Key Performance Indicators (KPI) for Hotels

Key Performance Indicators (KPI) for Hotels

Managing a successful hotel has to be one of the most challenging jobs. With so many departments and so many people that you have responsible for it can be very difficult to find the time to review the performance. Key Performance Indicators for hotels are select measurements that really matter for lasting success.

Measuring the performance is only the first and easiest part of the continual improvement process but without knowledge there can be no purposeful action.

The Basics

These are the KPI’s which every property should run on the regular basis. They are simple calculations, allowing you to access a high-level view of the hotel and also create benchmark metrics against industry standards and predictions.

1. Average Daily Rate (ADR)

Average daily rate is a simple metric used to calculate the average rate per occupied room. You calculate average daily rate by dividing total room revenue by total rooms occupied. It excludes complimentary rooms and rooms occupied by staff. Although ADR can assist in analyzing the hotel’s performance, it doesn’t take into account any unsold or empty rooms. Therefore, it could be deceiving in terms of overall property performance. It works well in isolation as an ongoing performance metric. The ADR is most useful when comparing to previous periods or seasons to identify performance over time.

Why is this metric important?
ADR compares your performance against your competitors and can also measure financial performance.

Average Daily Rate

ADR = Room Revenue / Number of Rooms Sold

Example: For the month of June your property made 50 000 EUR room revenue with 10 rooms. (assuming you had a 100% occupancy rate), by following the formula, we have: 50 000 / 10 = 166EUR ADR for the month of June.

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