Your guest room is a perishable product so pricing & customer happiness remain extremely important variables. To stay on top you need to understand revenue management and why it is important. I’ll explain.

Why did you want to become a hospitality property owner?

•The idea of becoming a hospitality property owner and greeting guests sounded appealing.

•You were tired of the rat race and wanted to take control of your own destiny.

•Or like most owners, you wanted to make money or even better, to make more money in less time

One of the main factors you need to be successful and make more money in less time it is for you to understand revenue management and why it is important.

It is what propels hotels, resorts, inns and bed and breakfasts success.

It does not matter the size of your property, a guest room is a perishable product since the number of guest rooms you have is defined. For this reason, pricing and customer happiness remain very important variables, which are subject to hospitality property revenue management.

Efficiently managing rates and availability while watching on all the different key performance markers takes training and talent. Branded hospitality property chains have a department that only focuses on these reports which result in well-organised revenue management strategy. This is not the same for smaller properties because time and resources are limited, might take a short-term approach to revenue management.

Knowing how to understand the reports is an invaluable resource because they can help hospitality property owners make choices that will result in positive outcomes.

Key Performance Indicators (KPIs)

You need to know and understand the following numbers to manage the revenue of your hospitality property.

•Occupancy Rate

•Average Daily Rate (ADR)

•Revenue Per Available Room (RevPar)

•Total Revenue/Rooms Sold


Occupancy Rate

This is one of the easiest metrics you can check.

It is the percentage of occupied rooms compared to total rooms over a certain period of time.

Occupancy = Rooms Occupied / Rooms Available

Knowing these numbers will help you create the foundation of your revenue management strategy.


Revenue Per Available Room (RevPar)

RevPar is an operation metric which is analysed by multiplying hospitality properties average daily room rate by its occupancy rate.

You can also analyse RevPar by dividing a hospitality properties revenue by the number of rooms (or beds) it has over a desired period of time.

RevPar = Total Room Revenue / Rooms Available

RevPar only uses room revenue and does not include other revenue streams such as upgrades, spas, restaurant revenue, etc. You can use this analysis to compare performance to other properties, but it could fluctuate greatly by property type.


Average Daily Rate (ADR):

ADR calculates the average price paid per room and helps you determine how much money was brought in per room. You calculate ADR by taking the Room Revenue and dividing it by the number of paid rooms occupied.

ADR = Room Revenue / Paid Rooms Occupied

ADR only considers the rooms that were sold - does not include vacant rooms.


Other Important Metrics:

There are other important metrics you need to consider when you create reports.

They include:

•total rooms sold

•total revenue

•revenue divided by category (i.e. rooms. restaurant, spa, etc.)

Continue reading and I will share with you techniques the big brands use and how you can replicate them...


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