Examining a business is important to understand the success or failure. Mathematics and Statistics help uncover all types of ratios, proportions, averages, deviations etc. in all walks of human life. Maths is almost infallible. Statistics, a little less so. Learning to use maths for a hospitality career begins right in the First year, but the Education Planners wait till the end to expose the students to the real villain in the movie. Profits, onward & upward...

1. Revenue
management
Evaluating a Hotel’s Financial
Performance

2. Welcome to a
new learning
session!
Knowledge is Money.

3. Hotel Performance
Evaluation

4. Why are students tested?

5. The answer is:

6. Why is a hotel tested, or evaluated?
For feedback, of course!

7. Hotel Performance Evaluation
Measuring the performance of a hotel is
important for it’s investors, owners, and
managers.
Investors want to know if they will earn good
profit by investing;
owners are keen to find out if the business will
generate enough revenue, to cover all
expenses;
and managers want to prove, that they have
successfully achieved their planned goals.

8. Key Performance Indicators
• All departments of an organization, that deal
with finance (income or expenditure) are always
evaluated by some common “key performance
indicators”.
• Example of such departments are; Marketing &
Sales, Finance, Project & operations, Kitchen, F &
B Service, Banquets etc.
• Hotel business also uses some KPI.

9. Key performance Indicators

10. Methods of measuring hotel performance
Methods Of Measuring Hotel
Performance
Market Share
Index
Revenue Per
Available Room
(RevPAR)
Occupancy Ratio
Average
Room Rate
Per Guest
(ARPG)
Average Daily
Rate (ADR)

11. Some More Hotel KPIs
GOPPAR TRevPAR RevPAS
RevPASF

12. Occupancy Ratio
It is one of the oldest method of evaluating a hotel’s
performance.
Occupancy % = Number of rooms occupied X 100
Total number of rooms in hotel

13. £ Average Daily Rate ¥
 Average daily rate (ADR) is the average rental
income per occupied room for a given time period.
ADR = Total Revenue generated in 1 day
Total rooms sold in 1 day
The time period can range from 1 day to 1 year,
including week, fortnight, month, quarter and six
months.

14. ADR

15. Average Room Rate Per Guest
• It is calculated by dividing the total room revenue
by the total number of guest in the hotel, including
children above 5 years.
ARG = Total revenue generated (in a specified time)
Total guests staying in the hotel

16. ARG

17. Revenue Per Available Room (RevPAR)
 Rev-par is the revenue per available room. It is
calculated by multiplying the average daily rate with
the occupancy percentage. It helps in comparing
the performances of two hotels of different type,
size and operations.
RevPAR = ADR * Occupancy %
RevPAR = Total Revenue (in a specified time period)
Total rooms available for sale

18. RevPAR

19. Use of RevPAR Calculation
• It helps to compare the performance of two
hotels that are not of the same size. By
multiplying Average Daily Rate with
Occupancy %, we eliminate the number of
rooms from the final calculation.
• ADR is for 1 room and occupancy % is for 100
rooms. Both hotels can now have the same
basis (denominator) for the final figure, and
compare the respective numerators to find
the difference.

20. Market Share Index
 it is defined as a hotel’s occupancy performance in
relation to other hotels within a pre-determined
competitive set.
Competitive set is a group of hotels in that area
who have equal star rating, size, and same target
market
For example, all business class, 5 star deluxe hotels in
Chennai.

21. Market Share Index
Hotel
B
Hotel C
Hotel
A

22. Sl.
No.
Hotel
Name
No. of
rooms
Market
Potential
for
Competitive
Set
Fair Market
share
Calculation
Fair
Market
Share
%
1. A 20 200 (20/200) x 100 10%
2. B 30 200 (30/200) x 100 15%
3. C 40 200 (40/200) x 100 20%
4. D 50 200 (50/200) x 100 25%
5. E 60 200 (60/200) x 100 30%
Total 200 100%

23. 0
1
2
3
4
5
6
Category 1 Category 2 Category 3 Category 4 Category 5
Series 1
Series 2
Series 3

24. Hotel Name No. of
rooms
Market
Potential
per week
Actual no.
of rooms
sold in 1 week
A 20 20 x 7 = 140 130
B 30 30 x 7 = 210 150
C 40 40 x 7 = 280 210
D 50 50 x 7 = 350 260
E 60 60 x 7 = 420 300
Total 1400 1050
Average occupancy % of Competitive set = 1050÷1400 x 100
= 75%

25. Actual Market Share of each hotel
A (130/1050) x 100 = 12.38 %
B (150 / 1050) x 100 = 14.28 %
C (210 / 1050) x 100 = 20 %
D (260 / 1050) x 100 = 24.77 %
E (300 / 1050) x 100 = 28.75 %

26. Market Share
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr

27. Comparison of each hotel’s actual share with fair market
share
Hotel Actual
market Share
%
Fair market
Share %
Difference
A 12.38 % 10 % + 2.38 %
B 14.28 % 15 % - 0.72 %
C 20 % 20 % 0 %
D 24.77 % 25 % - 0.23 %
E 28.57 % 30 % - 1.42 %

28. Fair Market Share
• Every hotel first tries to achieve it’s fair market
share.
• Once it is successful, next goal is to increase
the market share.
• There is a general rule-of-thumb that, in any
market, only top 3 companies survive in the
long run.

29. What is GOPPAR?
• GOPPAR is gross operating profit per available
room.
• GOPPAR considers revenue and expenses
from all areas of the business.
• That means it’s a good metric for measuring
your hotel’s performance as a whole.

30. How to calculate GOPPAR
• GOPPAR = (Gross revenue - Gross
expenditure) / Available rooms
• To calculate your gross operating profit per
available room (GOPPAR), subtract your gross
expenditure from your gross revenue, then
divide it by the number of available rooms in
your hotel.

31. GOPPAR includes all departments.

32. What is TRevPAR?
• TRevPAR is total revenue per available room.
• TRevPAR indicates the overall financial
performance of your property because it
considers revenue from all departments
(RevPAR only considers room revenue
performance).
• TRevPAR = Total Revenue / Total available
rooms

33. RevPASH
• Revenue per available seat, per hour
• This is a KPI for F & B outlets in a hotel.
• RevPASH = Total Restaurant Revenue
Number of seats x Number of hours in the shift

34. KPI is in all Departments & Industries

35. RevPASF
• Revenue per available square foot of Function
space
• RevPASF = Revenue from Function Space
Total area of function space in square foot

36. Function space is a major source of
revenue now.

37. Average Rate Index (ARI):
• A metric used to determine whether the property is
achieving its fair share of ADR, compared to a specific
group of hotels (i.e. a competitive set).
• It is calculated by taking the ADR of the property and
dividing it by the ADR of the competitive set
(competitive set data collected through a third-party
provider such as STR).
• An ADR of above 1.00 indicates that the property is
achieving more than its fair share, while below 1.00
suggests that the hotels in the competitive set are
'eating' into the properties' fair market share 'pie'.

38. Index (Indices) are great for quick
comparisons.

39. Cost Per Occupied Room (CPOR):
• Calculated by adding up all of the expenses
associated with a room booking, including
staff cost, commission, marketing, utilities
(amenities, energy etc), and cleaning the room
for the next guest.
• It allows the hoteliers to determine the
minimum rate which would make the booking
profitable.

40. Net Revenue per Available Room (Net
RevPAR):
• It is calculated by multiplying occupancy %
with ADR, and then the related overhead costs
are subtracted. This metric is a more reliable
indicator of the financial health of the hotel.
• ProPAR is another term for Net RevPAR.

41. Revenue Generating Index (RGI) or
RevPAR Index (RPI):
• A metric used to check whether a property is
achieving its fair share of revenue compared to a
specific group of hotels (i.e. a competitive set).
• It is calculated by taking the RevPAR of the
property and dividing it by the RevPAR of the
competitive set (competitive set data collected
through a third-party provider, such as STR).
• An RGI of above 1 indicates the property is
achieving more than its fair share, while below 1
suggests that the hotels in the competitive set
are eating into the properties’ pie.

42. Evaluation By Guests
• We have looked at some methods by which hotels
evaluate their performance. It is even more
important to learn how guests rate a hotel.
• Guest base their evaluation of hotel on various
criteria like location, hotel staff, service level,
cleanliness, etc.
• 80 % of guests now search online for making
reservations.
• 50 % of these guests will not select a hotel if they
read any negative review or comment about it.

43. Evaluation By Guests
• This is the reason why a “Guest Cycle” in a
hotel should run smoothly, & perfectly.
• A negative review has the power to spread
through “word-of-mouth” publicity and
decrease hotel sales.

44. TripAdvisor
• A travel portal that provides travel information,
booking and a the largest online travel
community.
• It allows map search of destinations. As the
search becomes narrow, it shows a local map of
attractions and offers from dealers in that
location.
• TripAdvisor is wiki-enabled. It is open like
Wikipedia.
• It provides direct access to OTA like Expedia,
Orbitz, Travelocity, hotel.com, Priceline,
Booking.com, Airbnb etc.

45. What makes a hotel great?
Location 30%
Comfortable beds 29%
Good Staff & Service 24%
What makes a hotel bad?
Unclean rooms 54%
Noisy hotel guest 14%
Poor hotel staff & services 11%
What was the worst experience in a hotel?
Dirty carpet 68%
Equipment not working 64%
Room not ready at check-in 59%

46. What is the dirtiest part of a hotel room?
Carpet 38%
Bed Spread 37%
TV Remote 11%
Bathroom 11%
What makes a bed comfortable?
Mattress 64%
Linen 11%
Pillow 11%
Cleanliness is the top priority of most customers in a hotel.

47. Google Reviews
• Watch out for this platform.
• It is going to influence the travel market in a
big way.

48. Power of Positive Reviews!

49. Compilation & Presentation
Praveen Jha
Senior Faculty
IHM Hajipur
Vaishali, Bihar