# Maximize Your Hotel's Success: The Top 7 KPI Metrics You Need to Track Now

Operating and managing a hotel business requires careful analysis of critical metrics. The hospitality industry continues to grow, and owners and managers need to track performance indicators to avoid losses. Focusing on the top seven hotel KPI metrics will ensure you can effectively track and measure growth.

• Occupancy rate: The percentage of available rooms that are booked over a period.
• Average daily rate (ADR): The average price of each room sold during a given period.
• Revenue per available room (RevPAR): A metric that shows revenue generated per available room.

Ensuring customer satisfaction is essential for the success of your hotel. You can measure this by calculating your customer satisfaction rating. Additionally, looking at your return on investment (ROI), conversion rate from website visits to bookings, and referral rate from satisfied guests, will help you better manage your business operations and stay ahead of the competition.

Scroll down to learn more about these top seven hotel KPI metrics, and find out how you can effectively track and calculate them to improve your hotel business.

## Occupancy rate

Occupancy rate is a key performance indicator for the hotel industry, measuring the percentage of rooms that are occupied over a period of time. It's a crucial metric for hotel managers and owners, providing insights into how efficiently they are using their available rooms.

### Definition

The occupancy rate is calculated by dividing the number of occupied rooms by the total number of available rooms, expressed as a percentage. For example, if a hotel has 100 rooms and 80 of them are occupied, the occupancy rate would be 80%.

### Use Case

The occupancy rate is an important metric for measuring a hotel's performance. It can help managers and owners identify patterns in demand, adjust pricing strategies, and optimize staffing levels. By monitoring occupancy rates, hotels can make data-driven decisions that improve their profitability and customer satisfaction.

### How To Calculate KPI

To calculate the occupancy rate, use the following formula:

Occupancy rate = (Number of occupied rooms / Total number of available rooms) x 100%

### Calculation Example

Let's say a hotel has 200 rooms and 150 of them are occupied on a given night. The occupancy rate would be:

Occupancy rate = (150 / 200) x 100% = 75%

• The occupancy rate is a simple, straightforward metric that provides valuable insights into a hotel's performance.
• It can help managers and owners identify trends and make data-driven decisions to improve profitability.
• By optimizing occupancy rates, hotels can improve their revenue management and pricing strategies.

• The occupancy rate only measures the number of rooms occupied, and not the revenue generated from those rooms.
• It doesn't take into account seasonal fluctuations in demand or the impact of external factors on hotel occupancy.
• A high occupancy rate does not necessarily mean a hotel is profitable or successful.

### KPI Industry Benchmarks

The ideal occupancy rate varies depending on the hotel's location, size, and target audience. According to industry benchmarks:

• Luxury hotels: 70-80%
• Resorts: 60-70%
• Midscale hotels: 50-70%
• Budget hotels: 40-60%

#### Tips and Tricks for Measuring Occupancy Rate

• Monitor demand trends in your local market to optimize your pricing and promotions.
• Use marketing and advertising strategies to attract new customers and increase your occupancy rate.
• Invest in technology and tools to automate the process of calculating and tracking your occupancy rate.

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## Top Seven Hotel KPI Metrics: How to Track and Calculate

### Average Daily Rate (ADR)

Definition: The average rate charged per occupied room per day. It is calculated by dividing the total room revenue by the number of rooms sold.

Use Case: ADR is a critical metric for hotels to determine their room pricing strategy. It provides insight into how well a hotel is doing financially in terms of pricing its rooms.

How to Calculate KPI:

ADR = Total Room Revenue / Number of Rooms Sold

Calculation Example: If a hotel has 100 rooms, out of which 80 are sold each day at an average rate of \$100, then the hotel's ADR will be:

ADR = \$8,000 / 80 = \$100

• Helps hotels to optimize their room pricing strategy
• Assists hotels in identifying revenue-generating opportunities
• Provides a benchmark for comparing hotels in the same market or region

• Does not consider other revenue sources of the hotel
• May not account for seasonal or market fluctuations

Industry Benchmarks: According to the latest available data from STR, the worldwide ADR in 2019 was \$131.93.

#### Tips & Tricks:

• Consider offering dynamic pricing models that adjust rates in real-time based on demand and supply.
• Factor in local events such as conferences or festivals that may drive room prices up.
• Offer guests incentives for longer stays or loyalty programs to increase occupancy rates.

## Top Seven Hotel KPI Metrics: How to Track and Calculate

### Revenue per available room (RevPAR)

Definition: Revenue per available room (RevPAR) is a KPI that measures the average revenue a hotel generates per available room over a particular period. It is calculated by dividing total rooms revenue by the total number of available rooms in a hotel.

Use Case: RevPAR helps the hotel managers to optimize the revenue and occupancy rate. It also helps to identify the successful period when the hotel is well occupied with high rates and the efficiency of hotel revenue management strategies.

How To Calculate KPI: RevPAR = Total Rooms Revenue / Total Number of Available Rooms

RevPAR =

• Total Rooms Revenue
• Total Number of Available Rooms

Calculation Example: Let's assume the total rooms revenue for a month is \$100,000, and the total available rooms are 500. Then, the RevPAR would be \$200.

KPI Advantages: RevPAR is an essential KPI as it helps to optimize revenue management, provides a comprehensive view of room revenue performance, identifies the hotel performance, and assists with sales and marketing decisions.

KPI Disadvantages: RevPAR does not provide insights into individual room performance or the factors that may contribute to room demand, such as location, seasonality or amenities. Therefore, it needs to be used in combination with other performance metrics.

Industry Benchmarks for the KPI: The RevPAR benchmark varies by location, size, and type of hotel. According to STR, the hotel industry benchmark for RevPAR is around \$95.

#### Tips & Tricks:

• Keep room prices competitive with those of similar hotels in the area to maintain optimal occupancy rates.
• Identify the peak season for your hotel and adjust pricing accordingly to maximize RevPAR.
• Create packages that include room and additional features to increase RevPAR.

## Customer Satisfaction Rating

### Definition

Customer satisfaction rating is a metric that measures how satisfied customers are with the service provided by a hotel. It takes into account factors such as the staff's performance, the quality of amenities, and the overall guest experience.

### Use Case

Measuring customer satisfaction is essential for hotels to gauge their performance and identify areas of improvement. It helps in retaining customers, generating positive reviews, and attracting new guests.

### How To Calculate KPI

To calculate customer satisfaction rating, follow this formula:
Customer Satisfaction Rating = (Total Number of Satisfied Customers / Total Number of Guests) x 100%

### Calculation Example

Suppose your hotel had 100 guests in a month, out of which 80 were satisfied with their stay. Then, the customer satisfaction rating would be:
Customer Satisfaction Rating = (80 / 100) x 100% = 80%

The advantages of customer satisfaction rating as a KPI for hotels are:
• Provides valuable insights into guest experience and preferences
• Helps in identifying areas of improvement
• Boosts customer loyalty and increases chances of positive reviews

The disadvantages of customer satisfaction rating as a KPI for hotels are:
• Subjective nature of customer satisfaction may affect the accuracy of data collected
• Difficult to benchmark against competitors as different hotels have varying standards and offerings
• May not reflect the entire guest experience as some customers may not express their feedback at all

### KPI Industry Benchmarks

Industry benchmarks for customer satisfaction rating vary for different types of hotels. Generally, a rating of 80% or higher is considered good for most hotels.

#### Tips & Tricks

• Regularly collect feedback from customers through surveys, online reviews, and social media to stay updated with their needs and preferences.
• Take prompt actions to address negative feedback and complaints to avoid their recurrence.
• Train the staff to be courteous, proactive, and efficient in handling customer requests and concerns.

## Return on Investment (ROI)

### Definition

Return on Investment (ROI) is a financial performance metric that measures the efficiency and profitability of an investment. It evaluates the amount of return on the investment relative to the investment's initial cost.

### Use Case

ROI is commonly used in the hotel industry to assess the profitability of investments in hotel properties. Hotel owners and investors can use this KPI to evaluate the success of a specific hotel project or an entire hotel portfolio.

### How To Calculate KPI

To calculate ROI, use the following formula:

ROI = (Profit - Investment Cost) / Investment Cost * 100

### Calculation Example

Suppose you invested \$500,000 in a hotel project, and it generated \$100,000 in profit. To calculate the ROI, use the formula:

ROI = (\$100,000 - \$500,000) / \$500,000 * 100 = -80%

• The ROI metric provides a clear and straightforward evaluation of the investment's profitability.
• It helps hotel owners and investors to make informed decisions about future investments and projects.
• ROI can be used to compare the profitability of different investment options.

• ROI doesn't take into account the time value of money and assumes that the profit is received at the end of the investment period.
• ROI doesn't consider the risks and uncertainty associated with the investment.
• ROI can be up to interpretation - it's dependent on how companies define 'profit' and 'investment cost.'

### KPI Industry Benchmarks for the KPI: 'Return on Investment (ROI)'

• According to a study by HVS, hotels in the United States have an average ROI of 6.8%.
• Another study by CBRE found that select-service hotels had an average ROI of 9.8%.

#### Tips & Tricks

• When calculating ROI, it's essential to consider all the costs associated with the investment project, including capital expenditures.
• Use ROI to compare the profitability of different investment options before making investment decisions.
• When using ROI, it's essential to factor in the risk associated with the investment to provide a more accurate picture of the project's potential profitability.

## Conversion rate from website visits to bookings

### Definition

The conversion rate from website visits to bookings is a key performance indicator (KPI) that measures the percentage of website visitors who make a booking.

### Use Case

As a hotel owner or manager, understanding your website conversion rate can help you determine the effectiveness of your website at driving bookings. A high conversion rate indicates that your website is successfully converting visitors into customers, while a low conversion rate may signal that your website needs improvement.

### How To Calculate KPI

To calculate the conversion rate from website visits to bookings, you need to divide the number of bookings by the number of website visits and multiply the result by 100 to get the percentage.

Conversion rate from website visits to bookings = (Number of bookings / Number of website visits) x 100

### Calculation Example

If your hotel website had 10,000 visits last month and you received 1,000 bookings, your conversion rate from website visits to bookings would be:

Conversion rate from website visits to bookings = (1,000 / 10,000) x 100 = 10%

• Provides insight into the effectiveness of your website at converting visitors into customers
• Enables you to track changes in your conversion rate over time and adjust your website accordingly
• Allows you to compare your website's performance against industry benchmarks to identify areas for improvement

• Does not take into account other factors that may impact bookings, such as pricing, location, and reputation
• May be influenced by external factors, such as seasonality, that are beyond your control
• Can be difficult to accurately track bookings that originate from sources other than your website

### KPI Industry Benchmarks

According to a study by Leonardo, the average conversion rate for hotel websites is approximately 2.2%. However, conversion rates can vary widely depending on factors such as location, pricing, and marketing strategy.

#### Tips & Tricks

• Optimize your website with clear calls-to-action and a user-friendly booking process to improve your conversion rate
• Monitor your conversion rate over time and track changes to identify trends and opportunities for improvement
• Compare your conversion rate to industry benchmarks to identify areas where you may be underperforming

## Referral rate from satisfied guests

### Definition

Referral rate from satisfied guests is a KPI that helps hotels measure the effectiveness of their customer satisfaction efforts. This KPI measures the percentage of guests who would recommend the hotel to their friends and family.

### Use Case

Referral rate from satisfied guests is an important KPI as it helps hotels understand how well they are meeting their guests' needs and expectations. If the referral rate is low, it could indicate that guests are not satisfied with their stay, which could result in a decrease in revenue.

### How To Calculate KPI

To calculate referral rate from satisfied guests, divide the number of guests who would recommend the hotel by the total number of guests who were surveyed and multiply by 100.

Referral Rate from Satisfied Guests = (Number of Guests Who Would Recommend the Hotel / Total Number of Guests Surveyed) x 100

### Calculation Example

Suppose a hotel surveyed 100 guests, of which 75 guests said they would recommend the hotel to their friends and family. The referral rate from satisfied guests would be:

Referral Rate from Satisfied Guests = (75 / 100) x 100 = 75%

• Helps hotels measure customer satisfaction levels
• Provides insight into how well hotels are meeting their guests' needs and expectations
• Helps identify opportunities for improvement

• Does not provide a detailed understanding of what guests liked or disliked about their stay
• May be affected by the type of guests surveyed (e.g., leisure vs business)

### KPI Industry Benchmarks

• Benchmark data for referral rate from satisfied guests varies depending on the type of hotel and its location. However, a referral rate of 70% or higher is generally considered to be a good benchmark.

#### Tips & Tricks:

• Provide guests with an exceptional experience to improve referral rates
• Collect feedback from guests to understand how to improve your services
• Encourage guests to leave reviews on online platforms to increase your visibility

In conclusion, tracking critical metrics is essential for the success of any hotel business. As the hospitality industry continues to grow, it is imperative for owners and managers to focus on the top seven KPI metrics, which include Occupancy rate, Average daily rate (ADR), and Revenue per available room (RevPAR). These metrics help track and measure growth, ensuring effective business management and preventing losses. Customer satisfaction is another crucial aspect of any hotel business. Calculating the customer satisfaction rating can help improve service delivery to enhance the guest experience. In addition, keeping track of other KPI metrics such as Return on investment (ROI), Conversion rate from website visits to bookings, and Referral rate from satisfied guests assists in making informed business decisions and staying ahead of the competition. Overall, by tracking these KPI metrics, hotel owners and managers can effectively manage their business operations, identify areas that need improvement, and make data-driven decisions to achieve the desired business goals. So, it is imperative to focus on these metrics to remain relevant in the fast-evolving hospitality industry.

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