In the fast-paced and highly competitive world of hospitality, understanding performance is key to success. Whether you're managing a boutique hotel or a large international chain, tracking the right Key Performance Indicators (KPIs) helps you make informed decisions, improve operations, and maximize profitability. Here are the seven most important KPIs for the hotel industry you should be measuring.
1. Occupancy Rate
Formula:
Occupancy Rate = (Rooms Sold / Rooms Available) x 100
This KPI measures how many available rooms are being occupied over a specific period. A high occupancy rate usually indicates strong demand and effective marketing, while a low rate could highlight issues in pricing, visibility, or guest satisfaction.
Why it matters:
It directly reflects how well your hotel is filling rooms, helping forecast demand and optimize inventory management.
2. Average Daily Rate (ADR)
Formula:
ADR = Total Room Revenue / Rooms Sold
ADR indicates the average income earned per occupied room per day. It gives insight into your pricing strategy and the value perception of your offerings.
Why it matters:
Increasing ADR without sacrificing occupancy can significantly boost revenue, making it crucial for pricing strategies.
3. Revenue Per Available Room (RevPAR)
Formula:
RevPAR = Occupancy Rate x ADR
or
RevPAR = Total Room Revenue / Available Rooms
RevPAR combines occupancy and ADR to give a snapshot of how well a hotel is utilizing its available inventory to generate revenue.
Why it matters:
It’s one of the most comprehensive KPIs to measure overall room revenue performance.
4. Gross Operating Profit Per Available Room (GOPPAR)
Formula:
GOPPAR = Gross Operating Profit / Available Rooms
Unlike RevPAR, GOPPAR factors in operating costs, giving a clearer picture of profitability per room.
Why it matters:
It helps hoteliers understand how effectively their operations generate profit beyond just room revenue.
5. Average Length of Stay (ALOS)
Formula:
ALOS = Total Room Nights / Number of Bookings
This metric shows how many nights guests typically stay at your hotel.
Why it matters:
A longer ALOS can reduce operational costs (fewer check-ins/outs and cleaning) and is often a sign of guest satisfaction.
6. Customer Satisfaction Score (CSAT)
Formula:
CSAT = (Number of Satisfied Customers / Total Responses) x 100
Measured through post-stay surveys or online reviews, CSAT gauges guest satisfaction and service quality.
Why it matters:
A high CSAT often correlates with repeat bookings, referrals, and better online reputation, which directly influence future revenues.
7. Booking Source Mix
What it tracks:
This KPI categorizes bookings by source—direct (website, phone), OTAs (Booking.com, Expedia), GDS, travel agents, etc.
Why it matters:
Understanding where your guests are coming from helps optimize marketing efforts, manage commissions, and shift more bookings to higher-margin channels.
Conclusion
Monitoring and understanding these seven KPIs allows hoteliers to make smarter decisions, optimize revenue, and enhance guest experience. While each KPI provides valuable insights on its own, the real power lies in analyzing them together for a comprehensive view of your hotel's performance.
By regularly tracking and adjusting based on these KPIs, hotels can stay agile, competitive, and profitable in a dynamic market.