The Case for New Revenue-Management Metrics - Knowledge Center - HSMAI
Hospitality Sales and Marketing Association International
Hospitality Sales and Marketing Association International
 
Hospitality Sales and Marketing Association International
The Case for New Revenue-Management Metrics

Hotels have been using revenue-management metrics such as OCC (occupancy), ADR (average daily rate), and RevPAR (revenue per available room) for years now. Is it time for new metrics? HSMAI Asia Pacific’s Revenue Advisory Board has partnered with the Singapore Institute of Technology (SIT) on a new study that explores that exact question — reviewing existing metrics and considering potential new ones, including barriers to adopting them. Here are key findings:

EXISTING METRICS

OCC essentially measures the utilization of the physical capacity of the hotel. ADR is the average price charged by the hotel for a room night. It is intuitive, straightforward, and easy to calculate and understand. Furthermore, it is the most common performance metric used in the hospitality industry. RevPAR combines both OCC and ADR to measure the room revenues generated by the hotel per room available for sale. It is considered as one of the most important metrics in the hotel industry.

However, the major concern for these commonly used revenue management metrics is that they have only considered the room division component. Guest-room revenues may well account for nearly all of the revenue for a budget hotel but not for a luxury business/leisure/golf/casino hotel room. Room revenues for the latter may only be less than half of its total revenues, which points to a need for a more holistic measurement. Furthermore, as hotel companies become better at collecting and collating transaction data from all revenue streams, it is inevitable that the number of performance measures used by revenue managers will also grow.

NEW METRICS

A variety of new revenue-management metrics have been under discussion for some time, including:

  • NRevPAR — net revenue per available room
  • RevPAC — revenue per available customer
  • RevPASH — revenue per available seat hour, for use in restaurant revenue management
  • RevPATH — revenue per available treatment hour), for use in spa revenue management
  • ConPAST — contribution per available space time, for use in function space revenue management

The majority of respondents to the new study said they are willing to adopt NRevPAR and RevPAC despite several concerns, including perceived usefulness (or lack of it); data inaccuracy and unavailability; the substantial effort involved in collecting, collating, and analyzing the data; and management support and resource constraints within the organization.

The full study goes into much greater detail about the use of existing metrics and the perceived advantages and disadvantages of new metrics. Download a copy here.



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