer rate can be calculated as follows:

KPI Advantages:

• Helps to evaluate customer satisfaction, loyalty, and retention
• Indicates the potential for future revenue and growth
• Cost-effective way to increase profitability

KPI Disadvantages:

• Does not account for the frequency or monetary value of repeat purchases
• May not include customers who did not book directly with the hotel

KPI Industry Benchmarks:

The average repeat customer rate in the floating hotel industry varies depending on the location, style, and amenities of the hotel. However, a rate above 40% is considered excellent.

6. Food and beverage revenue per guest

Definition

Food and beverage revenue per guest is a key performance indicator (KPI) that tracks the amount of revenue generated in a hotel's food and beverage department per guest served. The KPI helps hotels to understand their food and beverage sales performance and can be used to develop effective food and beverage revenue strategies.

Use Case

Food and beverage revenue per guest is particularly useful in hotels that offer in-house food and beverage services. The KPI helps hotel managers to evaluate the effectiveness of their food and beverage sales team and provides insights into how they can improve their service delivery.

How To Calculate KPI

The formula for calculating food and beverage revenue per guest is as follows:

Calculation Example

Suppose a hotel generated $20,000 in food and beverage revenue for the month of June and served a total of 1,000 guests. The food and beverage revenue per guest is calculated as:

Therefore, the hotel generated an average of $20 in food and beverage revenue per guest served in the month of June.

KPI Advantages

• Helps managers to develop targeted marketing campaigns that focus on specific guest segments with high food and beverage revenue potential.
• Provides insights into how the hotel’s food and beverage team is performing and where improvements are needed.
• Measures the revenue contribution of the hotel's food and beverage department and helps managers to evaluate its profitability.

KPI Disadvantages

• Does not account for the cost of goods sold, which can lead to overestimating the department's profitability.
• Can be affected by external factors such as seasonality and economic conditions.
• May not be applicable to hotels that do not offer in-house food and beverage services.

KPI Industry Benchmarks

The food and beverage revenue per guest benchmark varies according to the hotel's star rating and location. In North America, the industry benchmark for food and beverage revenue per guest in luxury hotels is around $95, while the benchmark for mid-priced hotels is around $33.

7. Return on Investment

Return on investment (ROI) is a metric that measures the return generated from an investment relative to its cost (Definition). Floating hotels that successfully generate ROI have a sustainable business model and can operate for an extended period without experiencing insufficient cash flow. The ROI KPI helps decision-makers assess the profitability of the floating hotel business and make strategic decisions accordingly (Use Case).

How To Calculate KPI

To calculate ROI, divide the net profit from the investment by the total cost of the investment and multiply it by 100 (Calculation Formula: Net Profit/Total Cost * 100). The net profit of the investment is the revenue generated minus all expenses related to the investment (Calculation Example). For example, if a floating hotel generates $1 million in revenue and incurs expenses of $500,000 in a year, the net profit would be $500,000. If the total cost of the investment in the floating hotel is $2 million, then the ROI would be 25% (ROI Calculation Example).

KPI Advantages

• Helps decision-makers assess the profitability of the floating hotel business
• Assists management in making strategic decisions based on actual ROI numbers
• Provides a way to compare the profitability of different floating hotels

KPI Disadvantages

• Calculating ROI requires accurate and consistent financial data, which can be challenging for floating hotels
• It may not factor in market conditions and perform a holistic evaluation of the floating hotel business
• ROI does not account for the time value of money, which could provide an incomplete picture of the investment's profitability over an extended period

KPI Industry Benchmarks for ROI

The ROI metric varies depending on the type and size of the investment, location, and market conditions. However, the hotel industry's average ROI is 10% to 14%, and a floating hotel with an ROI higher than 14% is considered profitable (ROI Industry Benchmarks).