The Ultimate Guide to Hotel KPIs

Benefits of Tracking Hotel Performance

Tracking your hotel performance through KPIs is crucial for owners or managers to make informed decisions and improve overall operations. One example is the Waldorf Astoria, a luxury hotel that successfully integrated technology into its operations. This approach upheld its high brand standards and led to more streamlined and efficient processes.

Here are the benefits of keeping an eye on hotel performance:

• Identify Areas for Improvement: Tracking hotel performance helps you spot areas that need improvement, like low occupancy or high staff turnover. With this information, you can create strategies and make changes to boost your hotel’s overall performance.
• Monitor Progress Over Time: By consistently tracking KPIs, you can monitor your hotel’s progress over time and see if there are any improvements or declines. It identifies patterns and trends, helping hotels create strategies for future growth.
• Improve Guest Experience: Guests are the heart of any hotel, and tracking your hotel’s performance is key to improving their experience. By monitoring guest satisfaction KPIs, you can spot areas for improvement and take steps to ensure a positive stay for your guests.
• Maximize Profitability: Metrics offer valuable insights into financial performance, helping hotels identify opportunities to reduce costs or increase revenue. You can make data-driven decisions to boost your hotel’s bottom line by tracking profitability metrics.
• Track Competitor Performance: Tracking industry-specific KPIs also helps monitor competitor performance in the market and benchmark your hotel against them. It allows for identifying areas of competitive advantage and areas that need improvement to stay ahead in the market.
• Align Goals and Objectives: Tracking KPIs ensures your hotel’s activities align with its goals and objectives. It makes it easier to allocate resources more efficiently, resulting in improved performance and profitability.

Essential Hotel Metrics

The advent of Artificial Intelligence (AI) and data analytics has significantly impacted the hotel industry’s operations. With technology, hotel operators can now collect vast amounts of data to track and measure performance more accurately.

Below are some essential KPIs that all hoteliers should track:

Operational KPIs

Operational KPIs are essential for measuring efficiency and boosting profitability. These metrics help businesses track costs, improve processes, and use resources better. By closely monitoring these indicators, companies can find ways to save money, improve performance, and achieve operational success.

• Employee Performance: Labor costs go beyond just salaries—they also include the hidden costs tied to employee performance. It’s about how much a hotel spends on labor and how much value it gets in return.
• Employee Turnover: Onboarding new employees is costly, and high turnover rates can harm a hotel’s success. Tracking employee turnover helps identify underlying issues that may be causing staff to leave and allows for implementing strategies to improve staff retention.
• Sustainability Score: ESG scores measure a hotel’s sustainability practices and social responsibility. Good ESG scores are increasingly important for hotels, as guests highly value sustainable and ethical practices.
• Energy Management: Energy expenses in the hospitality sector are enormous, with companies spending $3.7 billion every year on power and heating. Thankfully, sensors and the Internet of Things (IoT) technology can help track energy use, making it easier to cut costs and go green.
• Water Consumption: CBRE reports that water and sewer costs are the second largest utility expense for hotels, making up nearly 25 percent of total utility costs. The Environmental Protection Agency (EPA) says that using water-saving technologies and efficient practices can help hotels cut water bills by up to 30 percent.
• Labor Costs as a Percentage of Sales: Labor costs comprise a significant portion of a hotel’s expenses. By tracking this KPI, hoteliers can identify areas for cost-cutting and optimize staffing levels to align with business demand. 

Guest Experience KPIs

Financial KPIs are essential for measuring profitability, but guest experience KPIs are just as critical. These metrics help businesses understand customer satisfaction and what drives bookings, repeat visits, and positive reviews. By improving the guest experience, hotels can build a stronger reputation, increase customer loyalty, and drive more revenue.

• Online Reputation: TripAdvisor reports that 81 percent of people read reviews regularly or always before booking a hotel. It makes online reviews a crucial part of a hotel’s reputation. By tracking review scores and responding to guest feedback, hotels can improve their ratings and attract new guests.
• Customer Satisfaction Score (CSAT): Keeping your current customers happy is more important than focusing only on attracting new ones. CSAT measures customer satisfaction levels and provides valuable insights into what the hotel is doing well and where it can improve.
• Net Promoter Score (NPS): A study by Amadeus found that 50% of travelers rely on recommendations from friends and family when choosing a hotel. It makes NPS key for measuring customer loyalty and referrals. By tracking this metric, hotels can see how likely guests are to recommend them and improve their services.

Financial Performance

Hotels need to track key financial KPIs to stay profitable. Monitoring metrics like revenue, sales, and operating costs helps identify growth opportunities, control expenses, and improve economic stability. Regularly reviewing these numbers allows them to make data-driven decisions for long-term success.

• Average Daily Rate (ADR): ADR shows a room’s average daily income over a certain period. This metric helps forecast demand, plan marketing strategies, predict seasonal trends, adjust prices, and maximize room revenue.
• Average Rate Index (ARI): ARI measures a hotel’s ADR compared to its competitors, showing its performance in the market. Tracking this metric helps hotels spot opportunities for improvement and stay competitive.
• Average Room Rate (ARR): ARR is a hotel KPI that shows the average rate charged per room. Unlike ADR, which measures rates daily, ARR considers longer periods, like weeks or months.
• Cost per Occupied Room (CPOR): CPOR helps hotels understand how much it costs to keep a room occupied, including operational expenses like housekeeping, utilities, and maintenance. The lower a hotel’s CPOR, the higher its other KPIs.
• Net Revenue per Available Room (NRevPAR): NRevPAR measures a hotel’s total revenue minus distribution costs, divided by the number of available rooms. This metric helps hotels understand their net profit after accounting for distribution expenses.
• Occupancy Rate: The occupancy rate shows the percentage of rooms filled in a given period. It helps hotels understand their demand and adjust pricing strategies to maximize occupancy and revenue.
• Profit Per Available Room (PROFPAR): PROFPAR measures a hotel’s profit per available room after accounting for all expenses, including operational costs and distribution fees. This KPI is crucial for understanding a property’s overall profitability.
• Revenue per Available Room (RevPAR): RevPAR helps hotels monitor room occupancy and average daily rate (ADR), making planning for busy or slow seasons easier. Tracking revenue over time is a helpful way to compare performance and evaluate a property’s long-term success.
• Revenue per Occupied Room (RevPOR): RevPOR is another version of RevPAR. The key difference is that RevPOR focuses only on occupied rooms, making it a more accurate measure of a hotel’s revenue from guests.
• Total Revenue Per Available Room (TRevPAR): TRevPAR measures a hotel’s total revenue, including all sources like rooms, food and beverage, and other services. This KPI gives a complete picture of the property’s financial performance.