Kpi and Reporting Definitions for Hospitality

Topics: Hotel, Hotels, Rooms Pages: 11 (4033 words) Published: December 8, 2012
KPI and Reporting definitions for Hospitality IMPORTANT TO NOTE THAT HOSPITALITY INDUSTRY has organized itself  with a specific chart of account & reporting system (known as the Uniform System of accounts for the hospitality industry)  network of consultancy companies gathering actual & precise data for comparison and benchmarking, who have produced a large number of KPI (Key Performance Indicators) These are generally accepted definitions largely shared across the hospitality industry. You may find that in large organisations, some additional specific definitions are used for internal use. For example ACCOR is following as well ARR inclusive of VAT & Taxes, to have a true comparison of what customers pay = marketing aspect. Be careful with accepted definitions, English different from US (rack rate), Tax effect (VAT, Tourist tax, ..)

There’s a business saying: ‘If you can’t measure it, you can’t manage it!’ Real, responsive management needs reliable and truthful figures on which decisions can be based. If there are problems, you can take corrective action quickly. If you are having success, you’ll know to do more of what you’re doing! Good figures also give you a wider understanding of your success – sometimes if it’s a quiet month (when your suppliers are telling you that ‘everyone’s quiet!’) you’ll see that some of your KPIs are actually improving (eg sales per head). The main KPIs are 1) OPERATIONAL KPIs Average Daily Rate or ADR: The number represents the average rental income per occupied room in a given time period. ADR along with the property's occupancy are the foundations for the property's financial performance. The ADR can be calculated by dividing the room revenue by the number of rooms sold. ADR is one of the commonly used financial indicators in hotel industry to measure how well a hotel performs compared to its competitors and itself (year over year). It is common in the hotel industry for the ADR to gradually increase year over year bringing in more revenue. However, ADR itself is not enough to measure the performance of the hotel. One should combine ADR, OCC (occupancy) and RevPar (revenue per available room) to make a sound judgment on hotel performance. Recently, some hotels have adopted a new concept called BAR [best available rate] in addition to ADR. Average Daily Rate Room revenue earned divided by number of rooms that earned revenue. House use and complimentary rooms are excluded from the denominators. However, many hotels calculate ADR or ARR (Average Room Rate) using the formula: Room Income/(No. of rooms sold + Complimentary rooms) i.e. 'House Use' rooms are excluded. The logic for including complimentary rooms is that they are given for business reasons e.g. x rooms complimentary over y paid rooms as part of a business deal. This implies that the inclusion of this free unit is actually an inclusion in the revenue deal. 'House Use' rooms or those occupied by hotel employees or management are excluded as they are not available for sale and not generating income. ADR (Rate) Index/ARI (Average Rate Index) The ADR Index measures a hotel’s ADR performance relative to an aggregated grouping of hotels (e.g., competitive set, market, submarket). An ADR Index of 100 equals fair share of ADR, compared to the aggregated group of hotels. An ADR Index greater than 100 represents more than a fair share of the aggregated group’s ADR performance. An ADR Index below 100 reflects less than a fair share of the aggregated group’s ADR performance. To calculate an ADR Index: (Hotel ADR / Aggregated group of hotels’ ADR) x 100 = ADR Index Fair share can be thought of as the subject hotel’s “piece of the pie” in the market. For example, if the subject hotel’s ADR is $50 and the ADR of its competitive set is $50, the subject hotel’s index would total 100. If the subject hotel’s ADR is $60, its index would be 120, indicating the hotel has captured more than its fair share. If the subject hotel’s ADR is $40, its index...
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