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:

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:

KPI Advantages

• 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.

KPI Disadvantages

• 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%

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:

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:

KPI Advantages:

• 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

KPI Disadvantages:

• 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.

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

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.

Customer Satisfaction Rating

Definition

Use Case

How To Calculate KPI

Calculation Example

KPI Advantages

• Provides valuable insights into guest experience and preferences
• Helps in identifying areas of improvement
• Boosts customer loyalty and increases chances of positive reviews

KPI Disadvantages

• 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

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:

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:

KPI Advantages

• 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.

KPI Disadvantages

• 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%.

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.

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:

KPI Advantages

• 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

KPI Disadvantages

• 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.

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.

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:

KPI Advantages

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

KPI Disadvantages

• 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.