Hotel Management Glossary

  • Average Collection Period - Average collection period is the amount of time required for a business to receive payments from clients. It can be thought of as the time that elapses between the date that a credit sale is made and the date that the full amount is collected from the customer. It is usually calculated in terms of […]
  • Average Payment Period - Average payment period (APP) is the length of time a hotel, resort, or company takes to pay off credit purchases. It is used for accounting purposes to track when payments are due so that no penalties or excess interest are accrued. It does not have an effect on the company’s working capital. Because of this, […]
  • Average Rate Index - The Average Rate Index (ARI) is a property management performance metric that compares Average Daily Rate (ADR) with the property’s competitive set for a given period of time. A property’s competitive set includes other brands and competitors with a similar target market. The competitive set (comp set) is obtained by calculating the Average Daily Rate […]
  • Average Room Rate - Average Room Rate (ARR) is a hotel KPI that measures the average rate of an available room. As opposed to Average Daily Rate (ADR) which measures what rate a room might earn on any given day, ARR measures the average rate of rooms available over a longer period of time. It can be calculated for […]
  • Average Spend Per Customer - Average spend per customer is a metric that is most commonly used in hotel food and beverage operations. But it can also be applied to other areas of hotel operations and services. It gives revenue managers an idea of how much each customer spends on varying products and services during their stay, on average. It […]
  • Average Treatment Rate - Average Treatment Rate (ATR) is most relevant for spa or wellness operations in a hotel or resort property. It can apply to spa operations within a hotel or from an independent operator. It determines the average rate for treatments that guests receive in the spa. It can also be used to calculate the average spa […]
  • Benchmarking - Benchmarking uses a number of hotel KPIs to make comparisons against competing hotels. Examples of KPIs used in hotel benchmarking include prices, level of service, product offerings, location, and distribution channels. Some competitors may compete on all factors at all times. Others may only compete in a few segments and for different times, such as […]
  • Booking Curves - Booking Curves are visual representations that display how hotel bookings occur over a certain period of time. These curves are usually displayed in graph form and can include several data items, including room pickup, bookings, and availability. The data that is compiled to create a booking curves graph is usually calculated using a hotel’s Property […]
  • Cost of Sales Ratio - Cost of sales ratio applies directly to the cost of goods sold. It provides a metric for comparing a hotel’s expenses from sales activity against total revenue. It is an important hotel KPI used to give revenue managers a better idea of how a hotel’s food and beverage operation performs. Profitable food and beverage operations […]
  • Cost per Occupied Room - Cost per occupied room (CPOR) is a formula used to calculate the average cost of a guest occupying a room. It is a key performance indicator that helps hotels understand profitability. As a hotel lowers its CPOR, it can increase profits per available room and/or become more competitive. Reducing CPOR is one of the quickest […]
  • Current Ratio - Current ratio applies to hotel liquidity. It is a metric that is often considered by investors and analysts to determine a hotel’s ability to maximize current assets on its balance sheet. A hotel’s ability to maximize these assets plays a huge part in its ability to satisfy current debt obligations and other payables. It is […]
  • Demand Calendar - A Demand Calendar is a hotel revenue management tool that shows multiple demand indicators. It helps managers more accurately evaluate market situations in order to make decisions on prices, promotions, and more. Common metrics used to create an accurate Demand Calendar include the previous year’s RevPAR, groups or events booked in the past year, demand […]
  • Displacement Calculations - Displacement Calculations are used in hotel revenue management cost-benefit analysis. They are a calculation of the value of a group bookings versus the value of transient (or walk-in) bookings. Making these calculations requires day-to-day analysis of how a hotel’s TOP accounts (tour operators, corporate, consortia, and IDSs) are producing. What are Displacement Calculations For? Displacement […]
  • EBITDA - EBITDA is an acronym that stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a good indicator of a hotel’s financial performance and allows revenue managers to compare hotel profitability against competitors or sister properties. What is EBITDA For? EBITDA is used to evaluate the profitability of a hotel’s operations. It is specifically […]
  • EBITDAR - EBITDAR stands for Earnings Before Interest, Taxes, Depreciation and Amortization, and Restructuring or Rent Costs. Like EBITDA, it is a key metric for evaluating a hotel’s profitability and performance. However, EBITDAR is more widely used for hotels or properties that have undergone restructuring within the past year. What is EBITDAR For? EBITDAR can be used […]
  • Forecasting - Forecasting is a way for hotel managers to predict a number of key market indicators and customer behaviors, and is done using models that range from basic to very complex. It is also a strategic management tool for managers to gather more knowledge on visitor demographics and behaviors, as well as market trends. Forecasting models, […]
  • GOPPAR - Gross Operating Profit per Available Room (GOPPAR) Gross Operating Profit per Available Room (GOPPAR) is an important KPI that helps hotels adjust revenue against the costs incurred in generating that revenue. It is used in hotel revenue management to maximize a property’s profitability by factoring operational costs into its forecasting. Some examples of operation costs […]
  • Gross Operating Profit - Gross Operating Profit, or GOP, is a hotel KPI that signals the property’s profits after subtracting operating expenses. It is a useful indicator of the profitability of a hotel’s operations and should be calculated regularly for comparisons to the previous year’s GOP. A hotel’s GOP can also be compared to reported GOP for competitors and […]
  • Gross Profit Ratio - The Gross Profit Ratio is a profitability ratio that allows managers to compare gross profits to net sales revenue. It requires calculations of gross profits and net sales, and the final ratio is usually expressed as a percentage. What is Gross Profit Ratio For? Gross Profit Ratio is a profitability ratio used for comparing a […]
  • Labour Cost Ratio - Usually expressed as a percentage, Labour Cost Ratio provides revenue managers with a key performance indicator to compare labour costs to hotel revenue. It shows the amount of labour costs required to produce each dollar of sales. Employee salaries or wages are generally a large percentage of total labour costs. Other examples of labour costs […]
  • Market Penetration Index - Market Penetration Index (MPI) is a key hotel performance metric that measures how a hotel’s occupancy rates compare to those of its competitors. More specifically, it compares a hotel’s average occupancy rate to the average occupancy rate of similar hotels in your industry. It is also sometimes referred to as a hotel’s market share. What […]
  • Market Segmentation - Market Segmentation is a necessary element to apply several other hotel revenue management principles. It is useful for identifying different consumer segments in order to customize marketing initiatives to target those groups. One of the more common general examples of market segmentation is breaking guests down into those traveling for business purposes versus those traveling […]
  • Net Profit Ratio - The Net Profit Ratio is a profitability ratio used by hotel revenue managers to understand profitability after certain costs. It is a KPI that removes taxes to provide a more accurate picture of the relationship between net profits and net sales. A higher net profit ratio signals a more efficient hotel management. A lower ratio […]
  • NRevPAR - Net Revenue Per Available Room (NRevPAR) is a comparison metric similar to RevPAR, but whereas RevPAR looks only at a property’s room revenue, NRevPAR takes into account all net revenues for a hotel or property. Looking at net revenue, moreover, means that NRevPAR also takes costs into account, such as travel agency commissions, transaction fees, […]
  • Occupancy Rate - Occupancy rate is a hotel KPI that measures the number of rooms occupied in a hotel at a given time, and compares that to the total number of rooms available on the property. It is displayed as a percentage. Occupancy rate highlights how much of the available space in a hotel is actually being utilized […]
  • Operating Profit Ratio - Operating Profit Ratio is a hotel KPI that measures the relationship between operating profit earned and the net revenue generated by a property which is also labeled net sales. Net sales should include both cash and credit sales. Operating profit should be accounted for before interest and taxes. The ratio is a profitability ratio that […]
  • Price Positioning - Price Positioning is a determination of where a hotel’s prices stand in comparison to prices at similar properties. Price positioning can be used to evaluate daily room rates, holiday rate promotions, spa and food and beverage prices, and more. Some of the most common strategies for price positioning include penetration pricing, skimming pricing, equal pricing, […]
  • PROFPAR - Profit Per Available Room (PROFPAR) is a calculation of hotel profit earnings for each available room on the property. The calculation is made using operating profit, which accounts for changes in room revenue and operating expenses. For hotel owners, PROFPAR is a good metric for evaluating sales growth and management’s ability to control operating expenses. […]
  • Rate Fences - Rate fences are rules that are applied to specific room rates. They are set by revenue managers to prevent customers who are willing to pay higher amounts from having access to promotions or discounts. From the consumer’s perspective, certain rules will apply to a reservation in order to complete a booking at a certain rate. […]
  • Revenue Generation Index - A Revenue Generation Index (RGI) is a useful metric for comparing hotel revenue to the average RevPAR of the competition. Because it uses RevPAR as its primary KPI, an RGI also accounts for occupancy rates. What is Revenue Generation Index (RGI) For? An RGI is used to determine whether or not a hotel is earning […]
  • RevPAM - Revenue Per Available Square Meter (RevPAM) is a hotel KPI that measures a hotel’s ability to generate revenue from its banquet and conference spaces. Consequently, RevPAM only applied to hotels that rent space for banquets or conferences, and does not include revenue from room charges or breakfast offerings. What is Revenue Per Available Square Meter […]
  • RevPAR - Revenue per Available Room (RevPAR) is a critical metric for hotels to plan for high and low seasons. It helps hotels measure the efficiency of their operations by tracking how well they’re filling available rooms at their Average Daily Rate (ADR). And since RevPAR measures revenue made during a certain period of time, it can […]
  • RevPASH - Revenue Per Available Seat Hour (RevPASH) is a KPI used by food and beverage outlets in a hotel. It is similar to RevPAR, which is used to evaluate room revenue. RevPASH measures revenue generated by a food and beverage (F&B) outlet per hour based on available seats. It can be calculated daily, weekly, and monthly. […]
  • RevPATH - Revenue Per Available Treatment Hour (RevPATH) is used to measure profitability of spa operations in a hotel or resort property. It measures revenue generated by treatments and accounts for the number of rooms available during normal hours of operation. It is a very useful metric used in yield management for spa managers. What is Revenue […]
  • RevPOR - Revenue Per Occupied Room (RevPOR) differs from RevPAR because it accounts for all revenue a hotel earns when a room is occupied. It accounts for optional services guests can purchase at the hotel, as well as any additional sales made during a stay. RevPOR can be measured daily, weekly, monthly, or annually. The choice that […]
  • Spa Utilization Ratio - Spa Utilization Ratio (SUR) is a hotel spa KPI that signals how effective a spa is in selling its treatment hours. It is very similar to how Occupancy Rate evaluates how many rooms are filled in a hotel for a given period. What is Spa Utilization Ratio (SUR) For? SUR is used for spa managers […]
  • SRevPOR - Spa Revenue Per Occupied Room is a KPI specific to hotel spa operations. It helps both spa and hotel revenue managers identify the relationship between spa operations and hotel occupancy. The data used to calculate SRevPOR is pulled from a hotel’s Spa Management System. SRevPOR in the spa industry typically falls between $40 and $70. […]
  • Stay Controls - Stay Controls are methods for hotels to restrict bookings. They can depend on a variety of factors and are generally based on a hotel’s booking patterns. Essentially, Stay Controls are restrictions that help a hotel realize higher revenue potential. What are Stay Controls For? Stay Controls are used by hotel revenue managers to achieve as […]
  • TRevPAR - Total Revenue Per Available Room (TRevPAR) is a hotel KPI that gives a more holistic view of the total revenue generated from all departments. It differs from RevPAR by accounting for more than the revenue generated by only rooms sold. What is Total Revenue Per Available Room (TRevPAR) For? TRevPAR is often used as a […]
  • TRevPEC - Total Revenue Per Client (TRevPEC) is a hotel KPI that can be used to evaluate how much revenue is generated from each visiting customer. It breaks down family and group bookings to provide more information on revenue per customer for those bookings. TRevPEC can be calculated for a selected time period, depending on a hotel […]
  • Unconstrained Demand - Unconstrained Demand is part of a hotel’s Demand Forecast. It is a representation of a hotel’s total demand for a given period. It is a useful KPI for revenue management decisions, especially when it relates to maximizing revenue on a hotel’s last remaining rooms available. There are also many ways to organize data to identify […]