Summary Slide

Measuring Hotel PerformanceRev-parRev-par IllustratedRev-par IllustratedMarket ShareMarket ShareMarket ShareQualifiable AnalysisMeasuring Hotel Performance Web sites

Figure 13-1

Measuring Hotel Performance

Hotel performance benchmarks are needed to compare hotels of differing sizes, location types, and product types.

The approaches are either quantifiable or qualifiable.

Quantifiable measurements depend on data (rev-par and market share).

Qualifiable goals are determined by mgmt.

Figure 13-2

Rev-par

Rev-par is defined as revenue per available room. This analysis allows hotels of different sizes to compare the revenue generated by the sale of sleeping rooms.

To calculate Rev-par you divide the total sleeping room revenue generated for a pre-determined timeframe by the total number of hotel rooms.

Figure 13-3

Rev-par Illustrated

Step 1 Collection of dataABC hotel (with 350 rooms, an ADR of $150,

and an occupancy of 76%). XYZ hotel has 500 rooms, runs an ADR of

$120, and a 76% occupancy which results in a total of 380 rooms being sold.

Step 2 Revenue calculationThe total room revenue for the ABC Hotel is:

$39,000 ($150 x 266).The total room revenue for XYZ Hotel is:

$45,600 ($120 x 380).

Figure 13-4

Rev-par Illustrated

At first glance, a novice may look at the higher room revenue of XYZ and make the incorrect assumption that it outperformed ABC.

Step 3 Rev-par The rev-par comparison would show that the

rev-par for ABC ($114) is higher than the rev-par for XYZ $91.2 ($45,600 divided by 500). This example shows that with what it had to work with, ABC outperformed XYZ when ADR and occupancy were factored in.

Figure 13-5

Market Share

Market share is defined as a hotel’s occupancy performance in relation to other hotels within a predetermined competitive set.

The first step in determining market share is to determine which nearby hotels fall within the competitive set. The competitive set should include hotels of similar product type, location type, and service level.

Figure 13-6

Market Share

The next step in determining a hotel’s market share is to determine its individual market potential. The individual market potential is defined as the number of rooms a hotel has for sale within a given time frame.

A hotel's rightful market share (or fair share) reveals how much of the total market potential is made up by its own individual potential.

Figure 13-7

Market Share

Once the individual and total market potential is determined, and the rightful share of each hotel is known, actual occupancy data is used to calculate market share.

Most hotels will share occupancy data with each other, but they cannot share rate information.

Why is it unethical or illegal to share rate information?

Figure 13-8

Qualifiable Analysis

Qualifiable analyses are based on the goals of hotel managers.

Rate driven management goals may forgo occupancy levels for a higher average rate. The occupancy driven goals are simply the opposite, they forgo a higher average rate for greater occupancy.

Neither is right or wrong, each goal is simply in the “eye of the beholder.”

Figure 13-9

Hotel Performance Internet Exercise

The URLs listed on the next slide take you to sites that regularly track trends and statistics.

Use these sites in conjunction with other resources to monitor fluctuations in ADR and Rev-Par across the country.

How do changes in inflation, exchange rates, interest rates and other factors affect hotel performance?

How do changes in guest room supply in specific areas affect ADR and Rev-Par?

Figure 13-10

Measuring Hotel Performance Web Sites

Smith Travel Researchhttp://www.wwstar.com

Lodging Forecasthttp://www.lodgingforecast.com

National Business Travel Associationhttp://www.nbta.org/industry/stats_index.htm

Pricewaterhouse Coopershttp://www.pwcglobal.com/ca/eng/about/ind/svcs_hosp-os.html

Figure 13-11