100 Years of Advancing Destinations

Using Hotel Performance Metrics to Demonstrate Value

Author: Guest Brittany Baldwin
Posted: March 14, 2014
Blog Topics Covered:
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Brittany Baldwin, Smith Travel ResearchBenchmarking is used by hoteliers to consistently measure and analyze their performance against their industry peers and market, playing a vital role in revenue management strategy.

These same tools can be utilized by the destination marketing industry to discover the effectiveness of their efforts and demonstrate the value of the organization itself.

Key Metrics

The metrics by which hotels are measured, called key performance indicators or KPIs, are occupancy (a function of rooms available and rooms sold), ADR (average daily rate) and RevPAR (revenue per available room). These are generally looked at in relation to time periods and a competitive set – determining where you sit in relation to last year and if you’re gaining or losing market share.  

Looking at these data points for properties in your destination allows you, the destination management organization, to validate your efforts as being effective, finding out if certain groups presented a boost in occupancy or if a major event created lift for room rates.

Furthermore, if your organization is funded by bed/occupancy tax, these numbers allow you to estimate expected revenue and assist in your future financial planning efforts.

Segmentation

Diving a bit deeper, segmentation data displays performance relative to three customer segments. These are:

  • Group: Group rooms are sold simultaneously in blocks of a minimum of ten rooms or more (e.g. group tours, domestic and international groups, association, convention and corporate groups).
  • Transient: Transient rooms include rooms occupied by those with reservations at rack, corporate, corporate negotiated, package, permanent guests, government, or foreign traveler rates. Also includes occupied rooms booked via third party web sites (exception: simultaneous bookings of ten or more rooms which should be defined as group).
  • Contract: Contract rooms are occupied at rates stipulated by contracts—such as for airline crews.

Segmented data provides a deeper look into what visitors you attract and can demonstrate a clear pattern between your group and transient guests. If there are dates that are historically slow for group business, that might be an area of focus moving forward.  Similarly, the data may validate that an event your destination hosted resulted in a significant amount of group business leading to high occupancies at area properties.

The slide above was taken from a recent STR presentation and demonstrates the shift from group-led demand in Orlando 2005 to a higher transient share in 2013.

Day of Week, Weekday, Weekend

It is also valuable to look at how hotels performed on each individual day of the week, on weekdays (defined as Sundays through Thursdays) and weekends (Friday and Saturday).

Looking at the data this way can help you determine if the guests staying in the area are generally more business-oriented (tend to stay on weekdays) or leisure travelers (visiting on weekends).

Furthermore, the data may demonstrate areas of opportunity. If Wednesdays generally have great occupancy, but Tuesdays are lagging, you may decide to bring in groups that provide longer lengths-of-stay or push for more events different days of the week.

The slide above demonstrates that while weekend rates are rising in the Orlando market, they still have not reached the peak 2007 levels. Looking at this data for your area would enable you to gauge opportunities for growth.

Competitive Destinations

Finally, while looking at historical and year-over-year performance for your area is important, considering the performance of competing destinations is also valuable.

All of the metrics above can be viewed for both your area and any destinations that might cater to the same visitor. Looking at these numbers, you can determine the destination equivalent of “market share” – whether you are getting the appropriate amount of traffic or if you may be missing out on business.

The slide above illustrates RevPAR percent change for various Florida markets.

Putting It All Together

While you may have an idea of how your efforts are faring, data allows you to challenge your assumptions with facts. This will enable you to demonstrate the importance of your organization to your board, community and members with information from an unbiased third party and help you strategize moving forward.

For more information on reports available to you, please visit: http://www.str.com/products/destinations.