18 Methods for Measuring and Improving Hotel Performance – Part 2

Tags: #hotelperformance, #criticalmetrics, #KPIs, #ADR, #ARR, #Occ, #LOS, #RevPAR, #RevPOR, #TrevPAR, #NRevPAR, #ARPA, #ARPAR, #GOP, #GOPPAR, #CPOR, #EBITDA, #MCPB, #ROAS, #DRR

This is the second part of article series of “18 Methods for Measuring and Improving Hotel Performance” and we continue reviewing them in this article:


9- Average Revenue Per Account (ARPA)


ARPA = (Monthly) Recurring Revenue / Total Number of Accounts

Average revenue per account, or ARPA, is a revenue management key performance indicator used to show the average amount of revenue generated per customer account, over a particular period. It is usually calculated on a monthly or yearly basis and the time period was chosen can easily show hotel owners the average revenue value of existing customers, or the value of new customers. ARPA is calculated by dividing monthly recurring revenue by the total number of accounts.

This can help to show business growth, or when performance declines, which may be an indicator that prices need to be adjusted, or that more customers need to be attracted.

One potential limitation of the KPI is that it measures revenue on a per account basis, rather than on a per-user basis. Although the metric is sometimes referred to as average revenue per user, this is not an entirely accurate description of what the metric shows, because some users may actually have more than one account.


10- Adjusted Revenue Per Available Room (ARPAR)


ARPAR = (ADR – CPOR + additional revenue per occupied room) x Occupancy

ARPAR is adjusted revenue per available room. It is a great metric to measure the performance of revenue management and the overall effectiveness of the hotel’s pricing policy. ARPAR is similar to RevPAR, except that ARPAR takes into account revenue and costs per occupied room. Costs per occupied room that greatly influence ARPAR and hence profitability include cleaning, energy usage, water usage, internet and TV, supplies such as toiletries, etc. There are several costs that can be subtracted from the revenue generated by each occupied room, as reflected in the ARPAR formula.


11- Gross Operating Profit (GOP)


GOP = Gross Operating Revenue - Gross Operating Expenses

It defines the level of operational profitability of a hotel. It is a KPI which alludes to the Hotels profits before subtracting all of their operating expenses.


12- Gross Operations Profit Per Available Room (GOPPAR)


GOPPAR = Gross Operating Profit (GOP) / Number of Available Rooms

GOPPAR is gross operating profit per available room and is a helpful measurement for hotel owners looking for a general picture of their properties’ performance as it looks at all rooms regardless of if they are occupied or not. While GOPPAR is a strong indicator of performance across all revenue streams, it includes room variables, such as internet bills and hotel furniture costs, that hotel managers have little control over.

GOPPAR allows you to view the value of your hotel as an asset at any time - together as an operating business, management efficiency and real estate property.

13- Cost Per Occupied Room – CPOR


CPOR = Total Rooms Departmental Cost / Total Rooms Sold

Cost per occupied room helps you determine how efficient your property is per sold room. To determine CPOR you divide total gross operating profit by total rooms available. Gross operating profit is your Net Sales minus Cost of Goods Sold minus Operating Expense, which includes selling, general and administrative expenses. CPOR gives you the ability to see how profitable each room is while taking into consideration your expenses, both variable and fixed (labour, rent, etc.)

Managers and owners should use this metric to track how efficient their properties are over time. RevPAR and ADR help you determine if you’re selling enough rooms at the best price, and CPOR will help you maximize property’s efficiency.


14- EBITDA


EBITDA = Total Revenue – Expenses (excluding interest, taxes, depreciation and amortization