Revenue management glossary

REVENUE MANAGEMENT GLOSSARY BASEL SBEAHAT
1
ADR - AVERAGE DAILY RATE
WHAT ARE THE MEANING / DEFINITION OF ADR?
ADR STANDS FOR: AVERAGE DAILY RATE
IT IS A KPI TO CALCULATE THE AVERAGE PRICE OR RATE FOR EACH HOTEL ROOM SOLD FOR A SPECIFIC DAY.
IT IS ONE OF THE MOST COMMON FINANCIAL INDICATORS TO MEASURE HOW SUCCESSFUL THE PERFORMANCE OF THE HOTEL IS
AGAINST OTHER HOTELS THAT HAVE SIMILAR CHARACTERISTICS SUCH AS SIZE, CLIENTELE AND LOCATION AND/OR ITS OWN
PREVIOUS FIGURES.
FORMULA:
ADR = ROOM REVENUE / ROOMS SOLD
CALCULATION:
100.000 € REVENUE / 500 ROOMS = 200,00 € ADR
HOUSE USE AND COMPLIMENTARY ROOMS ARE EXCLUDED FROM THE DENOMINATORS. 'HOUSE USE' ROOMS OR THOSE OCCUPIED BY HOTEL EMPLOYEES OR
MANAGEMENT ARE EXCLUDED AS THEY ARE NOT AVAILABLE FOR SALE AND NOT GENERATING INCOME. COMPLIMENTARY ROOMS ARE EXCLUDED SINCE THEY DON'T
HAVE A CONCRETE VALUE TO CALCULATE SALE VALUE.
ALOS - AVERAGE LENGTH OF STAY
WHAT IS THE MEANING / DEFINITION OF AVERAGE LENGTH OF STAY?
ALOS STANDS FOR AVERAGE LENGTH OF STAY. IT IS THE AVERAGE AMOUNT OF DAYS GUESTS STAY AT THE HOTEL DURING A
PARTICULAR PERIOD.
FORMULA:
AVERAGE LENGTH OF STAY (ALOS) = NUMBER OF ROOM NIGHTS / NUMBER OF BOOKINGS
CALCULATION:
STEP 1
LENGTH OF STAY = DATE OF DISCHARGE - DATE OF ADMISSION
LOS OF GUEST A = [(4-4-2013) - (10-4-2013)] = 6
LOS OF GUEST B = [(2-4-2013) - (13-4-2013)] = 11
LOS OF GUEST C = [(15-4-2013) - (20-4-2013)] = 5
LOS OF GUEST D = [(22-4-2013) - (30-4-2013)] = 8
STEP 2
TOTAL LENGTH OF STAY: 6 + 11 + 5 + 8 = 30 DAYS
STEP 3:
AVERAGE LENGTH OF STAY: TOTAL LENGTH OF STAY / TOTAL NUMBER OF RESERVATIONS
30 / 4 = 7.5 DAYS

2
ARI - AVERAGE RATE INDEX
WHAT IS THE MEANING / DEFINITION OF ARI? ARI STANDS FOR: AVERAGE RATE INDEX
IT IS A HOTEL KPI THAT MEASURES THE PERFORMANCE OF THEIR ADRCOMPARED TO THEIR COMP SET DURING THE SAME PERIOD
(COMPETITIVE SET: A GROUP OF OTHER HOTEL BRANDS AND COMPETITOR THAT HAVE SIMILAR TARGET MARKET AND CONCEPT).
FORMULA:
ARI = HOTEL ADR / AGGREGATED GROUP OF HOTEL'S ADR
CALCULATION:
$150 / $ 120 = 1.25
(THIS MEANS THAT YOUR ADR IS 25% BETTER THAN THE AVERAGE OF YOUR COMPETITIVE SET)
WHEN:
ADR INDEX = 1.00 THE HOTEL ADR IS EQUAL TO THE AVERAGE ADR OF THEIR COMP SET
ADR INDEX > 1.00 THE HOTEL ADR IS MORE EXPENSIVE THAN THE AVERAGE ADR OF THEIR COMP SET
ADR INDEX < 1.00 THE HOTEL ADR IS LESS EXPENSIVE THAN THE AVERAGE ADR OF THEIR COMP SET
DEPENDS ON THE OCCUPANCY RATE, THE HOTEL CAN CHOOSE TO LOWER, EQUAL OR HIGHER THEIR ADR COMPARED TO THE ADR OR THEIR COMP SET IN ORDER
TO GAIN MORE REVENUE AND MAKE THEMSELVES MORE COMPETITIVE TO THEIR COMPETITORS.
ARR - AVERAGE ROOM RATE
WHAT IS THE MEANING / DEFINITION OF ARR? ARR STANDS FOR: AVERAGE ROOM RATE
IT IS A HOTEL KPI WHICH MEASURES THE AVERAGE RATE PER AVAILABLE ROOM - SIMILARLY TO ADR.
BOTH OF THEM CAN BE USED FOR THE SAME PURPOSE WHICH IS TO CALCULATE THE AVERAGE RATE OF THE ROOM. HOWEVER, ARR
CAN ALSO BE USED TO MEASURE THE AVERAGE RATE FOR A LONGER PERIOD OF TIME (WEEKLY, MONTHLY) WHILE ADR MAY ONLY BE
USED TO MEASURE THE AVERAGE RATE OF ONE DAY.
FORMULA:
ARR = TOTAL ROOM REVENUE / TOTAL ROOMS OCCUPIED
THIS IS NECESSARY TO MEASURE THE FINANCIAL PERFORMANCE OF THE HOTEL.
ATR - AVERAGE TREATMENT RATE
WHAT IS THE MEANING / DEFINITION OF ATR? ATR STANDS FOR: AVERAGE TREATMENT RATE
THIS ATR FORMULA IS MAINLY USED FOR SPA OPERATION (EITHER INDEPENDENTLY OR WITHIN A HOTEL). IT CALCULATES THE
AVERAGE RATE AND IT IS VARIED ON DIFFERENT TREATMENT, PACKAGES AS WELL AS THE DEMAND /OCCUPANCY OF SPA BOOKING
RATE.
FORMULA:
ATR= TOTAL TREATMENT REVENUE / TOTAL TREATMENTS SOLD
CALCULATION:
€ 12.500 / 200 = € 62,50
AVERAGE TREATMENT RATE IS EN EFFECTIVE INDICATOR FOR A HOTEL SPA OPERATION TO ANALYZE AND APPLY A DYNAMIC PRICING STRATEGY.

3
AVAILABILITY
WHAT IS THE MEANING / DEFINITION OF AVAILABILITY?
AVAILABILITY IS THE AMOUNT OF ROOMS AT THE HOTEL OPEN FOR SALES FOR A SPECIFIC SET OF DATES AND / OR TYPE OF
ACCOMMODATION.
BAR - BEST AVAILABLE RATE
WHAT IS THE MEANING / DEFINITION OF BEST AVAILABLE RATE?
BAR STANDS FOR BEST AVAILABLE RATE WHICH IS THE LOWEST RATE OF THE DAY THAT IS AVAILABLE FOR GUESTS TO BOOK.
BEST-AVAILABLE-RATE (BAR) PRICING IS AN ATTEMPT TO REDUCE CONFUSION FOR HOTEL GUESTS CAUSED BY COMPLEX RATE
STRATEGIES WITH MANY DIFFERENT PRICES. THE BAR RATE IS IN ESSENCE THE LOWEST RATE AVAILABLE FOR EACH DATE, AND IS
OFFERD TO THE GUEST.
AS A RESULT, INSTEAD OF PAYING THE SAME PRICE FOR EACH ROOM-NIGHT, THE GUEST COULD PAY DIFFERENT PRICES EACH NIGHT.
THE RATE DISTRIBUTED WILL FLUCTUATE TO BE THE SAME AS UNRESTRICTED RATES AVAILABLE PUBLICLY ON ANY OTHER CHANNEL,
INCLUDING ONLINE RETAILERS, HOTEL WEB SITES, THE GDS, THE CRO OR THE HOTEL DIRECTLY. THIS PRACTICE CREATES
TRANSPARENCY IN TERMS OF THE PRICES THE HOTEL IS OFFERING DIRECT ON ITS OWN WEBSITE VERSUS PRICES ON THIRD PARTY
WEBSITE, SUCH AS OTA.
COMBINED WITH A BAR RATE STRATEGY, A HOTEL USUALLY ALSO INCORPORARET A GUARANTEE TO ALWAYS LOWER THE BEST PRICE
DIRECTLY. THIS IS CALLED BEST RATE GUARANTEE OR BRG.
BOOKING CURVE
WHAT IS THE MEANING / DEFINITION OF BOOKING CURVE?
BOOKING CURVE IS A TOOL THAT CAN VISUALLY SHOW HOW BOOKINGS MATERIALIZE OVER A CERTAIN PERION IN TIME. IT INCLUDES
DATA LIKE ROOM PICKUP, BOOKINGS, AND AVAILABILITY.
IT IS BEST DISPLAYED IN A GRAPH, WHICH WILL CLEARLY SHOW THE BOOKINGS DEVELOP OVER TIME. THE DATA TO ASSEMBLE A
BOOKING CURVE CAN USUALLY BE FOUND AND CALCULATED IN THE HOTEL’S PMS SYSTEM.
BOOKING PACE
WHAT IS THE MEANING / DEFINITION OF BOOKING PACE?
BOOKING PACE IS ALSO KNOWN AS PICKUP PACE. IT IS THE RATE OR SPEED AT WHICH RESERVATIONS ARE MADE FOR A PARTICULAR
DATE.
IT IS A USEFUL YIELD TOOL, USED A LOT IN FORECASTING, WHICH DEMONSTRATES IF YOU ARE TRENDING AT THE CORRECT
LEVEL. FOR INSTANCE IF YOUR HOTELS BOOKING PACE IS 2 ROOMS PER DAY, AND YOU HAVE 10 ROOMS LEFT TO SELL, FOR AN
ARRIVAL DATE IN 5 DAYS FROM NOW, YOU CAN EXPECT OR FORECAST TO SELL-OUT.

4
BOOKING WINDOW
WHAT IS THE MEANING/DEFINITION OF BOOKING WINDOW?
BOOKING WINDOW IS SIMILAR TO LEAD TIME. IT’S THE PERIOD OF TIME BETWEEN THE RESERVATION IS MADE BY THE GUESTS OR A
GROUP AND THE ACTUAL ARRIVAL DATE TO THE HOTEL.
DIFFERENT MARKET SEGMENTS CAN HAVE DIFFERENT BOOKING WINDOWS. IT IS IMPORTANT TO CONSIDER THE BOOKING WINDOW
TO PROPERLY EVALUATE THE FINANCIAL PERFORMANCE OF THE HOTEL AND MAKE PROPER PRICING DECISIONS. IF FOR EXAMPLE
YOUR HOTEL HAVE A BOOKING WINDOW OF 30 DAYS THERE MIGHT BE NO NEED TO PULL DOWN YOUR PRICE FOR A CERTAIN DAY
WITH 50 DAYS OF ADVANCE ALTHOUGH YOU HAVE LOW OCCUPANCY FOR THAT SPECIFIC DATE.
BRG - BEST RATE GUARANTEE
WHAT IS THE MEANING / DEFINITION OF BRG?
BRG STANDS FOR BEST RATE GUARANTEE.
THE HOTEL MAKES A PROMISE THAT THE ROOM PRICES FOUND ON THEIR WEBSITE ARE THE BEST RATES COMPARED TO OTHER ANY
OTHER SITES.
HOTELS IMPLEMENT THE BRG POLICY, TO DRIVE CONSUMERS TO BOOK DIRECTLY VIA THEIR OWN WEBSITE, INSTEAD OF THE THIRD
PARTY OTA. OTA'S ARE OF COURSE GIVING THE SAME PROMISE AS THEY WANT TO ENCOURAGE CONSUMERS TO BOOK THEIR
HOTEL STAY WITH THEM.
THE POLICY IN GENERAL OUTLINES THAT IF WITHIN 24 HOURS OF MAKING A RESERVATION, A CUSTOMER FINDS A LOWER HOTEL
RATE FOR THE SAME HOTEL,ROOM TYPE AND RESERVATION DATES, AND SUBMIT A QUALIFIED GUARANTEE FORM, THE HOTEL SHOULD
MATCH THE RATE AND GIVE YOU AN EXTRA DISCOUNT ON THE ROOM.
THE BEST RATE IS OF COURSE RELATIVE, AS IT DOES NOT HAVE TO BE LOWER, THE SAME RATE IS ALSO THE BEST IN THIS CASE.
CLOSE OUT
WHAT IS THE MEANING / DEFINITION OF CLOSE OUT?
HOTEL ROOMS MADE UNAVAILABLE FROM SALES. SUCH A CLOSED OUT COULD BE FOR A VARIETY OF REASONS, AND APPLIED TO
INDIVIDUAL MARKET SEGMENTS.
FOR INSTANCE DATES COULD BE CLOSED OUT FOR SALES FROM LOWER PRICED SEGMENTS DURING HIGH DEMAND DATES SUCH AS
LARGE TRADEFAIRS OR CITY WIDE EVENTS.
COMP SET
WHAT IS THE MEANING / DEFINITION OF COMP SET?
COMPSET STANDS FOR COMPETITIVE SET. IT IS A GROUP OF HOTELS THAT ARE SEEN AS COMPETITORS OF YOUR HOTEL.
THE HOTEL WILL USE IT TO COMPARE ITS PERFORMANCE WITH THOSE OF THE COMPSET AND SEE HOW TO MAKE ITSELF MORE
COMPETITIVE.

5
CPOR - COST PER OCCUPIED ROOM
WHAT IS THE MEANING / DEFINITION OF CPOR?
CPOR STANDS FOR COST PER OCCUPIED ROOM
THE CPOR FORMULA HELPS CALCULATE THE AVERAGE COST PER ROOM OCCUPIED ROOM IN THE HOTEL. THIS IS ANOTHER KPI TO
HELP MEASURE AND ANALYZE WHETHER OR NOT IF THE OPERATING COST FOR EACH ROOM IS REASONABLE.
FORMULA:
COST PER OCCUPIED ROOM= TOTAL ROOMS DEPARTMENTS COST / NUMBER OF ROOMS SOLD
CALCULATION:
€ 1.875 / 75 = €25
CTA - CLOSED TO ARRIVAL
WHAT IS THE MEANING / DEFINITION OF CTA OR CLOSED TO ARRIVAL?
CTA STANDS FOR CLOSED TO ARRIVAL. IT IS A YIELD TOOL USED TO CLOSE DAYS OUR FROM RESERVATIONS ARRIVING ON A PARTICULAR DAY.
WHEN REQUESTING A STAY ON THE HOTEL'S WEBSITE, WITH SUCH A DAY AS CHECK-IN DATE, IT WILL SHOW AS NOT AVAILABLE. HOWEVER YOU CAN BOOK ROOMS
ARRIVING BEFORE AND STAY THROUGH SUCH DATE.
CTD - CLOSED TO DEPARTURE
WHAT IS THE MEANING / DEFINITION OF CTD?
CTD STANDS FOR CLOSED TO DEPARTURE. IT IS A SPECIFIC SET OF DAYS GUESTS CANNOT MAKE THEIR RESERVATION FOR WITH THIS DATE AS CHECK-OUT.
IN CONTRARY TO CLOSED TO ARRIVAL, THEY CAN BOOK THE ROOMS BEFORE ANDSTAY THROUGH THE DATES BUT THEY CANNOT MAKE RESERVATION THAT THEIR
STAY WOULD END ON ONE OF THOSE VERY SPECIFIC “CLOSE TO DEPARTURE” DATES.
CUT-OFF
WHAT IS THE MEANING/DEFINITION OF CUT OFF?
CUT-OFF IS SIMILAR TO RELEASE DATE. IT IS WHEN HOTEL SET A LIMIT TIME THE RESERVATION CAN BE MADE PRIOR TO THE GUEST'S
ACTUAL ARRIVAL. IT’S A WAY FOR HOTEL CONTROL THEIR LEAD TIME.
FOR EXAMPLE, IF A GUEST WANTS TO BOOK A RESERVATION FOR TOMORROW, AND TOMORROW'S CUT OFF DAYS IS SET TO 2 DAYS, IT
WOULD NOT SHOW AS BOOKABLE TO THE GUEST SINCE IT WAS NOT BOOKED 2 DAYS PRIOR TO THE ARRIVAL DATE
DBA - DAYS BEFORE ARRIVAL
WHAT IS THE MEANING / DEFINITION OF DAYS BEFORE ARRIVAL?
DBA STANDS FOR DAYS BEFORE ARRIVAL.
IT’S THE NUMBER OF DAYS REMAINING BEFORE THE EXPECTED ARRIVAL DATE OF GUESTS.
THIS IS OFTEN USED IN POLICIES IN REGARDS TO CANCELATION OR PREPAYMENT TO IDENTIFY FROM WHICH POINT IN TIME ON A
SPECIFIC RULE APPLIES. FOR ISTANCE FULL PAYMENT NEEDS TO BE MADE 30 DAYS BEFORE ARRIVAL.

6
DEMAND
WHAT IS THE MEANING /DEFINITION OF DEMAND?
BY DEMAND, WE MEAN THE LEVEL OF CONSUMER INTEREST AND NEED: DEMAND FOR BEDS, DEMAND FOR FAMILY ROOMS, DEMAND
FOR CONFERENCING, EVENT SPACE, RENTABLE SCUBA DIVING GEAR...
IF A MANAGER ASKS A CHEF: 'JACQUES, DID YOU SERVE A LOT OF MEALS IN THE RESTAURANT TONIGHT?' SHE COULD ALSO FRAME THE
SAME QUESTION LIKE THIS: ''JACQUES, WAS THERE HIGH DEMAND FOR MEALS IN THE RESTAURANT TONIGHT?'
DEMAND FOR PRODUCTS AND SERVICES CAN CHANGE A LITTLE, OR A LOT! FOR EXAMPLE, HOTELS IN AUSTRIA'S TYROL WILL
EXPERIENCE A NOTICEABLE INCREASE IN DEMAND FOR ROOMS DURING THE PEAK SKIING SEASON, BUT DURING THE LOW SEASON
DEMAND COULD BE WORRYINGLY SMALL.
GENERALLY, PRICES AMPLIFY AS DEMAND GROWS, AND VICE VERSA.
IN HOSPITALITY, OTHER TYPES OF DEMAND COULD INCLUDE:
CONSTRAINED OR UNCONSTRAINED DEMAND – THE TOTAL DEMAND FOR A PARTICULAR DATE IRRESPECTIVE OF A HOTEL'S CAPACITY.
ELASTIC OR INELASTIC DEMAND – AN INELASTIC DEMAND MEANS THAT THE DEMAND IS NOT SENSITIVE TO FLUCTUATING PRICING
LEVELS.
DEMAND BASED PRICING
WHAT IS THE MEANING / DEFINITION OF DEMAND-BASED PRICING?
IN THE HOSPITALITY INDUSTRY, PRICES FOR SERVICES DO NOT HAVE TO BE PERMANENTLY SET. THEY CAN BE ADJUSTED, DEPENDING
UPON HOW MANY ROOMS, MEALS, ETC. ARE NEEDED BY CUSTOMERS AT ANY A PARTICULAR TIME. THIS IS WHAT DEMAND-BASED
PRICING IS ALL ABOUT – THE PRICE OF SOMETHING CHANGES DEPENDING UPON HOW MUCH DEMAND THERE IS FOR IT AT A GIVEN
TIME.
SO, YOU CAN SEE THAT DEMAND-BASED PRICING OFFERS A LOT OF FLEXIBILITY TO HOTELS AND OTHER TYPES OF BUSINESSES IN THE
HOSPITALITY INDUSTRY, WHICH CAN ONLY BE A GOOD THING!
LET'S LOOK AT A SPECIFIC EXAMPLE NOW...
A HOTEL IN WIMBLEDON (LONDON, UK) WANTS TO MAKE AS MUCH MONEY AS POSSIBLE DURING THE WORLD-FAMOUS WIMBLEDON
LAWN TENNIS CHAMPIONSHIPS. THEY KNOW THAT DEMAND FOR ROOMS AND OTHER SERVICES WILL BE VERY HIGH DURING THAT
TIME IN SUMMER. SO, THEY PLAN TO INCREASE THEIR PRICES THEN, IN PARALLEL TO DEMAND ESCALATION.
THE ECONOMIC 'LAW' OF SUPPLY AND DEMAND IS STRAIGHTFORWARD AND UNIVERSAL. WHEN MANAGING REVENUE, MAKING A
PRICING STRATEGY DEMAND-BASED IS ESSENTIAL – A HOTEL CAN ALTER ITS ROOM RATES AT DIFFERENT TIMES OF THE YEAR,
INSTEAD OF ALWAYS BEING FRUSTRATINGLY STUCK AT ONE PRICING LEVEL.
WHEN DEMAND IS HIGH, PRICES USUALLY INCREASE.
WHEN DEMAND IS LOW, PRICES USUALLY DECREASE.

7
DEMAND GENERATORS
WHAT IS THE MEANING / DEFINITION OF DEMAND GENERATORS?
IN HOSPITALITY, MEETING DEMAND FOR GOODS AND SERVICES IS NOT ONLY ABOUT MEETING CUSTOMERS' NEEDS, WHENEVER
REQUIRED; SOMETIMES, A HOTEL OR OTHER TYPE OF HOSPITALITY BUSINESS CAN CREATE DEMAND.
THE BEST WAY TO DO THIS IS BY USING DEMAND GENERATORS.
YES, IT SOUNDS QUITE SELF-EXPLANATORY, DOESN'T IT! BUT LET'S CONSIDER THIS IN MORE DETAIL...
DEMAND CAN BE INCREASED BY HOTELS (OR, IN FACT, DECREASED DURING BUSY GROUP BOOKING PERIODS OR WHEN REFURBISHING,
FOR EXAMPLE), DEPENDING UPON WHEN THEY NEED OR WANT TO DO THIS. THEY DON'T HAVE TO SIT AND WAIT TO SEE WHAT
CUSTOMERS WILL DO (AND THEREFORE ARE AT THE MERCY OF CONSUMER BEHAVIOUR ALL THE TIME). NO. THERE IS ANOTHER WAY.
A BETTER WAY. AND THAT IS DEMAND GENERATION.
LET'S LOOK AT THIS EXAMPLE:
A HOTEL IN PORTUGAL'S ALGARVE REGION DOES NOT HAVE MANY BOOKINGS IN THE PRE AND AFTER SEASON, OUTSIDE THE MAIN
SUMMER PEAK DEMAND PERIODS. SO, THE HOTEL MANAGEMENT MUST FIND A WAY TO ATTRACT CUSTOMERS DURING THOSE TIMES.
THE BEST THING THEY CAN DO IS CREATE A DEMAND GENERATOR, SUCH AS OFFERING A REDUCED PRICE DEAL, WITH LOTS OF
ADDITIONAL OFFERS BUILT INTO IT.
'HALF-PRICE ROOMS, WITH FREE BREAKFAST!' NOW, THAT WOULD BE DIFFICULT TO RESIST!
TO MAKE THIS EVEN MORE APPEALING, THE HOTEL COULD PUT A TIME LIMIT ON THE OFFER: 'THIS PACKAGE IS ONLY AVAILABLE FOR
THE NEXT FOURTEEN DAYS.' THIS WOULD ENCOURAGE POTENTIAL CUSTOMERS TO BOOK QUICKLY, FOR FEAR OF MISSING OUT ON THE
PROMOTION.
PSYCHOLOGY CAN ALSO BE USED IN DEMAND GENERATION BY OFFERING AN EXCLUSIVE PACKAGE. THAT'S RIGHT; YOU DON'T JUST
HAVE TO CUT PRICES TO GROW DEMAND! SOMETIMES, BY MAKING PEOPLE FEEL THAT THEY COULD BECOME A MEMBER OF A
PRESTIGIOUS 'ELITE CLUB' BY JOINING OTHER PEOPLE ON AN EXCLUSIVE HOLIDAY, THAT CAN RESULT IN INCREASED (HIGHER
PRICED) BOOKINGS FOR A HOTEL, TOO
DENIAL
WHAT IS THE MEANING / DEFINITION OF DENIAL?
WELL, IT IS QUITE SIMPLE. WHEN A HOTEL CANNOT ACCOMMODATE MORE GUESTS, BECAUSE IT IS FULLY BOOKED AT THAT TIME,
THEN THEIR RESPONSE TO THE POTENTIAL CUSTOMERS' REQUEST IS CALLED A DENIAL.
EVERY YEAR, MANY HOTELS AROUND THE WORLD HAVE TO DENY RESERVATIONS TO PEOPLE EAGER TO STAY WITH THEM, BUT THAT
IS THE NATURE OF THE HOSPITALITY INDUSTRY, UNFORTUNATELY. IT IS GOOD FOR A FULLY-BOOKED HOTEL, OF COURSE, BUT NOT
FOR THE PEOPLE WHO REALLY WANT TO STAY THERE!
KEEPING A RECORD OF DENIALS IS ALWAYS A GOOD IDEA FOR A HOTEL. WHY? BECAUSE IT CAN HELP THEM IN THEIR CUSTOMER
MONITORING. HAVING SUCH DATA AT HAND CAN HELP HOTELS TO MORE EFFECTIVELY YIELD ON THEIR LIMITEDINVENTORY,
ACHIEVING THE BEST LAST ROOM VALUE. ALSO, KNOWING HOW MANY DENIALS YOU HAVE IN YEAR 1, FOR EXAMPLE, WILL GIVE YOU
AN INSIGHT INTO HOW MUCH EXTRA CAPACITY YOU MIGHT ENDEAVOUR TO CREATE IN YEAR 2.
TRACKING DENIAL STATISTICS CAN GIVE AN INDICATION OF HOW MUCH UNFULFILLEDDEMAND A HOTEL HAS FOR A CERTAIN DATE,
TOO. FOR EXAMPLE, IF A PARTICULAR HOTEL IN CHICAGO ALWAYS HAS AN INCREASED DEMAND FOR BOOKINGS ON THE EVE OF THE
PATRICK'S DAY PARADE, THEY CAN ADJUST THEIR PRICES FOR THAT DATE TO ENSURE THAT THEY ARE MAXIMISING PROFITS – THE
PEOPLE WHO CAN PAY INCREASED PRICES GET THE ROOMS (RATHER THAN BEING DENIED THEM).

8
DISPLACEMENT ANALYSIS
WHAT IS THE MEANING / DEFINITION OF DISPLACEMENT ANALYSIS?
FOR A HOTEL, THE IDEA OF MAKING MONEY THROUGH ACCEPTING GROUP BUSINESS BOOKINGS SOUNDS LIKE A GOOD IDEA – AN
OBVIOUS THING TO DO.
BUT IS THAT REALLY ALWAYS THE CASE?
THE ANSWER IS NO!
SOMETIMES IT WOULD BE PRUDENT TO DENY A GROUP BOOKING IN FAVOUR OF LEAVING ROOMS AVAILABLE TO TRANSIENT (NON-
BUSINESS) CUSTOMERS AND WALK-IN GUESTS. THE METHOD USED TO MAKE THIS JUDGEMENT IS CALLED DISPLACEMENT ANALYSIS.
BY USING DISPLACEMENT ANALYSIS, A HOTEL CAN CALCULATE THE VALUE OF THE GROUP BOOKING COMPARED TO WHAT TRANSIENT
AND WALK-IN BOOKINGS WOULD GENERATE BY CONTRAST. BASED ON THE RESULTS OF THE DISPLACEMENT ANALYSIS, IT CAN THEN
MAKE A DECISION ON WHETHER TO ACCEPT A GROUP BUSINESS BOOKING OR NOT.
WITH ANY HOTEL BOOKING, YOU HAVE TO CONSIDER THE TOTAL VALUE, NOT JUST THE ROOM RATES. ALL FOOD AND BEVERAGE
SPENDING, MEETING ROOM RENTAL, AND ANY ADDITIONAL OUTLET SPENDING (MINUS ANY COSTS) INVOLVED, AS WELL AS RANDOM
ANCILLARY IN-HOUSE SPENDING, WILL HAVE TO BE FACTORED INTO THE DISPLACEMENT ANALYSIS CALCULATION.
IF THE VALUE OF THE DISPLACED TRANSIENT BOOKING IS LESS THAN THAT OF THE GROUP BUSINESS BOOKING, THEN IT WOULD MAKE
SENSE TO ACCEPT THE GROUP BOOKING, OF COURSE (AND VICE VERSA!).
DISTRESSED INVENTORY
WHAT IS THE MEANING / DEFINITION OF DISTRESSED INVENTORY?
DISTRESSED INVENTORY IS USED IN HOTELS TO REFER TO ROOMS THAT ARE NOT EXPECTED TO BE SOLD AT FULL PRICE. FOR THESE
ROOMS, HOTELS OFTEN SIGNIFICANTLY REDUCE PRICES TO ENCOURAGE CONSUMERS TO BOOK LAST-MINUTE AND TO AVOID THEIR
ROOMS GOING UNOCCUPIED.
AFTER ALL, IT IS BETTER TO MAKE A LITTLE LESS MONEY ON A HOTEL ROOM BOOKING THAN TO MAKE NONE AT ALL, ISN'T IT? WHAT
IS THE VALUE OF A HOTEL ROOM IF IT IS EMPTY? THE ANSWER, OF COURSE, IS ZERO.
ALSO, A HOTEL THAT IS FULL TO CAPACITY IS GOOD FOR BUSINESS IN OTHER WAYS. IT CONVEYS THE IMPRESSION THAT THERE IS
ALWAYS HIGH DEMAND FOR ROOMS THERE. THIS CAN ENHANCE A HOTEL'S REPUTATION BOTH LOCALLY, REGIONALLY AND
NATIONALLY (AND SOMETIMES EVEN INTERNATIONALLY).
AND DON'T FORGET, WHEN PEOPLE STAY AT A HOTEL, THEY DON'T JUST PAY FOR THE ROOM. OTHER REVENUE CAN BE GENERATED
FROM FOOD SERVICES, RECREATIONAL ACTIVITIES AND THROUGH OTHER ANCILLARY IN-HOUSE SPENDING. SOMETIMES, THE
DISCOUNTED AMOUNT OF MONEY ON A REDUCED PRICE ROOM CAN BE MADE UP THROUGH THE LATE-COMING GUESTS' EXTRA
EXPENDITURE.
ALL THIS IS WHY DISTRESSED INVENTORY IS SOMETHING THAT ALL HOTELS SHOULD SERIOUSLY CONSIDER AS PART OF THEIR
OVERALL STRATEGY!

9
DYNAMIC PRICING
WHAT IS THE MEANING / DEFINITION OF DYNAMIC PRICING ?
SUCCESSFUL HOTELS AROUND THE WORLD AIM FOR OPTIMUM PROFITABILITY AT ALL TIMES. THERE ARE LOTS OF THINGS A HOTEL
CAN DO TOWARDS ACHIEVING THIS. ONE IS FOR THE REVENUE MANAGEMENT TEAM TO MAKE DYNAMIC PRICING PART OF THEIR
OVERALL STRATEGY.
WHEN IT COMES TO DYNAMIC PRICING, THE KEY IS FLEXIBILITY. ROOMS WITHIN THE SAME CATEGORY AT A HOTEL CAN BE SOLD AT
DIFFERENT PRICES AT DIFFERENT TIMES – THE PRICE DOES NOT ALWAYS HAVE TO REMAIN LOCKED.
SO, HOW DOES A HOTEL KNOW WHEN TO CHANGE THE RATE FOR CERTAIN ROOMS, OR INDEED, ALL OF THEM? WELL, THE BEST WAY
TO DO THIS IS TO CLOSELY MONITOR CONSUMER DEMAND. IF YOU KNOW HOW MUCH NEED THERE IS FOR ROOMS AT CERTAIN TIMES,
YOU CAN THEN ADJUST YOUR PRICES TO SATISFY THOSE NEEDS, AT EXACTLY THE RIGHT MOMENT.
THE DEMANDS OF THE MARKET, THEN, DETERMINE HOW ROOM RATES DYNAMICALLY ALTER. AND THIS DOES NOT ONLY APPLY TO
ADJUSTING ROOM RATES FOR INDIVIDUAL CUSTOMERS, COUPLES OR FAMILIES. DYNAMIC PRICING CAN ALSO BE FACTORED INTO THE
MANAGEMENT OF GROUP BUSINESS BOOKINGS, I.E. WHEN SETTING GROUP RATES AND CORPORATE RATES.
FINALLY, IF A HOTEL HAS A MEMBERSHIP SCHEME, DYNAMIC PRICING CAN BE USED WHEN CREATING A MEMBER RATE PRICING
STRATEGY. THE COST OF ROOMS AND OTHER IN-HOUSE SERVICES CAN BE DYNAMICALLY CHANGED, IN ACCORDANCE WITH
ROOM AVAILABILITY FOR MEMBERS AND ALSO THE TERMS OF EACH MEMBERSHIP PACKAGE.
EARLY BIRD DISCOUNT
WHAT IS THE MEANING/DEFINITION OF EARLY BIRD DISCOUNT?
HOTELS CAN INCREASE ADVANCED BOOKINGS BY OFFERING SOMETHING CALLED AN EARLY BIRD DISCOUNT. THIS IS A TYPE OF
PROMOTION THAT MANY HOTELS ACROSS THE WORLD USE TO INCREASE REVENUE. IT IS ALSO POPULAR WITH CONSUMERS, WHO
ALWAYS LIKE TO GET A SPECIAL RATE WHEN BOOKING ROOMS OR TAKING ADVANTAGE OF OTHER IN-HOUSE SERVICES AT HOTELS
LARGE AND SMALL.
IT IS IMPORTANT FOR A HOTEL REVENUE MANAGEMENT TEAM TO STRICTLY CONTROL EARLY BIRD DISCOUNT PROMOTIONS,
HOWEVER, TO MAKE SURE THAT ONLY THE GUESTS WHO DEFINITELY QUALIFY FOR THE SPECIAL RATE RECEIVE IT. ONE WAY TO DO
THIS IS TO OFFER AN EARLY BIRD DISCOUNT AS A NON-REFUNDABLE RATE. IF THE GUESTS DOES NOT ARRIVE AT THE AGREED TIME,
THEN THEY WILL MISS OUT ON THE DISCOUNT.
USUALLY YOU CAN ONLY HAVE THE SPECIAL RATE UNDER EARLY BIRD DISCOUNT IF YOUR LEAD TIME FROM THE RESERVATION UNTIL
YOUR ACTUAL ARRIVAL AT THE HOTEL IS FROM 1 WEEK TO A MONTH APART.
AS WELL AS HELPING A HOTEL TO CONTROL COSTS, HAVING AN EARLY BIRD DISCOUNT NON-REFUNDABLE POLICY ALWAYS HELPS TO
ENCOURAGE GUESTS TO ARRIVE ON TIME ON THE AGREED DATE. IF THEY DON'T, THEY WILL MISS OUT ON THE OFFER AND HAVE TO
PAY THE NORMAL ROOM RATE. THEY MAY EVEN HAVE TO PAY A CANCELLATION OR LATE-BOOKING FEE IF THEY DO NOT STICK TO
THEIR PART OF THE PROMOTIONAL AGREEMENT! (WHEREAS PAYING THE REGULAR RATE USUALLY ALLOWS CANCELLING OR
CHANGING THE BOOKING FOR FREE UP TO A DAY OR TWO BEFORE).

10
EBITDA
WHAT IS THE MEANING / DEFINITION OF EBITDA?
EBITDA STANDS FOR : EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION.
IT IS A KPI WHICH ILLUSTRATES HOW MUCH PROFIT IT MAKES WITH ITS PRESENT ASSETS AND ITS OPERATIONS ON THE PRODUCTS
IT PRODUCES AND SELLS, AS WELL AS PROVIDING A PROXY FOR CASH FLOW (OPERATING PROFIT BEFORE DEPRECIATION AND
AMORTIZATION AND GAIN ON SALE OF SHARES AND FIXED ASSETS AND NET FINANCIAL ITEMS AND TAX).
IT CAN BE USED TO ANALYZE AND COMPARE PROFITABILITY BETWEEN HOTELS AND THE INDUSTRIES BECAUSE IT ELIMINATES THE
EFFECTS OF FINANCING AND ACCOUNTING DECISIONS.
FORMULA:
EBITDA = REVENUE - EXPENSES*
* EXPENSES IN THIS CASE ARE EXCLUDING INTEREST, TAXES, DEPRECIATION AND AMORTIZATION.
EBITDAR
WHAT IS THE MEANING / DEFINITION OF EBITDAR?
EBITDAR STANDS FOR: EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AMORTIZATION, AND RENT
EBITDAR IS WHEN OPERATING PROFIT BEFORE RENTAL EXPENSE AND SHARE OF INCOME IN ASSOCIATES AND BEFORE
DEPRECIATION AND AMORTIZATION AND GAIN ON SALE OF SHARES AND OF FIXED ASSETS AND NET FINANCIAL ITEMS AND TAX.
IT IS USEFUL KPI FOR HOTEL TO EVALUATE ITS FINANCIAL PERFORMANCE.
FORMULA:
EBITDAR = REVENUE - EXPENSES*
*EXPENSES IN THIS CASE ARE EXCLUDING TAX, INTEREST, DEPRECIATION, AMORTIZATION AND RENT (OR RESTRUCTURING) COST
FAIR MARKET SHARE
WHAT IS THE MEANING/DEFINITION OF FAIR MARKET SHARE?
HOTELS CAN MEASURE THEIR PERFORMANCE BY COMPARING THEMSELVES AGAINST OTHER HOTELS. YES, IT IS ALWAYS A GOOD IDEA
TO SEE WHAT THE COMPETITION IS DOING!
A HOTEL WITHIN A COMPETITIVE GROUP (ALSO CALLED A COMPETITIVE SET ORCOMP SET) CAN WORK OUT IF IT IS GETTING ITS
FAIR MARKET SHARE (A REASONABLE SLICE OF THE CAKE, IF YOU LIKE) BY USING A SIMPLE CALCULATION:
FAIR MARKET SHARE = TOTAL NUMBER OF ROOMS AT THE HOTEL / TOTAL NUMBER OF ROOMS IN THE COMP SET
THE COMP SET ROOM TOTAL CAN BE HUNDREDS OR THOUSANDS, OF COURSE, DEPENDING UPON THE SIZE OF THE SET: HOW MANY
HOTELS ARE IN IT AND HOW BIG THOSE HOTELS ARE.
HOWEVER LARGE OR SMALL THE COMP SET, A HOTEL TRYING TO FIND OUT IF IT IS GETTING ITS FAIR SHARE OF BUSINESS CAN MAKE
ITSELF MORE COMPETITIVE BY UTILISING THE POWERFUL FAIR MARKET SHARE TOOL, WHEN IT NEEDS TOO, AND THEN ADJUSTING
ITS OPERATIONAL STRATEGY IN ACCORDANCE WITH THE RESULTS.
THE GREAT THING ABOUT THE FAIR MARKET SHARE TOOL IS THAT A HOTEL CAN USE IT AT ANY TIME OF YEAR, TO COMPARE ITS
INDIVIDUAL PERCENTAGE TO THEIR COMP SET. DURING PEAK TIMES, SUCH AS IN SUMMER, DURING THE HEIGHT OF THE SKIING

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SEASON, AND/OR OVER THE CHRISTMAS & NEW YEAR HOLIDAY, A HOTEL CAN GATHER IMPORTANT INFO ABOUT THE PERFORMANCE
OF THE OTHER HOTELS IN THEIR COMP SET. THEN, USING THEIR FAIR MARKET SHARE TOOL IT CAN DISCOVER HOW IT COMPARED TO
OTHER HOTELS DURING THOSE BUSY TIMES. THIS CAN HELP WHEN PLANNING AHEAD FOR THE NEXT YEAR OR EVEN FURTHER INTO
THE FUTURE.
FENCED RATE
WHAT IS THE MEANING / DEFINITION OF FENCED RATE?
LOTS OF VARIABLES CAN DETERMINE A HOTEL'S PURCHASE RATES FOR ROOMS. AND WHEN THESE RATES ARE EASILY SEGMENTED
INTO FENCED RATES, IT MAKE THE WHOLE RATE-SETTING PROCESS A LOT SIMPLER WHEN ACCEPTING HOTEL RESERVATIONS FOR
OVERNIGHT OR WEEKEND STAYS.
THE TERM FENCED RATE REFERS TO RESERVATIONS THAT MAY ALLOW CERTAIN BENEFITS FOR BOOKERS, BUT UNDER SOME
CONDITIONS AND REQUIREMENTS.
TYPES OF FENCED RATES CAN INCLUDE:
NON-REFUNDABLE RESERVATIONS
NON-CANCELLABLE RESERVATIONS
ADVANCED PURCHASE RESERVATIONS
FOR BOTH HOTELIERS AND CUSTOMERS, FENCED RATES CAN BE BENEFICIAL.
BY SETTING FENCED RATES, AND ADHERING TO A WELL THOUGHT-THROUGH FENCED RATE PRICING STRATEGY, A HOTEL CAN OFTEN
SELL MORE ROOMS IN ADVANCE. AND FOR GUESTS WHO ACCEPT FENCED RATES WHEN RESERVING ROOMS, THERE CAN BE
ADVANTAGES, SUCH AS REDUCED PRICES FOR IN-HOUSE SERVICES AND ACTIVITIES PARTICIPATION, AS WELL AS ENJOYING THE PEACE
OF MIND THAT MAKING A DEFINITE ADVANCED BOOKING CAN BRING.
GUESTS CAN ARRIVE AT A HOTEL ON AN AGREED DATE AND FIND THEIR ROOMS READY FOR THEM, AND NOT OCCUPIED BY SOMEONE
ELSE. THIS IS ESPECIALLY IMPORTANT FOR FAMILIES.
NOTE: GUESTS ARE NOT FORCED TO ACCEPT THESE RESTRICTIONS, BUT THEIR RATE IS DETERMINED BY WHICH (IF ANY) FENCES
THEY ACCEPT.
FORECAST
WHAT IS THE MEANING / DEFINITION OF FORECAST?
FOR ANY HOTEL SEEKING TO MAXIMIZE PROFITS, IT CAN PAY TO LOOK AHEAD, TO TRY TO PREDICT THE FUTURE... ONE WAY TO DO
THIS IN AN ORGANIZED MANNER IS TO CREATE SOMETHING CALLED A FORECAST. FORECASTING CAN BE DONE AT ANY TIME OF YEAR,
BY ANY KIND OF ESTABLISHMENT IN THE HOSPITALITY SECTOR, IN FACT, NOT JUST AT HOTELS LARGE AND SMALL ACROSS THE
WORLD.
THE BEST WAY TO FORECAST FUTURE BOOKINGS AND OTHER DEMAND FOR SERVICES IS TO USE A CALCULATION – TO ASK A
RELATIVELY SIMPLE QUESTION: 'AT OUR HOTEL, WHAT IS THE LIKELY EXPECTED REVENUE IN 2016, BASED ON OUR
REVENUE TEAM'S ANALYSIS OF FIGURES FROM 2015 (THE OCCUPANCY AND AVERAGE RATE)?'
A FORECAST NEED NOT ONLY BE BASED ON A WHOLE YEAR, OF COURSE; SOMETIMES, IT CAN BE USEFUL TO CREATE A MONTH-TO-
MONTH, OR EVEN A WEEK-TO-WEEK FORECAST!
FORECASTING IS SOMETHING THAT NO HOTEL SHOULD IGNORE, AS IT CAN HELP IMMENSELY TOWARDS MONITORING AND FORESEEING
TRENDS IN CONSUMER BEHAVIOUR, AND ALSO TO ACCURATELY GAUGE THE DEMAND OF EACH SEASON.

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GOP
WHAT IS THE MEANING / DEFINITION OF GOP?
GOP STANDS FOR: GROSS OPERATING PROFIT
IT IS A KPI WHICH REFERS TO THE HOTELS PROFITS AFTER SUBTRACTING ALL OF THEIR OPERATING EXPENSES. IT ILLUSTRATES THE
LEVEL OF OPERATIONAL PROFITABILITY OF A HOTEL.
GOPPAR
WHAT IS THE MEANING / DEFINITION OF GOPPAR?
GOPPAR STANDS FOR: GROSS OPERATING PROFIT PER AVAILABLE ROOM
IT IS ONE OF THE MOST EFFECTIVE WAYS TO LOOK AT YOUR HOTEL´S PERFORMANCE AND MAKE ADJUSTMENTS THAT IMPACT THE
BEST INTERESTS TO ACHIEVE THE HOTEL´S GOALS.
GOPPAR IS A KPI THAT ALLOWS HOTELS TO APPLY THE LAWS OF ECONOMICS TO A COMPLETE DRILL DOWN OF THE PROCESS
OF REVENUE MANAGEMENT AND MAKE ADJUSTMENTS NOT ONLY ON ACHIEVING THE TOP LINE BUT ALIGNING IT WITH THE BOTTOM
LINE AS WELL. FROM AN OWNERSHIP PERSPECTIVE, GOPPAR ALLOWS YOU TO SEE WHAT THE VALUE OF YOUR ASSET IS AT ANY
GIVEN TIME. A HOTEL IS REALLY TWO ASSETS IN ONE; A REAL ESTATE ASSET AND AN OPERATING BUSINESS.
FORMULA:
GOPPAR= GOP (GROSS OPERATNG PROFIT) / AVAILABLE ROOMS
GROUP DISPLACEMENT
WHAT IS THE MEANING / DEFINITION OF GROUP DISPLACEMENT?
GROUP BOOKINGS CAN HELP INCREASE PROFITS FOR HOTELS, BUT (PERHAPS SURPRISINGLY) NOT ALWAYS! SOMETIMES RESERVING
ROOMS FOR A GROUP BOOKING (AND THEREFORE MAKING THEM UNAVAILABLE FOR TRANSIENTCUSTOMERS) CAN PROVE A MISTAKE.
THERE MIGHT HAVE BEEN MORE PROFITABILITY IN REFUSING A GROUP BOOKING, EVEN IF IT INVOLVED A GROUP CONSISTING OF
SEVERAL PEOPLE WHO WISHED TO STAY FOR SEVERAL NIGHTS AND EVEN OVER THE WEEKEND.
WHEN TRANSIENT OR WALK-IN CUSTOMERS (AND INDIVIDUAL, COUPLE, OR FAMILY) ARE PRECLUDED FROM MAKING A RESERVATION
DUE TO A GROUP BOOKING BEING TAKEN INSTEAD, THEY ARE DESCRIBED AS BEING 'DISPLACED' BY THE GROUP BOOKING.
ONE OR SEVERAL GROUPS CAN BE DISPLACED BY A PARTICULAR GROUP, TOO, IF THE HOTEL SO DECIDES.
THANKFULLY FOR HOTELS, GROUP DISPLACEMENT, WHICH WOULD FORM PART OF THEIR DISPLACEMENT ANALYSIS PROCESS, IS
NOT ALL DOWN TO GUESSWORK! GROUP DISPLACEMENT CAN BE MEASURED. BEFORE ACCEPTING ANY GROUP RESERVATION, THE
FOLLOWING DATA MUST BE CONSIDERED WHEN CALCULATING THE OVERALL PROFITABILITY:
HOW MANY ROOMS WILL THE GROUP REQUIRE?
HOW MUCH REVENUE WILL ALSO BE GENERATED FROM FOOD AND BEVERAGE AND OTHER SERVICES?
WILL THE GROUP NEED A MEETING ROOM (OR MAYBE EVEN MORE THAN ONE)? AND IF SO, WHAT WILL THE EXTRA COST OF THIS BE?
IF THE GROUP WISHES TO STAY AT THE HOTEL AS THEY ARE ALSO HOLDING OR PARTICIPATING IN AN EVENT THERE, WILL THEY
WANT TO BOOK EXTENSIVE EVENT SPACE? AND IF SO, HOW MUCH EXTRA REVENUE WILL THIS CREATE FOR THE HOTEL?

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ONE MISTAKE SOME HOTELS MAKE IS TO ALWAYS ACCEPT THE GROUP BOOKING THAT WILL MAKE THEM THE MOST MONEY. OF
COURSE, IT IS IMPORTANT TO ALWAYS STRIVE TO MAXIMISE PROFITS, BUT SOMETIMES THIS CAN PROVE A MISTAKE – A CLASSIC
EXAMPLE OF SHORT-TERM THINKING! IT CAN SOMETIMES PROVE BETTER FOR BUSINESS AND HOTEL/CUSTOMER RELATIONS OVERALL
IF A HOTEL ACCEPTS A GROUP BOOKING FROM AN ORGANISATION OR COMPANY THAT MAKES A BOOKING ANNUALLY (AND HAS DONE
SO FOR SEVERAL YEARS) THAN FROM A ONE-OFF GROUP BOOKING WITH MORE IMMEDIATE PROFITABILITY POTENTIAL.
GROUP RATE
WHAT IS THE MEANING / DEFINITION OF GROUP RATE?
HOTELS THAT FREQUENTLY ACCEPT BOOKINGS FROM GROUPS CAN OFFER RESERVATIONS AT A SPECIALLY NEGOTIATED RATE. THIS IS
CALLED A GROUP RATE.
YOU MIGHT BE WONDERING HOW MANY PEOPLE (AND THEREFORE HOW MANY TOTAL ROOMS!) ARE INVOLVED FOR A BOOKING TO BE
CATEGORIZED AS A 'GROUP BOOKING'? WELL, THE ANSWER IS USUALLY FIVE ROOMS OR MORE. IT IS QUITE RARE THAT A HOTEL WILL
ACCEPT A GROUP BOOKING, AND THEREFORE OFFER A REDUCED GROUP RATE, FOR LESS THAN FIVE ROOMS.
GROUP RATES ARE BENEFICIAL FOR BOTH HOTELS AND CUSTOMERS. THE GROUP CAN RESERVE ROOMS (AND PERHAPS TAKE
ADVANTAGE OF EVERYTHING IN-HOUSE THAT A HOTEL HAS TO OFFER, AT A DISCOUNTED PRICE), AND THE HOTEL CAN LOOK
FORWARD TO ASSURED CAPACITY DURING THE DURATION OF THE GROUP’S STAY, RATHER THAN BEING RELIANT UPON
UNPREDICTABLE TRANSIENT BOOKINGS FROM INDIVIDUALS, COUPLES AND FAMILIES, WHICH MAY BE A LOT, OR AMOUNT TO NONE AT
ALL.
THESE ARE JUST SOME OF THE TYPES OF GROUPS WHO COULD QUALIFY FOR A GROUP RATE AT HOTELS AROUND THE WORLD:
WEDDING PARTIES
ASSOCIATIONS
BUSINESS GROUPS
CONFERENCES
CORPORATE EVENT GROUPS – HOLDING A CORPORATE EVENT AT A BEAUTIFUL HOTEL CAN HELP ENHANCE A BRAND'S PRESTIGE, AS
WELL PROVIDING UNFORESEEN BUSINESS OPPORTUNITIES
AND, LET'S NOT FORGET:
REUNIONS! BOOKING A HOTEL FOR AN OLD SCHOOL-FRIENDS GET-TOGETHER, FOR EXAMPLE, CAN BE A LOVELY IDEA. AND IF THE
GROUP IS OFFERED A GROUP RATE BY THE HOTEL, THE OVERALL COST OF THE GATHERING CAN BE REASSURINGLY CONTROLLED
HEADS IN BEDS
WHAT IS THE MEANING / DEFINITION OF HEADS IN BEDS?
OF COURSE, ANY HOTEL'S AIM IS TO MAXIMIZE PROFITS. THE BEST WAY TO DO THIS IS TO MAKE AS MANY BOOKINGS AS POSSIBLE.
WHEN DISCUSSING THE LEVEL OF OCCUPANCY OF HOTEL ROOMS, STAFF WILL OFTEN USE THE TERM: HEADS IN BEDS. THIS MAY
SOUND A BIT STRANGE, BUT IT IS TRUE!
YES, LIKE MOST OTHER INDUSTRIES, THE HOSPITALITY INDUSTRY HAS ITS VERY OWN LINGO, WITH HEADS IN BEDS BEING A VERY
COMMON PHRASE. SOME HOTELS EVEN HAVE SOMETHING CALLED A HEADS IN BEDS STRATEGY, WHICH FORMS PART OF THEIR
OVERALL PLAN.
A HEADS IN BEDS STRATEGY CAN BE LOCAL, REGIONAL, NATIONAL OR BEYOND NATIONAL:

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A LOCAL HEADS AND BEDS STRATEGY: SELL AS MANY HOTEL ROOM BOOKINGS AS POSSIBLE TO THE LOCAL POPULATION. THIS
USUALLY OCCURS IN AREAS WHERE A HOTEL IS STRIVING TO FORGE A REPUTATION AS 'THE BEST HOTEL IN TOWN' – THE FIRST
CHOICE FOR LOCAL PEOPLE WHO WOULD PERHAPS ENJOY AN OVERNIGHT OR WEEKEND HOTEL STAY OCCASIONALLY, AT A VENUE
CLOSE TO HOME (TO GET A BREAK FROM WASHING THE DISHES, PERHAPS!).
A REGIONAL HEADS IN BEDS STRATEGY CAN BE WHERE A HOTEL IS TRYING TO INCREASE BOOKINGS BY CASTING ITS NET WIDER.
RATHER THAN SIMPLY FOCUSING ON THE LOCAL TOWN OR CITY POPULATION, THEY SEEK TO ATTRACT CUSTOM FROM PEOPLE ACROSS
AN ENTIRE COUNTY. FOR EXAMPLE, A HOTEL IN SOUTHAMPTON (UK) MAY WISH TO ATTRACT GUESTS FROM ALL OVER HAMPSHIRE!
A NATIONAL HEADS AND BEDS STRATEGY IS ALL ABOUT SELLING HOTEL BEDS TO PEOPLE COMING FROM ALL OVER THE COUNTRY.
WITH A BEYOND NATIONAL HEADS IN BEDS STRATEGY, A HOTEL IN SAY, COPENHAGEN, COULD BE TRYING TO ATTRACT CUSTOM
FROM VISITORS TO DENMARK FROM OTHER SCANDINAVIAN COUNTRIES, SUCH AS NORWAY AND SWEDEN (BUT NOT NECESSARILY
FROM ALL OVER THE WORLD).
THE KEY THING TO REMEMBER IS... WHICHEVER HEADS IN BEDS STRATEGY A HOTEL DEVISES AND THEN USES, THEIR CORE GOAL
WILL BE TO MAXIMISE PROFITS THROUGH FILLING AS MANY ROOMS AS POSSIBLE.
HOTEL CAPACITY
WHAT IS THE MEANING / DEFINITION OF HOTEL CAPACITY?
THE HOTEL CAPACITY IS THE TOTAL NUMBER OF ROOMS IN THE HOTEL OR THE TOTAL AMOUNT OF GUESTS (CHILDREN AND ADULTS)
THE HOTEL CAN HAVE AT MAXIMUM OCCUPANCY.
TYPICALLY ANSWERS THE QUESTION: HOW MANY GUESTS CAN YOUR HOTEL HAVE? OR WHICH IS THE TOTAL NUMBER OF ROOMS FOR
YOUR HOTEL.
* BANQUETS AND EVENT ROOM ARE EXCLUDED FROM THE ROOM COUNT.
HOTEL MARKET INTELLIGENCE
WHAT IS THE MEANING / DEFINITION OF HOTEL MARKET INTELLIGENCE?
THE GLOBAL HOTEL INDUSTRY IS MASSIVE. KEEPING TRACK OF CHANGES, DEVELOPMENTS AND IN-MARKET TRENDS IS NOT
SOMETHING THAT CAN BE ACHIEVED IN A DISORGANISED MANNER, THEREFORE. TO ALWAYS REMAIN ABREAST OF MARKET
FLUCTUATIONS, HOTELIERS NEED TO CAREFULLY AND THOROUGHLY GATHER INTELLIGENCE. THIS IS WHERE HOTEL MARKET
INTELLIGENCE COMES IN!
HOTEL MARKET INTELLIGENCE IS ABOUT MUCH MORE THAN JUST INFORMATION GATHERING. DATA THAT IS COLLECTED OVER TIME
THEN NEEDS TO BE CAREFULLY COLLATED AND FORENSICALLY ANALYSED. AFTER THIS, THE NEXT SEQUENTIAL PROCESS STEP IS
INFORMATION DISSEMINATION, WHERE STATISTICS AND OTHER RELEVANT AND USEFUL INFO IS DISTRIBUTED TO VARIOUS
DEPARTMENTS OF A HOTEL, OR EVEN TO SEVERAL HOTELS THAT FORM PART OF A NATIONAL OR INTERNATIONAL CHAIN.
GATHERED HOTEL MARKET INTELLIGENCE CAN BE BEST UNDERSTOOD AND DIGESTED BY RECIPIENTS IF IT IS PRESENTED IN THE
FORM OF A COMPREHENSIBLE REPORT. THE KEY PURPOSE OF THE REPORT IS TO SUMMARISE THE STATE OF THE HOTEL MARKET
OVERALL AT THAT TIME, BEFORE CONSIDERING THE FUTURE.
ONCE A HOTEL MARKET INTELLIGENCE REPORT HAS BEEN DISCUSSED IN FULL BETWEEN KEY PERSONNEL, STRATEGIES CAN THEN BE
DEVELOPED TO ENSURE THAT ALL REVENUE POSSIBILITIES ACROSS ALL SEGMENTS ARE CAPITALISED ON, FROM THERE. THIS MAKES
HOTEL MARKET INTELLIGENCE REPORTS INVALUABLE FOR HOTELS VYING FOR BUSINESS IN WHAT IS AN INCREASINGLY COMPETITIVE
MARKET.
BY GAINING A CLEAR UNDERSTANDING OF THE HOSPITALITY INDUSTRY AND IN-MARKET TRENDS, THROUGH GATHERED HOTEL
MARKET INTELLIGENCE, HOTELIERS AND MANAGERS CAN MAKE MORE INFORMED DECISIONS, SWIFTLY AND WITH CONFIDENCE.

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INVENTORY
WHAT IS THE MEANING / DEFINITION OF INVENTORY?
THE NUMBER OF ROOMS AVAILABLE FOR A HOTEL TO SELL OR DISTRIBUTE ACROSS ALL CHANNELS IS CALLED AN INVENTORY.
AN INVENTORY MAKES IT POSSIBLE TO CONTROL WHAT TYPE OF ROOMS AND HOW MANY YOU MAKE AVAILABLE TO A PARTICULAR
MARKET SEGMENT.
SOMETIMES, A HOTEL MAY WANT TO MAKE ACCESSIBLE A CERTAIN NUMBER OF ROOMS TO A PARTICULAR MARKET, FOR EXAMPLE: A
GROUP OF BUSINESS PEOPLE WHO WISH TO USE THE HOTEL'S CONFERENCING FACILITIES OVER A TWO- OR THREE-DAY STAY. AFTER
MAKING THIS GROUP BOOKING, THE HOTEL CAN ENTER INTO THEIR INVENTORY BOOK THE NUMBER OF ROOMS FILLED. BASED ON
THIS INFORMATION THEY CAN THEN ADJUST THEIR PRICES FOR THE REMAINING AVAILABLE ROOMS IN THE HOTEL, IF THEY NEED TO.
MOST HOTELS HAVE AN INVENTORY. IN FACT, NOT TO HAVE ONE IS A POOR BUSINESS DECISION, AS KNOWING
ROOM AVAILABILITY AT ALL TIMES CAN BE USEFUL WHEN MAKING RAPID DECISIONS. WHEN LOOKING TO MAXIMIZE PROFITS, HAVING
ROOM AVAILABILITY DATA AT YOUR FINGERTIPS CAN GIVE A HOTEL A COMPETITIVE ADVANTAGE IN THE MARKETPLACE.
KPI (KEY PERFORMANCE INDICATOR)
WHAT IS THE MEANING / DEFINITION OF KPI?
KPI STANDS FOR: KEY PERFORMANCE INDICATOR
KPI INCLUDES A SET OR RATIOS AND FORMULAE THAT HELP CALCULATE AND INDICATE THE PERFORMANCE AND PROGRESS OF A
HOTEL ACCORDINGLY TO THEIR PLANS AND ACTIONS.
HERE ARE EXAMPLE OF SERIES OF STANDARD KEY PERFORMANCE INDICATORS TO MONITOR AND TO BENCHMARK PERFORMANCE OF
DIFFERENT DEPARTMENTS IN A HOTEL.
ACCOMMODATION (ROOMS)
AVERAGE ROOM RATE
BEDROOM OCCUPANCY RATE
REVENUE PER AVAILABLE ROOM
COST PER OCCUPIED ROOM
LABOUR COST RATIO
FOOD
COST OF SALES RATIO
GROSS PROFIT RATIO
AVERAGE SPEND PER CUSTOMER
LABOUR COST RATIO.
BEVERAGE
COST OF SALES RATIO

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GROSS PROFIT RATIO
AVERAGE SPEND PER CUSTOMER
LABOUR COST RATIO.
PROFITABILITY
OPERATING PROFIT RATIO
NET PROFIT RATIO
LIQUIDITY
CURRENT RATIO
AVERAGE PAYMENT PERIOD
AVERAGE COLLECTION PERIOD.
LCR - LOCAL COMPANY RATE
WHAT IS THE MEANING / DEFINITION OF LOCAL COMPANY RATE?
LCR IS SHORT FOR LOCAL COMPANY RATE.
HOTELS SOMETIMES AGREE A SPECIAL RATE WITH A LOCAL COMPANY, AS THAT CAN BE GOOD FOR BUSINESS IN BOTH THE SHORT AND
LONG TERM.
WHEN MAKING AVAILABLE A LOCAL CORPORATE CONTRACT, A HOTEL SHOULD TAKE SEVERAL FACTORS INTO ACCOUNT, AND NOT
SIMPLY HAVE A SINGLE LCR FOR ALL FIRMS.
THE KEY TO GETTING AN LCR RATE RIGHT IS TO NEGOTIATE THE RATE WITH EACH COMPANY SEPARATELY. ALSO, INVOLVING
CORPORATE CLIENTS IN THE RATE-SETTING PROCESS SHOWS RESPECT AND ALSO RECOGNITION OF THE PREVIOUS REVENUE EACH
CLIENT HAS GENERATED AT THE HOTEL (WHERE APPLICABLE).
LET'S TAKE AN EXAMPLE SCENARIO NOW...
A LARGE HOTEL IN ROME, THAT IS ONE OF SEVERAL HOTELS BELONGING TO A CHAIN ACROSS ITALY, OFTEN ACCEPTS GROUP
BOOKINGS FROM A ROME-BASED IT COMPANY. THAT COMPANY ANNOUNCES IN THE PRESS THAT IT WILL SOON BE OPENING NEW
OFFICES IN FIVE OTHER ITALIAN CITIES. FOR THE HOTEL CHAIN, THIS COULD MEAN A LOT OF INCREASED BUSINESS FROM ALL
CORNERS OF THE COUNTRY! SETTING AN LCR FOR THIS PARTICULAR CLIENT MAKES GOOD BUSINESS SENSE, AS IT COULD SERVE AS AN
INCENTIVE FOR THE THEM TO ALWAYS HOLD CONFERENCES, ANNUAL GENERAL MEETINGS AND OTHER CORPORATE GET-TOGETHERS
AT HOTELS BELONGING TO THAT SINGLE CHAIN IN DIFFERENT REGIONS OF ITALY AT VARIOUS TIMES OF THE YEAR. BY OFFERING A
DISCOUNTED LCR TO THE IT COMPANY, THE HOTEL IS WISELY THINKING AHEAD.
THIS, OF COURSE, MAY BE AN EXCEPTIONAL CIRCUMSTANCE, A RARE OPPORTUNITY, BUT IT MAY STILL OCCUR. THAT IS WHY HOTELS
SHOULD ALWAYS ADOPT A FLEXIBLE MINDSET WHEN SETTING LCRS. GENERALLY SPEAKING, LCRS ARE USUALLY KEPT RELATIVELY
SIMILAR FOR DIFFERENT CLIENTS, AND ARE VALID FOR ONE YEAR.
LEAD TIME RESTRICTION
WHAT IS THE MEANING / DEFINITION OF LEAD TIME RESTRICTION?
AT A HOTEL, THE TIME TAKEN BETWEEN WHEN A CUSTOMER MAKES A RESERVATION AND THEIR ACTUAL ARRIVAL IS CALLED THE
LEAD TIME. SOMETIMES THIS TIME PERIOD HAS TO BE RESTRICTED.

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INTEGRATING A LEAD TIME RESTRICTION INTO A HOTEL'S BOOKING SYSTEM IS SOMETHING ALL HOTEL RESERVATION TEAMS
AND/OR MANAGEMENT DEPARTMENTS SHOULD CONSIDER. WHY? BECAUSE IT CAN HELP WITH THE MANAGEMENT OF
ROOM AVAILABILITY OVERALL, ENSURING THAT PROFITABILITY IS ALWAYS MAXIMIZED.
HAVING A LEAD TIME RESTRICTION POLICY IN PLACE AT A HOTEL CAN ALSO PREVENT A SITUATION OCCURRING WHERE A ROOM IS
NOT FILLED BY EITHER THE INITIALLY INTERESTED PARTY, OR A LATE-COMING TRANSIENT GUEST, DUE TO THE HOTEL SIMPLY NOT
KNOWING FOR SURE IF THE PERSON WHO MADE THE INITIAL RESERVATION IS GOING TO DEFINITELY ARRIVE ON THE AGREED DATE.
YOU COULD THINK OF A LEAD TIME RESTRICTION AS A KIND OF INSURANCE POLICY! THE RESTRICTION REQUIRES AN INDIVIDUAL
CUSTOMER OR GROUP TO MEET OR EXCEED A SPECIFIED ADVANCE NOTICE IN ORDER TO COMPLETE THE RESERVATION.
LOS - LENGTH OF STAY
WHAT IS THE MEANING / DEFINITION OF LENGTH OF STAY?
LOS STANDS FOR LENGTH OF STAY.
WHEN IT COMES TO REVENUE MANAGEMENT, LOS IS AN IMPORTANT CRITERIA. IT CAN HELP ENORMOUSLY WITH THE ORGANISING
AND OPTIMISATION OFOCCUPANCY WITHIN A HOTEL.
THERE A DIFFERENT TYPES OF LOS, IN FACT. LET'S CONSIDER THESE NOW...
AVERAGE LENGTH OF STAY (ALOS)
THIS IS USED TO ESTIMATE THE RELATIVE VALUES OF VARIOUS SEGMENTS AND TO KEEP TRACK OF HOTEL PERFORMANCE IN
ATTRACTING AND KEEPING GUESTS IN HOUSE.
SOME HOTELS HAVE CERTAIN BOOKING POLICIES IN PLACE. THESE CAN BE USED TO MANIPULATE BOOKING FACTORS WHEN SEEKING
TO FILL AS MANY ROOMS AS POSSIBLE. ONE SUCH POLICY IS:
MINIMUM LENGTH OF STAY (MINLOS)
MINLOS IS IMPLEMENTED WHEN A HOTEL IS FACING A HIGH DEMAND PERIOD, FOLLOWING A LOWER ONE (A HECTIC TIME AFTER A
QUIET TIME, IN OTHER WORDS!).
A MINLOS POLICY HELPS REGULATE RESERVATIONS, MEANING THAT SHORT-STAYERS AND LAST-MINUTE ONE NIGHT STAYS ARE
AVOIDED. CONSEQUENTLY THIS CAN IMPROVE THE OCCUPANCY RATIOS ON THE FOLLOWING DAYS WHERE THERE IS PERHAPS LOW
DEMAND.
CLOSED TO ARRIVAL
THIS POLICY IS INTENDED/USED WHEN TURNING DOWN NEW ARRIVALS ON A DAY OF EXPECTED HIGH-DEMAND, WITH ONLY GUESTS
FROM PREVIOUS NIGHT STAYS BEING ALLOWED TO GET THROUGH.
MAXIMUM LENGTH OF STAY (MAXLOS)
MAXLOS IS ONE OF THE STRATEGIES IN REVENUE MANAGEMENT THAT LIMITS THE NUMBER OF NIGHTS A GUEST OR GROUP CAN STAY
WHEN ARRIVING ON A CERTAIN DATE.
THIS CONTROL IS USED WHEN THE HOTEL MANAGER ANTICIPATES SELLING OUT ROOMS AT HIGHER RATES.
USING MAXLOS, A HOTEL CAN LIMIT THE NUMBER OF ROOMS SOLD AT LARGE DISCOUNTS DURING THE HIGH RATE TIME PERIOD BY
LIMITING THE (DISCOUNTED) MULTI-NIGHT STAYS EXTENDING INTO THAT TIME PERIOD.

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TO ACCOMMODATE GUESTS WHO WOULD LIKE TO STAY AT THE HOTEL LONGER THAN THE MAXIMUM LENGTH, IT IS POSSIBLE TO
CHARGE TWO RATES: 1) A DISCOUNT RATE FOR NIGHTS UP TO THE MAXIMUM, AND 2) A RACK RATE FOR SUBSEQUENT NIGHTS.
KEEP IN MIND AND BE SURE THAT THE HOTEL WILL HAVE HIGH DEMAND DURING THAT PERIOD; OTHERWISE, YOU COULD
DECREASE REVPAR (REVENUE PER AVAILABLE ROOM) INSTEAD OF IMPROVING IT!
FORMULA
AVERAGE LENGTH OF STAY (ALOS) = TOTAL OCCUPIED ROOM NIGHTS / TOTAL BOOKINGS
CALCULATION
AVERAGE LENGTH OF STAY (ALOS) = 111 / 37 = 3
LRA - LAST ROOM AVAILABILITY
WHAT IS THE MEANING / DEFINITION OF LAST ROOM AVAILABILITY (LRA)?
LRA IS SHORT FOR LAST ROOM AVAILABILITY. AT THE CONTRACTED RATE, AN AGENT CAN BOOK THE LAST ROOM A HOTEL HAS
AVAILABLE, BY RIGHT. SOME PEOPLE MAY BE SURPRISED BY THIS, THINKING THAT A HOTEL HAS COMPLETE CONTROL OVER ROOM
BOOKING DECISIONS AT THEIR PREMISES, AT ALL TIMES. BUT, BECAUSE OF LRA, THIS IS NOT NECESSARILY ALWAYS THE CASE!
EVEN IF A HOTEL ONLY HAS ONE SINGLE ROOM AVAILABLE, A ROOM-SEEKING PARTY WITH A CONTRACT HAS A RIGHT TO BUY IT; IT
CAN'T JUST BE LEFT VACANT. THE ROOM MUST BE SOLD IN ACCORDANCE WITH THE INTERESTED PARTY'S CONTRACT TERMS AND
PRICES.
LRA, HOWEVER, CAN BE USED TO A HOTEL'S ADVANTAGE. FOR EXAMPLE, A HOTEL IN PARIS THAT OFFERS LRA AS PART OF ITS
OVERALL SERVICE CAN DRAW ATTENTION TO THIS IN BOTH ITS ONLINE AND OFFLINE MARKETING MATERIAL:
'WE ARE PLEASED TO OFFER VISITORS TO THE CITY OF LIGHT GUARANTEED AVAILABILITY AT OUR HOTEL UNTIL THE VERY LAST
PHYSICAL ROOM IS SOLD OUT!'
LRA IS IN FACT SOMETHING THAT TRAVEL AGENCY CONSORTIA AND CORPORATIONS OFTEN REQUEST, AND SO IT IS IMPORTANT FOR
ALL HOTELS TO CONSIDER MAKING LRA PART OF THEIR OFFERINGS.
MARKET SEGMENTS
WHAT IS THE MEANING/DEFINITION OF MARKET SEGMENTS?
MARKET SEGMENTS IS THE PROCESS OF DIFFERENTIATING CUSTOMERS INTO SEGMENTS TO ORGANISE AND CATEGORISE INTO TARGET
GROUP-SPECIFIC FOR SALES ACTIVITIES.
EXAMPLE:
TYPES OF MARKET SEGMENTATION
GEOGRAPHIC SEGMENTATION
DEMOGRAPHIC SEGMENTATION
BEHAVIORAL SEGMENTATION
PSYCHOGRAPHIC SEGMENTATION
OCCASIONAL SEGMENTATION

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SEGMENTATION BY BENEFITS
CULTURAL SEGMENTATION
MULTI-VARIABLE ACCOUNT SEGMENTATION
MARKET SHARE
WHAT IS THE MEANING/DEFINITION OF MARKET SHARE?
THE ACTUAL PERCENTAGE OF THE ROOM NIGHTS OR REVENUE (BASED UPON COMPETITIVE) THAT A HOTEL CAPTURES DURING A
PARTICULAR TIME FRAME. CALCULATED BY DIVIDING THE TOTAL ROOM NIGHTS OR REVENUE SOLD AT THE HOTEL BY THE TOTAL
ROOM NIGHTS OR REVENUE SOLD WITHIN THE COMPETITIVE SET INCLUSIVE OF THE SUBJECT HOTEL.
FORMULA:
MARKET SHARE= REVENUE SOLD AT THE HOTEL / REVENUE SOLD WITHIN COMPETITIVE SET
CALCULATION:
MARKET SHARE = 5000 / 14500= 34%
MAXLOS - MAXIMUM LENGTH OF STAY
WHAT IS THE MEANING/DEFINITION OF MAXIMUM LENGTH OF STAY?
MAXLOS STANDS FOR MAXIMUM LENGTH OF STAY.
MAXIMUM LENGTH OF STAY IS ONE OF THE STRATEGIES IN REVENUE MANAGEMENT THAT LIMITS THE NUMBER OF NIGHTS A
RESERVATION CAN STAY WHEN ARRIVING ON A CERTAIN DATE.
THIS CONTROL IS USED WHEN THE HOTEL MANAGER IS EXPECTING TO BE ABLE TO SELL OUT ROOMS AT HIGHER RATES. USING
MAXIMUM LENGTH OF STAY, THE HOTEL CAN LIMIT THE NUMBER OF ROOMS SOLD AT LARGE DISCOUNTS DURING THE HIGH RATE TIME
PERIOD BY LIMITING THE (DISCOUNTED) MULTI-NIGHT STAYS EXTENDING INTO THAT TIME PERIOD.
TO ACCOMMODATE GUESTS WHO WOULD LIKE TO STAY AT THE HOTEL LONGER THAN THE MAXIMUM LENGTH, IT IS POSSIBLE TO
CHARGE TWO RATES: THE DISCOUNT RATE FOR NIGHTS UP TO THE MAXIMUM AND THE RACK RATE FOR SUBSEQUENT NIGHTS.
KEEP IN MIND AND ASSURE THAT THE HOTEL WILL HAVE HIGH DEMAND DURING THAT PERIOD. OTHERWISE, YOU COULD
DECREASE REVPAR INSTEAD OF IMPROVING IT.
MINLOS - MINIMUM LENGTH OF STAY
WHAT IS THE MEANING/DEFINITION OF MINIMUM LENGTH OF STAY?
MINLOS STANDS FOR MINIMUM LENGTH OF STAY.
MINIMUM LENGTH OF STAYS ARE IMPLEMENTED WHEN YOUR HOTEL IS FACING A HIGH DEMAND PERIOD FOLLOWING WITH A LOWER
ONE. OPENING LONGER STAYS WILL HELP REGULATING THE RESERVATIONS IN ORDER TO AVOID SHORT-STAYERS AND LAST-MINUTE
ONE NIGHT STAYS. CONSEQUENTLY IT WILL ALSO IMPROVE THEOCCUPANCY RATIOS ON THE FOLLOWING DAYS FACING LOW DEMAND.
MPI - MARKET PENETRATION INDEX

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WHAT IS THE MEANING / DEFINITION OF MPI?
MPI STANDS FOR: MARKET PENETRATION INDEX
MPI IS A CALCULATION TO MEASURE YOUR HOTEL´S OCCUPANCY COMPARED TO THE AVERAGE MARKET OCCUPANCY LEVELS.
THIS TOOL HELPS THE HOTEL TO SEE ITS POSITION AND PERFORMANCE IN PROPORTION TO THE COMPETITORS AND THE MARKET IN
GENERAL.
FORMULA:
MPI = HOTEL OCCUPANCY % / MARKET OCCUPANCY %
NEGOTIATED RATE
WHAT IS THE MEANING/DEFINITION OF NEGOTIATED RATE?
NEGOTIATED RATES ARE THE SPECIAL RATE THAT IS USUALLY MUCH LOWER THAN THE HOTEL’S NORMAL RATES AND THESE ARE
STRICTLY NOT AVAILABLE FOR PUBLIC USE. THESE RATES ARE USUALLY CONTRACTED UNDER CERTAIN REQUIREMENTS AND
CONDITIONS WHICH ARE AGREED BETWEEN THE HOTEL AND THE NEGOTIATED COMPANIES. IT IS COMMON FOR CORPORATES,
COMPANY CHAINS AND AIRLINES TO NEGOTIATE WITH THE HOTEL BRANDS THAT ALLOW THEIR EMPLOYEES TO BOOK ROOMS AT
SPECIAL RATE FOR THE COMPANY'S BUSINESS TRIPS.
OPAQUE WEBSITES SUCH AS HOTWIRE AND PRICELINE ARE ALSO A FORM OF NEGOTIATED RATE BETWEEN THE COMPANY AND THE
HOTELS IN ORDER TO GET THE LOWEST RATE AS POSSIBLE.
USUALLY CORPORATE ACCOUNTS AT HOTELS HAS AS MANY FACETS AND NUANCES AS THERE ARE HOTELS, HOTEL NEEDS, CUSTOMERS,
AND CUSTOMER NEEDS. VIEWERSHIP OF THESE RATES IN THE GDS (BY A TRAVEL AGENT OR OTHER GDS USER) IS RESTRICTED, AND
THE RATE MAY BE BOOKED ONLY AFTER ENTRY OF EITHER THE AGENT OR CLIENT IDENTIFICATION CODE.
NET RATE
WHAT IS THE MEANING/DEFINITION OF NET RATE?
NET RATE IS THE SELLING RATE WITH COMMISSION ALREADY TAKEN OUT, SOMETIMES REQUIRED FOR OTAS.
FOR EXAMPLE, WHEN YOUR HOTEL'S ROOM NIGHTS ARE SOLD ON A WHOLESALER WEBSITE (OR OTAS OR ANY THIRD PARTY
WEBSITES), THE AMOUNT YOUR HOTEL TAKES FROM THE SELL RATE IS YOUR NET RATE. SO IF THE GUEST PAYS $100 FOR A ROOM
NIGHT (WHICH IS THE SELL RATE) AT YOUR HOTEL AND YOU COLLECT $75 AFTER SUBTRACTING ALL OF THE FEES TO THE
WHOLESALERS, THIS MEANS YOUR NET RATE IS $75.
NO SHOW
WHAT IS THE MEANING/DEFINITION OF NO SHOW?
NO SHOW HAPPENS WHEN GUESTS MAKE A RESERVATION AT THE HOTEL BUT DO NOT ARRIVE TO THE HOTEL AS EXPECTED OR EVEN
DO NOT ARRIVE AT ALL.

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DEPENDING ON DIFFERENT HOTEL POLICIES, IF THE GUESTS FAIL TO CANCEL THE RESERVATION WITHIN CERTAIN PERIOD PRIOR TO
THE EXPECTED ARRIVAL DATE OR IN CASE OF NO-SHOW, THE FIRST DAY OF RESERVATION OR THE WHOLE STAY WILL BE CHARGED.
FOR EXAMPLE, CITY HOTELS OFTEN OFTEN ONLY CHARGE “NO-SHOW” GUESTS FOR THEIR FIRST NIGHT SINCE THEY HAVE
HIGHER DEMAND FOR ROOMS AND EASIER TO FILL ROOM OCCUPANCY. HOWEVER, FOR RESORTS AND HOTELS IN MORE EXOTIC
LOCATIONS, THEY WILL USUALLY CHARGE “NO-SHOW” ACCORDINGLY FOR THE WHOLE RESERVATION.
EXAMPLE FOR NO-SHOW POLICY:
#1 HOTEL IN LONDON:
CANCELLING YOUR RESERVATION
YOU MAY CANCEL YOUR RESERVATION FOR NO CHARGE UNTIL AUGUST 25, 2015 (1 DAY[S] BEFORE ARRIVAL).
PLEASE NOTE THAT WE WILL ASSESS A FEE OF 305.00 GBP IF YOU MUST CANCEL AFTER THIS DEADLINE.
IF YOU HAVE MADE A PREPAYMENT, WE WILL RETAIN ALL OR PART OF YOUR PREPAYMENT. IF NOT, WE WILL CHARGE YOUR CREDIT
CARD.
THIS FEE EQUALS 1 NIGHT OF YOUR ROOM CHARGE PLUS TAX (FOR THE FIRST NIGHT OF YOUR RESERVATION).
#2 HOTEL IN VIETNAM:
IF CANCELLED OR MODIFIED AFTER 7 DAYS BEFORE DATE OF ARRIVAL, 100% OF THE FIRST NIGHT WILL BE CHARGED. IN CASE OF
NO-SHOW, 100% OF THE FIRST NIGHT WILL BE CHARGED.
#3 HOTEL IN GENEVA:
IN CASE OF NO-SHOW, 100 PERCENT OF THE FIRST NIGHT WILL BE CHARGED.
NREVPAR
WHAT IS THE MEANING / DEFINITION OF NREVPAR?
NREVPAR STANDS FOR: NET REVENUE PER AVAILABLE ROOM
NREVPAR METRIC IS SIMILAR TO REVPAR, EXCEPT THAT IT FACTORS IN THE NET REVENUES (MEANING THAT IT ACCOUNTS FOR
DISTRIBUTION COSTS, TRANSACTION FEES AND TRAVEL AGENCY COMMISSIONS).
COMPARED TO REVPAR, NREVPAR REMOVES THE "APPLES TO APPLES" COMPARISON, WHICH IS ABSOLUTELY NECESSARY FOR
EFFECTIVE MEASUREMENT OF A PROPERTY'S REVENUE MANAGEMENT STRATEGIES. FACTORING THE COST OF DISTRIBUTION INTO ITS
CALCULATION IT IS A MORE TRANSPARANT PERFORMANCI INDICATOR.
FORMULA:
NREVPAR = (ROOM REVENUE - DISTRIBUTION COSTS) / AVAILABLE ROOMS
IT IS UNDENIABLY A USEFUL CALCULATION FOR REVENUE MANAGERS AND OWNERS TO PREPARE A STRATEGIC PLANNING FOR THE
HOTEL. THE PROBLEM IS THAT, IT IS DIFFICULT TO CALCULATE THE ALL OF MANY DIFFERENT TYPES OF COMMISSION, TRANSACTION
AND DISTRIBUTION COSTS.
OCCUPANCY (OCC)
WHAT IS THE MEANING / DEFINITION OF OCCUPANCY (OCC) ?
IT IS A HOTEL KPI CALCULATION THAT SHOWS THE PERCENTAGE OF AVAILABLE ROOMS OR BEDS BEING SOLD FOR A CERTAIN PERIOD
OF TIME.

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IT IS IMPORTANT FOR HOTELS TO KEEP TRACK OF THIS DATA ON A DAILY BASIS TO IDENTIFY THE AVERAGE DAILY
RATE, FORECAST AND APPLY REVENUE MANAGEMENT.
FORMULA:
OCCUPANCY = ROOMS SOLD / ROOM AVAILABLE
OPEN PRICING
WHAT IS THE MEANING/DEFINITION OF OPEN PRICING?
OPEN PRICING IS THE ABILITY FOR HOTEL TO SET THE PRICE INDEPENDENTLY ON MANY DIFFERENT DISTRIBUTION CHANNELS. USING
THIS WAY, THE HOTEL CAN TARGET DIFFERENT USERS AT DIFFERENT BUDGET; THEREFORE, HOTEL CAN MAXIMISE THEIR REVENUE
WITHOUT HAVING TO CLOSE ANY OFF.
OVERBOOKING
WHAT IS THE MEANING/DEFINITION OF OVERBOOKING?
OVERBOOKING IS A STRATEGY AIMING AT SELLING MORE ROOMS THAN THE ACTUAL NUMBER OF ROOMS AVAILABLE. IT CAN BE VERY
GOOD WAY OF MAXIMIZING THEOCCUPANCY WITHIN YOUR HOTEL, SUPPOSEDLY THAT YOU GET CANCELLATIONS.
IN CASE YOUR HOTEL IS OVERBOOKED AND DO NOT GET ANY CANCELLATIONS, YOU WILL HAVE NO OTHER CHOICE THAN WALK OR
TURN AWAY THE GUEST TO ANOTHER HOTEL. THIS WILL OBVIOUSLY IMPACT ON YOUR HOTEL’S REVENUE BUT ALSO BRAND IMAGE, AS
WHEN GUESTS BOOK AT YOUR HOTEL, THEY ACTUALLY WANT TO STAYTHERE AND NOT SOMEWHERE ELSE.
CONCLUSION: PRACTICING OVERBOOKING CAN BE USEFUL BUT HAS TO BE IMPLEMENTED VERY CAREFULLY.
PRICE MATCH GUARANTEE
WHAT IS THE MEANING/DEFINITION OF PRICE MATCH GUARANTEE?
PMG IS SHORT FOR PRICE MATCH GUARANTEE. IT IS THE PROMISE THAT HOTELS OR OTAS WILL OFFER THE LOWEST RATES OR
MATCH THE LOWEST RATE AVAILABLE ACROSS ANY CHANNEL FOR THE SAME PRODUCT.
PROPERTY
WHAT IS THE MEANING/DEFINITION OF PROPERTY?
PROPERTY REFERS S CONCRETE OBJECT THAT CAN BE POSSESSED BY A BUSINESS OR AN INDIVIDUAL. IN THIS CASE, IT USUALLY
MEANS THE HOTEL (BUILDING), MOTEL, INN,
RACK RATE
WHAT IS THE MEANING/DEFINITION OF RACK RATE?
RACK RATE IS THE HIGHEST RATE SET BY THE HOTEL FOR EACH ROOM CATEGORY. THE RATE WILL USUALLY NOT GO ANY HIGHER
THAN THAT.- DEPENDS ON THE OCCUPANCY, DEALS AND CONTRACTS, ALL RATES WILL BE DISCOUNTED FROM THE RACK RATE.
RATE PARITY

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WHAT IS THE MEANING/DEFINITION OF RATE PARITY?
RATE PARITY IS A WAY FOR HOTEL TO SET UP THE SAME PRICE FOR EACH ROOM TYPES IN ALL OF THEIR DISTRIBUTION CHANNELS.
IT’S A TECHNIQUE FOR THE THEM TO BE MORE COMPETITIVE AND GAIN BRAND LOYALTY FROM THEIR CUSTOMERS.
THIS IS BECAUSE THE ONLINE BOOKING MARKET IN GETTING MORE POPULAR ON OTAS AND GDSS, PEOPLE WILL TEND TO SEARCH
MANY DIFFERENT WEBSITES TO FIND THE LOWEST PRICE FOR SPECIFIC HOTELS THAT THEY ARE LOOKING FOR.
THEREFORE HOTELS EMPLOY RATE PARITY TO STRENGTHENS CUSTOMER LOYALTY AND ENCOURAGES GUESTS TO BOOK DIRECTLY
WITH THE HOTEL WHERE TERMS/POLICIES MAY BE MORE FLEXIBLE, GIVEN THE SAME PRICING AS IN OTHER CHANNELS.
THIS ALSO A WAY FOR THEM TO HAVE MORE BOOKING THROUGH THEIR OWN HOTEL WEBSITE.
REGRET
WHAT IS THE MEANING/DEFINITION OF REGRET?
REGRET IS A TERM TO DESCRIBE WHEN A HOTEL IS NOTIFIED THAT THEIR HOTEL SITE HAS BEEN SHOPPED AND LOOKED AT ON THEIR
DIRECT BOOKING ENGINE YET THE GUEST DECLINE AND DO NOT ACCEPT TO MAKE A RESERVATIONS.
RESTRICTION
WHAT IS THE MEANING/DEFINITION OF RESTRICTION?
RESTRICTION IS ANY FORM OF REGULATION, CONDITION AND REQUIREMENT THAT HOTEL MAY SET UP IN ORDER TO PREVENT OR
LIMIT THE FLEXIBILITY OF THEIR GUEST IN THEIR RESERVATION.
REVENUE MANAGEMENT
WHAT IS THE MEANING/DEFINITION OF REVENUE MANAGEMENT?
REVENUE MANAGEMENT IS THE ART OF SELLING THE RIGHT ROOM TO THE RIGHT CLIENT AT THE RIGHT MOMENT AT THE RIGHT
PRICE AND ON THE RIGHT DISTRIBUTION CHANNEL WITH THE BEST COMMISSION EFFICIENCY.
IT ALSO HELPS PREDICTING CONSUMER’S DEMAND TO OPTIMIZE INVENTORY AND PRICE AVAILABILITY IN ORDER TO MAXIMIZE
REVENUE GROWTH.
REVENUE MANAGEMENT IS NOT ONLY MAXIMIZING IN HIGH PERIOD DEMAND, BUT ALSO STIMULATING DEMAND IN LOW PERIODS .
THIS IS A LONG TERM STRATEGY APPLICABLE IN HOTELS WITH THE FOLLOWING CHARACTERISTICS
FIXED CAPACITY
PERISHABLE PRODUCT
HIGH FIXED COSTS AND LOW VARIABLE COSTS
PRODUCT CAN BE PRICED DIFFERENTLY
DEMAND EVOLVES
PRODUCT CAN BE SOLD IN ADVANCE

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MARKET CAN BE SEGMENTED
IN MORE IN-DEPTH ANALYSIS, REVENUE MANAGEMENT UTILISES INTUITIVE AS WELL AS ANALYTICAL SKILLS; BOTH OF THESE SKILL
SETS IMPROVE WITH PRACTICE. THE MIND-SET OF A GOOD REVENUE MANAGER OR TEAM IS FOCUSED ON PRODUCING A GOOD BLEND
OF OCCUPANCY AND AVERAGE RATE. THE HOTEL’S MISSION SHOULD BE TO BUILD BASE OCCUPANCY, THROUGH A GOOD MIX OF RATES,
AND THEN TAKE ADVANTAGE OF HAVING A BASE BY THEN CLOSING-OUT LOWER RATES TO BUILD AVERAGE RATES.
THE MISSION SHOULD NOT SIMPLY BE TO GET 100% OCCUPANCY; IT SHOULD BE TO GET OCCUPANCY AS HIGH AS POSSIBLE, WITH AN
AVERAGE RATE AS HIGH AS POSSIBLE. FOR A 100 ROOM PROPERTY, OCCUPANCY OF 85% WITH AN AVERAGE RATE OF $140 IS FAR
MORE PROFITABLE THAN 100% OCCUPANCY AT $110. ALTHOUGH BOTH SCENARIOS PRODUCE ROUGHLY THE SAME REVENUE, WHAT
DOES IT COST YOU TO CLEAN 15 ROOMS?
THIS IS A SIMPLIFIED FORMAT FOR THOSE HOTELS WHICH ARE CURRENTLY “SIMPLY SELLING ROOMS” AT THE PRESENT TIME. THE
PURPOSE OF REVENUE MANAGEMENT IS TO HELP HOTELS TO “SHAPE” THEIR BUSINESS. OBVIOUSLY, THERE CAN BE MUCH MORE
DETAIL AND INTRICATE TECHNIQUES INVOLVED IN REVENUE MANAGEMENT; BUT SOMETIMES PROGRESS HAS TO COME IN BABY STEPS
IN THE BEGINNING.
IT IS TRUE THAT MANY LARGER HOTELS, FRANCHISED AND INDEPENDENT, AND SOME HOTEL COMPANIES HAVE FULL-TIME TALENTED
REVENUE MANAGERS. HOWEVER, MOST INDEPENDENT AND SMALLER HOTELS ARE NOT USING ANY FORM OF REVENUE MANAGEMENT
IN THEIR OPERATIONS. REVENUE MANAGEMENT, EVEN IN ITS SIMPLEST FORM, CAN BENEFIT MOST HOTELS NO MATTER HOW LARGE
OR SMALL.
THERE ARE OTHER FACTORS WHICH WILL AFFECT CLOSE-OUT AND/OR RESTRICTION DECISIONS SUCH AS OCCUPANCY HISTORY,
OVERFLOW PRESSURE FROM HOTELS WITH CONVENTION FACILITIES, AND SPECIAL EVENTS BEING HELD IN THE AREA. FOR
PROPERTIES WHICH MAY BE JUST BEGINNING TO USE REVENUE MANAGEMENT IN THEIR OPERATION, PRACTICE MAKES PERFECTION.
FOR MANY HOTELS, START WITH THE BASICS. YOU WILL FIND, IN SHORT ORDER, MANY OPPORTUNITIES TO BECOME MORE
SOPHISTICATED WITH ADDITIONAL WAYS TO IMPROVE YOUR REVENUE YIELD.
REVENUE MANAGEMENT IS A VEHICLE TO HELP HOTELS TO BECOME AWARE OF THE ROOMS THEY SELL, THE RATES AT WHICH THEY
SELL, AND THE PACE AT WHICH THEY SELL. IT IS A WAY HOTELS CAN BECOME PRO-ACTIVE IN THE SELLING PROCESS, RATHER THAN
SIMPLY POSTING RATES AND WAITING FOR THEM TO BE SOLD.
REVENUE MANAGEMENT STRATEGY
WHAT IS THE MEANING / DEFINITION OF REVENUE MANAGEMENT STRATEGY?
A REVENUE MANAGEMENT STRATEGY INCLUDES A SET OF TOOLS AND WAYS IN ORDER TO EFFECTIVELY APPLY THE CONCEPT OF
HOTEL REVENUE MANAGEMENT, BIG DATA SETS NEED TO BE ANALYZED AND EVALUATED.
BELOW A TOP 10 SHORT LIST OF KEY ELEMENTS OF A REVENUE MANAGEMENT STRATEGY FOR HOTELS:
DEMAND CALENDAR
MARKET SEGMENTATION
FORECASTING
BOOKING CURVES
PRICE POSITIONING
STAY CONTROLS

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RATE FENCES
BENCHMARKING
DISPLACEMENT CALCULATIONS
UNCONSTRAINED DEMAND
FURTHERMORE, THIS INCLUDES INFORMATION ABOUT BASIC FACTORS LIKE:
PAST OCCUPANCY RATES
GENERAL SALES
COMPANY TARGET GROUPS
CUSTOMER SEGMENTATION
MARKET(SHARE) INFORMATION
CUSTOMER SATISFACTION
BUT ALSO ABOUT EXTERNAL INFLUENCES, SUCH AS
PAST WEATHER CONDITIONS
HOLIDAY AND EVENT INFORMATION
CLOSING OF NEARBY HOTELS
COMPETITOR PRICE INFORMATION AND
SIMILAR CIRCUMSTANCES THAT ARE LIKELY TO AFFECT YOUR BUSINESS.
REVPAM
WHAT IS THE MEANING OF REVPAM?
REVPAM STANDS FOR: REVENUE PER AVAILABLE SQUARE METER
IT IS A KPI WHICH IS CALCULATED FOR HOTELS WHICH RENT OUT ITS SPACE FOR CONFERENCES AND BANQUETS. THE UTILIZATION
EFFICIENCY OF THE SALES DEPARTMENT IS CALCULATED ON THE REVENUE PER AVAILABLE SQUARE METER OF BANQUET SPACE.
FORMULA:
REVPAM = REVENUE / AVAILABLE SQUARE METER OF BANQUET SPACE (M2
REVPAR
WHAT IS THE MEANING / DEFITION OF REVPAR?
REVPAR STANDS FOR: REVENUE PER AVAILABLE ROOM

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REVPAR IS A VERY CLASSIC KPI AND REGARDED AS ONE OF THE MOST IMPORTANT FINANCIAL CALCULATION FOR ANY HOTEL TO SEE
HOW MUCH REVENUE THEY HAVE MADE WITHIN A CERTAIN PERIOD OF TIME.
WHEN AN ANALYSIS IS CARRIED OUT, REVPAR FIGURES CAN BE COMPARED TO REVPAR OF THE HOTEL DURING THE SAME TIME
FRAME OF THE PREVIOUS YEARS OR TO ITS COMPSET.
FORMULA:
REVPAR = ROOMS REVENUE / ROOMS AVAILABLE
WITH REVPAR YOU CAN ONLY EVALUATE YOUR INCOME AS A PERCENTAGE OF ROOM SALES (NOT INCLUDING ANY OTHER FACTORS
THAT ALSO TAKE ACCOUNT INTO MAKING PROFITABILITY, LIKE TOURSALES, ROOM SERVICE, AND SPA BOOKINGS).
REVPASH
WHAT IS THE MEANING / DEFINITION OF REVPASH?
REVPASH STANDS FOR: REVENUE PER AVAILABLE SEAT HOUR
REVPASH AS A REVENUE MANAGEMENT TOOL FOR FOOD AND BEVERAGE OUTLETS IN A HOTEL (SIMILAR TO REVPAR FOR ROOMS),
THIS CALCULATION IS USEFUL TO MEASURES THE USAGE AND REVENUE OF A SEAT PER HOUR AND ALLOWS A BETTER UNDERSTANDING
AND PLANNING FOR FOOD AND BEVERAGE MANAGER. RESTAURANTS TAKE RESERVATIONS BUT WALK-INS GUESTS ARE COMMONLY
EXPECTED DURING OPENING HOURS.
FORMULA:
REVPASH = TOTAL OUTLET REVENUE / (AVAILABLE SEATS X OPENING HOURS)
IT CAN BE CALCULATED HOURLY, DAILY, WEEKLY AND MONTHLY.
IT IS ALSO USED TO SUPPORT RESTAURANTS TO PLAN THE LABOR SCHEDULING, FOOD PURCHASING, MARKETING TOOLS AND
BUDGETING DURING THE LOWEST OCCUPANCY.
REVPATH
WHAT IS THE MEANING / DEFINITON OF REVPATH?
REVPATH STANDS FOR: REVENUE PER AVAILABLE TREATMENT HOUR
REVPATH IS A CALCULATION FOR SPA OPERATION THAT TAKES MEASURE TO A MORE DETAILED LEVEL GIVEN THE NEED TO “TURN
OVER” OF ROOMS DURING THE DAY- VERY SIMILAR TO REVPAR FOR ROOMS. IT HELPS THE SPA OPERATION TO MANAGE TIME
EFFECTIVELY.
THIS IS A CRUCIAL KPI CALCULATION, THE FIRST STEP FOR YIELD MANAGEMENT IN THE SPA INDUSTRY.
FORMULA:
REVPATH = SPA OCCUPANCY / AVERAGE TREATMENT RATE
CALCULATION
IN PRACTICAL TERMS, THIS MEANS THAT A SPA WITH A TREATMENT ROOM OCCUPANCY OF 70% AND AN AVERAGE-RELATED
EXPENDITURE OF $200, HAS A REVPATH OF $140

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70% *200$ = 140 $
SIMILARLY, A TWENTY-ROOM SPA THAT MAKES $1600 ON FRIDAYS BETWEEN 6:00 AND 7:00 PM, HAS A REVPATH OF $80
1600$ / (20 * 1) = 80 $
REVPOR
WHAT IS THE MEANING / DEFINITION OF REVPOR?
REVPOR STANDS FOR: REVENUE PER OCCUPIED ROOM
REVPOR, UNLIKE REVPAR, CONSIDERS REVENUE PER OCCUPIED ROOM WHICH GIVES YOU A BETTER UNDERSTANDING OF HOW MUCH
PROFIT YOU MAKE FROM THE GUESTS WHO ACTUALLY STAY AT YOUR PROPERTY.
USING REVPOR, YOU CAN TRACK RETURNS FROM OTHER DEPARTMENTS APART ROOMS SUCH AS FOOD AND BEVERAGE, SPA
TREATMENTS, AND SO ON
FORMULA:
REVPOR = TOTAL REVENUE* / TOTAL OCCUPIED ROOMS
*TOTAL REVENUE = ACCOMMODATION + BREAKFAST + SPA + BAR + MINI BAR +[ANY OTHER EXTRA REVENUE]
REVPOR LETS YOU KNOW HOW SUCCESSFUL YOU REALLY ARE WHEN YOU A CUSTOMER STEPS FOOT INSIDE YOUR HOTEL, WHICH IS
CRITICAL TO EVALUATING YOUR OVERALL PERFORMANCE.
RGI - REVENUE GENERATION INDEX
WHAT IS THE MEANING / DEFINITION OF RGI?
RGI STANDS FOR: REVENUE GENERATION INDEX.
RGI COMPARES YOUR HOTEL'S REVPAR TO THE AVERAGE REVPAR IN THE MARKET. IT IS USED TO DETERMINE WHETHER IF A HOTEL
IS GAINING A FAIR SHARE OF REVENUE COMPARED TO ITS COMPSET.
FORMULA:
RGI = YOUR HOTEL'S REVPAR / HOTEL MARKET REVPAR
WHEN:
RGI = 1 THE HOTEL REVPAR IS EQUAL TO THE AVERAGE REVPAR OF THEIR COMP SET
RGI > 1 THE HOTEL REVPAR IS HIGHER THAN THE AVERAGE REVPAR OF THEIR COMP SET
RGI < 1 THE HOTEL REVPAR IS LESS THAN THE AVERAGE REVPAR OF THEIR COMP SET

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ROOM BLOCK
WHAT IS THE MEANING / DEFINITION OF ROOM BLOCK?
A ROOM BLOCK OR BLOCKING IS WHEN CERTAIN AMOUNTS OF ROOMS ARE ALLOCATED ACCORDINGLY TO A GROUP OR TOUR
OPERATOR RESERVATION BY THE SALES OR RESERVATION TEAM OF THE HOTEL.
A ROOM BLOCK IS VISIBLE IN THE OCCUPANCY STATISTICS IN THE PMS OF THE HOTEL, PREVENTING FROM THIS INVENTORY TO BE
USED FOR OTHER RESERVATIONS. THERE’S ALWAYS A SPECIFIC GROUP CODE ATTACHED TO ALL OF THE ROOMS BEING BLOCKED FOR
THAT GROUP RESERVATION TO ALLOW IT TO BE EASILY IDENTIFIED.
ROOM INVENTORY
WHAT IS THE MEANING/DEFINITION OF ROOM INVENTORY?
ROOM INVENTORY DETERMINES HOW MANY ROOMS YOU HAVE IN YOUR HOTEL, MINUS THE AMOUNT OF ROOMS YOU HAVE SOLD. THIS
ALLOWS YOU TO SEE HOW MANY ROOMS YOU HAVE AVAILABLE IN YOUR HOTEL FOR A PARTICULAR DAY.
WE MUST NOTE THAT NOT ALL ROOMS ARE INVENTORIED. ROOMS THAT ARE OUT OF ORDER, ARE EXCLUDED FROM THE LIST. WHEN
A ROOM IS OUT OF ORDER, IT CANNOT BE USED. THE REASON WHY A ROOM IS LISTED OUT OF ORDER MAY BE DUE TO MAINTENANCE
ISSUES SUCH AS BAD WIRING OR SINK NEEDS TO BE FIXED, OR SIMPLY THE HOTEL IS RENOVATING THE ROOM BY ADDING OR
SUBTRACTING FURNITURE. A ROOM COULD BE OUT OF ORDER FOR A DAY TO A WHOLE MONTH, THE AMOUNT OF TIME RANGES
DEPENDING ON WHAT NEEDS TO BE DONE.
WHY IS ROOM INVENTORY SO IMPORTANT? THE REASON WHY ROOM INVENTORY IS SO IMPORTANT IS BECAUSE HOTELS ARE ONLY IN
BUSINESS TO SELL ROOMS.
THEREFORE, UNDERSTANDING HOW MANY ROOMS YOU HAVE SOLD AND HOW MANY ROOMS YOU HAVE AVAILABLE GIVES YOU A
BETTER UNDERSTANDING ON HOW WELL YOUR HOTEL IS DOING FINANCIALLY FOR A PARTICULAR DAY.
ROOM INVENTORY ALLOWS YOU TO SET PRICES THROUGHOUT THE DAY, IF NEEDED.
ROOM TYPE
WHAT IS THE MEANING/DEFINITION OF ROOM TYPE?
ROOM TYPE IS SIMPLY A LIST OF ALL ROOMS AND ROOM CATEGORIES THE HOTEL HAS TO OFFER THEIR GUEST. THE IMAGES AND
DESCRIPTION OF FEATURES AND AMENITIES OF EACH ROOM CATEGORIES WILL BE INCLUDED ON THE HOTEL’S WEBSITE AND ACROSS
ALL DISTRIBUTION CHANNELS.
EVEN THOUGH THE ROOMS TYPE'S MAY VARY HOTEL BY HOTEL, THE FOLLOWING ROOM TYPE DEFINITIONS ARE COMMON IN THE
HOTEL INDUSTRY.
SINGLE: A ROOM ASSIGNED TO ONE PERSON. MAY HAVE ONE OR MORE BEDS.
DOUBLE: A ROOM ASSIGNED TO TWO PEOPLE. MAY HAVE ONE OR MORE BEDS.
TRIPLE: A ROOM ASSIGNED TO THREE PEOPLE. MAY HAVE TWO OR MORE BEDS.
QUAD: A ROOM ASSIGNED TO FOUR PEOPLE. MAY HAVE TWO OR MORE BEDS.
QUEEN: A ROOM WITH A QUEEN SIZED BED. MAY BE OCCUPIED BY ONE OR MORE PEOPLE.

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KING: A ROOM WITH A KING SIZED BED. MAY BE OCCUPIED BY ONE OR MORE PEOPLE.
TWIN: A ROOM WITH TWO TWIN BEDS. MAY BE OCCUPIED BY ONE OR MORE PEOPLE.
DOUBLE-DOUBLE: A ROOM WITH TWO DOUBLE (OR PERHAPS QUEEN) BEDS. MAY BE OCCUPIED BY ONE OR MORE PERSON.
STUDIO: A ROOM WITH A STUDIO BED- A COUCH WHICH CAN BE CONVERTED INTO A BED. MAY ALSO HAVE AN ADDITIONAL BED.
MINI-SUITE OR JUNIOR SUITE: A SINGLE ROOM WITH A BED AND SITTING AREA. SOMETIMES THE SLEEPING AREA IS IN A BEDROOM
SEPARATE FROM THE PARLOUR OR LIVING ROOM.
SUITE: A PARLOUR OR LIVING ROOM CONNECTED WITH TO ONE OR MORE BEDROOMS.
CONNECTING ROOMS: ROOMS WITH INDIVIDUAL ENTRANCE DOORS FROM THE OUTSIDE AND A CONNECTING DOOR BETWEEN. GUESTS
CAN MOVE BETWEEN ROOMS WITHOUT GOING THROUGH THE HALLWAY.
ADJOINING ROOMS: ROOMS WITH A COMMON WALL BUT NO CONNECTING DOOR.
ADJACENT ROOMS: ROOMS CLOSE TO EACH OTHER, PERHAPS ACROSS THE HALL.
SELL RATE
WHAT IS THE MEANING/DEFINITION OF SELL RATE?
SELL RATE IS THE AMOUNT THE GUESTS WILL PAY IF THEY MAKE A RESERVATION THROUGH ONE OF THE HOTEL´S DISTRIBUTION
CHANNELS. IT IS THE ROOM PRICE THE GUESTS ARE EXPECTED TO PAY IF YOU AGREE TO MAKE A BOOKING OF THE HOTEL.
SELL THROUGH
WHAT IS THE MEANING/DEFINITION OF SELL THROUGH?
SELL THROUGH IS A CRS (RESERVATION SYSTEM) TOOL THAT ALLOWS THE HOTEL TO SET THRESHOLDS (RESTRICTION) THAT WILL
ENABLE A REQUEST FOR AN EXTENDEDSTAY RESERVATION TO BE BOOKED THROUGH SOLD-OUT NIGHTS. THIS TOOL IS VALUABLE IN
CAPTURING EXTENDED STAY BUSINESS AND BUILDING OCCUPANCYON SHOULDER DAYS.
ANY TIME YOU APPLY A CLOSE-OUT TO A DATE, A SELL THROUGH (IF YOU HAVE SET ONE) WILL AUTOMATICALLY ACTIVATE.
THE SELL THROUGH FEATURE CONSISTS OF 2 NUMBERS. THE FIRST IS THE NUMBER OF ROOMS YOU WANT THE CRS TO SELL
THROUGH THE CLOSED-OUT DATE AND THE SECOND IS THE MINIMUM NUMBER OF NIGHTS YOU WILL ACCEPT.
EXAMPLE: IF YOU SET YOUR SELL THROUGH AT 10/5, IT MEANS THAT THE CRS WILL SELL 10 ROOMS THROUGH YOUR CLOSE-OUT
DATE FOR GUESTS STAYING A MINIMUM OF 5 NIGHTS
SHOULDER DATE
WHAT IS THE MEANING/DEFINITION OF SHOULDER DATE?
DATES BEFORE AND AFTER ONE OR MULTIPLE HIGH DEMAND DATES.
CONSIDERING SHOULDER DATES IS IMPORTANT FOR YOUR REVENUE MANAGEMENTSTRATEGY. YOU CAN FOR EXAMPLE APPLY A
MINIMUM LENGTH OF STAYRESTRICTION ON HIGH DEMAND DATES IN ORDER TO TRY TO FILL THE HOTEL ON THE UPCOMING
SHOULDER DATE.

30
SREVPOR
WHAT IS THE MEANING / DEFINITION OF SREVPOR?
SREVPOR STANDS FOR: SPA REVENUE PER OCCUPIED ROOM
SREVPOR IS AN EFFECTIVE KPI FOR SPA OPERATION TO MANAGE AND OPTIMIZE THEIR TIME AND YIELD MANAGEMENT. IT
ILLUSTRATE THE REVENUE MADE FOR EACH ROOM OCCUPIED WHICH THEREFORE HELPS THE OPERATION TO ANALYZE AND PROPOSE
THEIR STRATEGIC MARKETING PLAN.
FORMULA:
SREVPOR = TOTAL SPA REVENUE / TOTAL OCCUPIED ROOMS
STATIC PRICING
WHAT IS THE MEANING/DEFINITION OF STATIC PRICING?
STATIC PRICING IS SIMILAR TO FIXED PRICING WHICH IS WHEN THE HOTEL KEEPS EXACTLY THE SAME SELLING RATE AT ALL TIME
REGARDLESS OF THE OCCUPANCY, MARKET TREND AND THE DEMAND.
ADVANTAGES:
STATIC PRICING PRICING IS INTENDED TO ATTRACT MORE CUSTOMERS AND CLIENTS BECAUSE IT OFFERS THEM ASSURANCES.
FIXED PRICING IS ALSO CONSISTENT, SO CUSTOMERS GET USED TO YOUR PRICING AND YOU HAVE LESS RISK OF OFFENDING THEM BY
FLUCTUATING PRICES OVER TIME.
SALES FORECASTING AND PROFIT ESTIMATES ARE ALSO SIMPLER WHEN YOU KNOW YOUR PRICE POINT.
DISADVANTAGES:
THE RISK WITH FIXED PRICING IS THAT IT DOESN'T ALLOW FOR ADJUSTMENTS IF YOU GET INTO HIGH SEASON OR HIGH DEMAND
PERIOD, THE COST MAY BE HIGHER THAN EXPECTED. THIS MAY MEAN YOU UNDERCHARGE A CUSTOMER IN HIGH DEMAND PERIOD
LOOSING IMPORTANT REVENUE OPPORTUNITIES.

31
STAY
WHAT IS THE MEANING / DEFINITION OF STAY?
STAY IS THE PERIOD OF TIME THAT A CUSTOMER STAYS IN A GUEST ROOM OF A HOTEL. STAY IS YOUR OVERNIGHT VISIT AT A HOTEL
WHERE YOU WILL NEED AN ACCOMMODATION TO STAY REGARDLESS OF THE NUMBER OF NIGHTS.
FOR EXAMPLE, WHETHER IF YOU ARE STAYING AT A HOTEL FOR 2, 5, 10 DAYS OR EVEN 2 WEEKS, THAT IS STILL COUNTED AS 1
STAY. IF YOU VISIT THE HOTEL 10 TIMES AND STAY 1 NIGHT EACH TIME YOU VISIT, THAT WILL BE COUNTED AS 10 STAYS.
THIS IS THE REASON WHY HOTEL BUSINESSES ALSO HAVE A ALOS (AVARAGELENGTH OF STAY) IN ORDER TO CALCULATE THE
LENGTH OF STAY OF THEIR GUESTS IN THE HOTEL.
SUR - SPA UTILIZATIONS RATIO
WHAT IS THE MEANING / DEFINITION OF SUR?
SUR STANDS FOR: SPA UTILIZATION RATIO
TO CALCULATE THE SUR (SPA UTILIZATION RATIO) OF YOUR SPA YOU NEED TO DEFINE TIME AND SPACE UNITS TO BE MEASURED.
THIS CALCULATION MEASURE HOW EFFECTIVE YOU ARE UTILIZING YOUR SPACE AND OPENING TIME.
FORMULA:
SUR = HOURS OF TREATMENT SOLD / HOURS OF TREATMENT AVAILABLE
CALCULATION:
IF A SPA HAS 4 TREATMENT ROOMS AND IS OPEN FROM 9.00AM TO 6PM, 6 DAYS A WEEK, THIS GIVES 216 HOURS OF TREATMENT
AVAILABLE IS A WEEK. IF 150 HOURS WERE SOLD THE SUR WOULD BE CALCULATED AS BELOW:
150 HOURS OF TREATMENT SOLD / 216 HOURS AVAILABLE = 69.4 %
TARGET MARKET
WHAT IS THE MEANING/DEFINITION OF TARGET MARKET?
TARGET MARKET IS A SPECIFIC DEMOGRAPHIC, SOCIO-GRAPHIC TARGET WITHIN THE VARIETY OF CONSUMER GROUPS WITH
DIFFERENT BEHAVIOR AT WHICH MARKETING COMMUNICATIONS AND REVENUE MANAGEMENT STRATEGY ARE DIRECTED.
TRANSIENT
WHAT IS THE MEANING/DEFINITION OF TRANSIENT?
TRANSIENT REFERS TO “NON-GROUP” BUSINESS IN THE HOTEL.
TRANSIENT TRAVELERS ARE GUESTS WHO ARE PREDOMINANTLY ON-THE-MOVE AND SEEK SHORT (AND OFTEN URGENT) HOTEL-
STAYS. SO IN HOSPITALITY INDUSTRY, IT’S USUALLY SIMILAR TO WALK-IN GUESTS, GUESTS WITH LAST MINUTE BOOKING OR JUST
INDIVIDUAL GUESTS WITH SHORT STAY AT THE HOTEL.
HOTEL USUALLY COMPARES THE PROFITABILITY AND BENEFIT BETWEEN ACCEPTING GROUPS OR TRANSIENT GUESTS IN
THE DISPLACEMENT ANALYSIS

32
TREVPAR
WHAT IS THE MEANING / DEFINITON OF TREVPAR?
TREVPAR STANDS FOR: TOTAL REVENUE PER AVAILABLE ROOM
IT IS A HOTEL KPI THAT GIVES A PREVIEW OF THE TOTAL REVENUE FROM ALL DEPARTMENT EACH ROOM CAN GENERATE - WHILE
REVPAR ONLY TAKE ACCOUNTS OF THE REVENUE FROM ROOMS.
THIS CALCULATION IS PREFERABLE FOR MANAGEMENT BOARD AND ACCOUNTANTS TO HAVE A BROAD AND MORE GENERIC LOOK OF
THE HOTEL’S POTENTIAL AND ITS ACTUAL PERFORMANCE. IT IS ALSO A GOOD BENCHMARKING TOOL FOR ALL INCLUSIVE HOTELS OR
RESORTS.
FORMULA:
TREVPAR = TOTAL REVENUE* / TOTAL AVAILABLE ROOMS
*TOTAL REVENUE = ACCOMMODATION + BREAKFAST + SPA + BAR + MINI BAR +[ANY OTHER EXTRA REVENUE]
TURNAWAY
WHAT IS THE MEANING/DEFINITION OF TURNAWAY?
TURN AWAY IS SIMILAR TO DENIAL WHEN THE HOTEL CANNOT ACCOMMODATE THE GUEST THAT HAVE ALREADY MADE A
RESERVATION AT THE HOTEL DURING PARTICULAR PERIOD FOR ANY PARTICULAR REASONS.
IT USUALLY CAUSED BY OVERBOOKING WHEN THE HOTEL ACCEPTS MORE RESERVATION THAN THE AMOUNT OF AVAILABLE ROOM
THAT THEY ARE HAVING. THIS RM STRATEGY IS AIMING AT SELLING MORE ROOMS THAN THE ACTUAL NUMBER OF ROOMS AVAILABLE.
IT CAN BE VERY GOOD WAY OF MAXIMIZING THE OCCUPANCY WITHIN YOUR HOTEL, SUPPOSEDLY THAT YOU GET CANCELLATIONS
UNCONSTRAINED DEMAND
WHAT IS THE MEANING/DEFINITION OF UNCONSTRAINED DEMAND?
UNCONSTRAINED DEMAND OR TRUE DEMAND IS THE CONCEPT EXPLAINS THE TOTAL DEMAND THAT EXISTS FOR A CERTAIN TIME
PERIOD AS IF THE HOTEL HAD NO LIMITATION IN ITS CAPACITY.
WALK
WHAT IS THE MEANING/DEFINITION OF WALK?
WALK THE GUESTS IS A TERM IN HOSPITALITY WHEN THE HOTEL CANNOT ACCOMMODATE THE GUESTS WITH A RESERVATION FOR
PARTICULAR REASONS AND HAD TO WALK THEM TO ANOTHER HOTEL.
THIS USUALLY HAPPEN WHEN THE HOTEL IS OVERBOOKED AND DO NOT GET ANY CANCELLATIONS, YOU WILL HAVE NO OTHER CHOICE
THAN WALK OR TURN AWAY THE GUEST TO ANOTHER HOTEL. THIS WILL OBVIOUSLY IMPACT ON YOUR HOTEL’S REVENUE BUT ALSO
BRAND IMAGE, AS WHEN GUESTS BOOK AT YOUR HOTEL, THEY ACTUALLY WANT TO STAY THERE AND NOT SOMEWHERE ELSE.

33
YIELD
WHAT IS THE MEANING/DEFINITION OF YIELD?
YIELD SIMPLY MEANS REVENUE MADE. IN HOSPITALITY INDUSTRY, IT REFERS TO THE SALES REVENUES MADE WITHIN THE HOTEL OR
THE PROFITABILITY OF FROM DIFFERENT DEPARTMENTS (OUTLETS) OF THE HOTEL.
YIELD CAN ALSO BE CONSIDERED A SYNONYM OF REVENUE MANAGEMENTSIMPLY RESUMED AS THE DYNAMIC
PRICING, OVERBOOKING AND ALLOCATION OF PERISHABLE ASSETS TO MAXIMIZE REVENUE.
YIELD MANAGEMENT
WHAT IS THE MEANING/DEFINITION OF YIELD MANAGEMENT?
YIELD MANAGEMENT PURPOSE IS TO ACHIEVE MAXIMUM REVENUE/PROFIT. IN ORDER TO DO THAT, A YIELD MANAGEMENT
STRATEGY NEEDS TO HAVE AN UNDERSTANDING OF WHAT HAS HAPPENED BEFORE AND WHAT IS HAPPENING NOW; USING THIS
HISTORICAL DATA TO PREDICT WHAT MAY THEN HAPPEN IN THE FUTURE. TO SIMPLY SUM UP, HOTEL YIELD MANAGEMENT IS THE
PROCESS OF UNDERSTANDING, ANTICIPATING AND REACTING TO CONSUMER BEHAVIOR TO MAXIMIZE REVENUE.
YIELD MANAGEMENT IS ALSO REFERRED TO AS REVENUE MANAGEMENT.
THE PROCESS OF YIELD MANAGEMENT OPTIMIZATION HELPS AN ORGANIZATION TO ADJUST ITS PRICES SO THAT THEY MEET THE
TOTAL DEMAND CHARACTERISTICS OF ITS MARKETS.
IN ORDER TO MAXIMIZE THE REVENUE, PRICES CAN BE DETERMINED BY:
SERVICE
GROUP OF SERVICES
MARKET (CONSUMER TYPE OR GEOGRAPHICAL)
A COMBINATION OF THE ABOVE
YIELD MANAGEMENT MODELS ARE MOST EFFECTIVE WHERE THE SERVICE BEING SUPPLIED IS CHARACTERIZED AS:
CAPITAL INTENSIVE
PERISHABLE (REVENUE IS LOST IF THE PRODUCT/SERVICE IS NOT SOLD BY A PARTICULAR POINT IN TIME)
AND THE DEMAND SIDE IS CHARACTERISED WITH:
VARIABILITY OF DEMAND/VARIABILITY OF VALUE

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