Measuring Hotel Performance Unit VIII 1 Measuring Hotel

Measuring Hotel Performance Unit- VIII 1

Measuring Hotel Performance Hotel performance benchmarks are needed to compare hotels of differing sizes, location types, and product types. Ø The approaches are either quantifiable or qualifiable. Ø Quantifiable measurements depend on data (rev -par and market share). Ø Qualifiable goals are determined by mgmt. Ø 2

Measuring Hotel Performance Quantifiable Analysis 3

Rev - Par Ø Rev-par is defined as revenue per available room. This analysis allows hotels of different sizes to compare the revenue generated by the sale of sleeping rooms. Ø To calculate Rev-par you divide the total sleeping room revenue generated for a predetermined timeframe by the total number of hotel rooms. 4

Rev-Par Illustrated Step 1 -Collection of data: ABC hotel (with 350 rooms, an ADR of $150, and an occupancy of 76%). XYZ hotel has 500 rooms, runs an ADR of $120, and a 76% occupancy which results in a total of 380 rooms being sold. Ø Step 2 -Revenue calculation: The total room revenue for the ABC Hotel is: $39, 000 ($150 x 266). The total room revenue for XYZ Hotel is: $45, 600 ($120 x 380). Ø 5

Rev-Par Illustrated – At first glance, a novice may look at the higher room revenue of XYZ and make the incorrect assumption that it outperformed ABC. Ø Step 3 -Rev-par – The rev-par comparison would show that the rev-par for ABC ($114) is higher than the revpar for XYZ $91. 2 ($45, 600 divided by 500). This example shows that with what it had to work with, ABC outperformed XYZ when ADR and occupancy were factored in. 6

Market share Ø Market share is defined as a hotel’s occupancy performance in relation to other hotels within a predetermined competitive set. Ø The first step in determining market share is to determine which nearby hotels fall within the competitive set. The competitive set should include hotels of similar product type, location type, and service level. 7

Market share Ø The next step in determining a hotel’s market share is to determine its individual market potential. The individual market potential is defined as the number of rooms a hotel has for sale within a given time frame. Ø A hotel's rightful market share (or fair share) reveals how much of the total market potential is made up by its own individual potential. 8

Market share Ø Once the individual and total market potential is determined, and the rightful share of each hotel is known, actual occupancy data is used to calculate market share. Ø Most hotels will share occupancy data with each other, but they cannot share rate information. Ø Why is it unethical or illegal to share rate information? 9

Qualifiable Analysis Ø Qualifiable analyses are based on the goals of hotel managers. Ø Rate driven management goals may forgo occupancy levels for a higher average rate. The occupancy driven goals are simply the opposite, they forgo a higher average rate for greater occupancy. Ø Neither is right or wrong, each goal is simply in the “eye of the beholder. ” 10

Revenue Per Available Room This combines revenue earned with utilisation of capacity and is therefore one of the measures used in Yield Management. Actual Room revenue (excluding taxes) ------------------ Number of rooms available 11

Yield Percentage Ø Yield % shows the Revenue earned as a percentage of the potential revenue that could have been earned. Actual Room Revenue (- taxes) Potential Room Revenue X 100 Or Realised revenue ----------- X 100 Potential revenue 12

Calculating Potential Revenue a) Rack Rates for each room type: Rack Rate = the rate displayed on the rack in reception, traditionally this is the first rate quoted to an enquirer and is usually the highest rate. It is often, but not always, Room Only (no meals included). Room only Rack Rate including taxes: Single £ 75. 00 13

Calculating Potential Revenue b)Secondly multiply this rate by the number of single rooms in the hotel, e. g. £ 63. 83 * 50 = £ 3, 191. 50. This gives you the potential revenue from Single Rooms per night. c) Do the same for the other room types. d)Add the totals for the room types and this is the total potential room revenue. 14

GOPPAR (Gross Operating Profit Per Available Rooms ) Ø Gross operating profit is defined as the profit of the hotel before allocating central charges such as interest, depreciation , and taxes Gross operating profit --------------Rooms available for sale 15

Double Occupancy % More than one guest / pax in a room requires a higher room rate and thus brings additional income to the hotel Number of guests – number of rooms sold --------------------------- * 100 Number of rooms sold 16

Bibliography Ø The Hospitality Industry www. hospitality-industry. com Ø www. hospitalitynet. org Ø www. indianhospitalityonline. com/ Ø www. ibef. org Ø www. hospitalityupgrade. com Ø

BIBLIOGRAPHY Front Office operation and Management by Ahmed Ismail. Front office Management and Operations by Sudhir Andrews. Front Office Procedures , Social Skills, Yield and Management by Peter Abbot & Sue Lewery. Front Office Management by S. K. Bhatnagar. Hotel front Office Operation and Management by Jatashankkar R. Tewari.