Understanding Property Performance Metrics And KPIs
Maths
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Maths 〰️
Understanding Property Performance Metrics And KPIs
Today we are going to be discussing the boring metrics that measure the success of your property marketing efforts. Like with most other industries, short term letting has its own unique set of performance metrics and understanding (and then implementing) them will help you track your progress.
Whether you choose to measure simple things like your social media engagement or delve deeper and workout your conversion rate, having key performance indicators help you evaluate your property's progress towards achieving your objectives.
Occupancy rate (OR)
A property’s occupancy rate is exactly as it sounds, the number of rooms occupied by guests. Occupancy is expressed as a percentage. The goal is to have 100% occupancy if possible, but sometimes it’s more profitable to sacrifice a few bookings for a higher average rate.
How do you calculate your property’s occupancy rate?
Daily occupancy rate = Number of rooms occupied ÷ Total number of rooms x 100 = %
Example - You have 4 rooms and 3 of them were occupied today.
3 ÷ 4 = 0.75 x 100 = 75% = OR
Average Daily Rate (ADR)
A property’s average daily rate is the average price guests pay for rooms. It can be measured on any given night or over a specific period of time such as a month or year. ADR is expressed as a GBP figure.
How do you calculate your property’s average daily rate?
Total room revenue ÷ Number of rooms sold
Example - Yesterday your total room revenue = £1250 and you have 8 rooms.
£1250 ÷ 8 = £156.25 = ADR
Revenue Per Available Room (RevPAR)
Revenue per available room (RevPAR) is the average amount of room revenue generated per available room in a property. It can be measured on any given night or over a specified period of time. Unlike ADR, RevPAR takes into account all available rooms including both unoccupied and sold rooms.
How do you calculate a properties RevPAR?
Total room revenue ÷ Total number of rooms available
Example - Yesterday your total room revenue = £1800 and you have 9 rooms available.
£1800 ÷ 9 = £200 = RevPAR
Average Length of Stay (ALOS)
A properties average length of stay (ALOS) is the number of nights guests stay on average over a certain period of time.
How do you calculate a hotel’s average length of stay?
Total occupied room nights per month ÷ Total number of bookings per month
Example - You had 36 occupied rooms and 7 bookings
36 ÷ 9 = 4 = ALOS
Market Penetration Index (MPI)
Market penetration index (MPI) is a measure of your property’s market share of occupancy in comparison to your competitors. It is usually measured over a month or annually. An MPI lower than 100 means you received less than your fair share of bookings and an MPI above 100 means you received more than your fair share of bookings.
How do you calculate a properties market penetration index?
Property’s occupancy rate for given month ÷ Competitors occupancy rate x 100
Example - Your monthly occupancy rate is 120 and your competitors is 146
120 ÷ 146 = 0.8219178082 x 100 = 82% = MPI (Not ideal for you)
Gross Operating Profit (GOP)
Gross operating profit measures a property's total revenue minus its operating costs. It provides a more holistic view of your property's performance because it takes into account all revenue streams and the costs of doing business.
How do you calculate a hotel’s GOP?
Total revenue for the month - Total operating costs
Example - Your revenue for the month = £4560 and your operating costs were £2322
£4560 - £2322 = £2238 = GOP
Website conversion rate
Your conversion rate measures how many people make a booking in comparison to the number of people that visited your website. It gives you an idea of how effective your user experience and search engine optimization is.
How do you calculate your websites CR?
Total number of bookings ÷ Total website visitors x 100
Example - You have 198 total visitors and 20 bookings
20 ÷ 198 = 0.101010101 x100 = 10% = CR (a crazily good rate)
Average booking window
Your average booking window represents the number of days between when the reservation is made and the check-in date. This then allows you to better forecast and amend your pricing to try and maximize your occupancy.
Days between the booking date ————> Check in date = ABW
Example - Reservation date = 01/01/23 - Check in date = 18/01/23 = 18 days booking window
Conclusion
Having these metrics in mind as a property owner will help you better assess the success of your business. You can then optimize based on the results with the goal of driving more bookings, building a strong revenue management strategy and maximizing occupancy. We hope you found this article useful and if you have any other questions about property performance metrics, do get in touch with our team!