Title: Brief explanation on Evaluation on Hotel Performance

Hotel Performance evaluation

1. EVALUATING HOTEL PERFORMANCE

2. Methods of Measuring Hotel Performance Measuring the performance of a hotel is important for its investors, owners, and managers. The investors want to assess the profitability of their investment in order to decide whether to continue to invest or to withdraw their investment from that venture. The owner need to continuously evaluate the performance of the hotel with respect to revenue generation. The managers formulate strategies to improve the performance of the hotel and set targets to measure their success.

3. Methods of Measuring Hotel Performance The approaches are either quantifiable or qualifiable . Quantifiable measurements depend on data Qualifiable goals are determined by mgmt. There are different ways of measuring the performance of hotels. Some of them are as under: Occupancy Ratios Average Daily Rate Average Room Rate Per Guest Revenue Per Available Room (Rev-Par) Market Share Index Evaluation of Hotels by Guests.

4. Occupancy Ratios One of the oldest and traditional ways of evaluating the performance of a hotel is by calculating occupancy ratios. The calculation of occupancy ratios requires the following data: Total number of saleable rooms Number of rooms sold Number of guests (i.e. house count) Net room revenue generated Occupancy percentage is the ratio of the total number of occupied rooms to the total number of rooms that are available for sale . Occupancy percentage= No. of rooms sold × 100 Total no. of rooms available for sale The occupancy percentage can be calculated for a particular day, or on a weekly, fortnightly, monthly, quarterly, half yearly, or annual basis. This yardstick helps the management to measure the performance of the hotel.

5. Occupancy Ratios Let us suppose that the hotel with 350 rooms (all available for sale) managers to sell 245 rooms on certain day. The occupancy percentage on that particular day will be: Occupancy percentage= No. of rooms sold × 100 Total no. of rooms available for sale = 245 × 100 350 = 70%

6. Average Daily Rate Average daily rate commonly referred to as ADR is a statistical unit that is often used in the hospitality industry. It is the average rental income per occupied room for a given time period. It is calculated by dividing the total revenue generated in a specific duration of time by the total number of rooms sold in that duration. Formula to calculate ADR is as under:

7. Average Daily Rate Let us suppose that hotel with room 350 (all available for sale) managers to sell 245 rooms on certain day. The total revenue generated was Rs . 49,000. The average daily rate will be: = Rs 49,000 245 rooms = Rs 200 per rooms.

8. Average Room Rate Per Guest Average room rate per guest (ARG) is calculated by dividing the total room revenue by the total number of guests in the hotel, including children above five years. The formula to calculate the average room rate per guest is as under:

9. Average Room Rate Per Guest Let us suppose that hotel with room 350 (all available for sale) .The total revenue generated was Rs . 49,000 . If total no. of guests is 280 on that particular day, the average room rate per guests will be: = Rs . 49,000 280 guests = 175 per guests

10. Revenue Per Available Room (Rev-Par) Rev-par is the revenue per available room. It is used to measure and compare the performance of two or more hotels. Rev-par is calculated by multiplying the average daily rate with the occupancy percentage . Only considers room revenue performance Rev-par can analyse the performance of a hotel over any timeframe—daily, weekly, monthly, quarterly, or yearly.

11. Revenue Per Available Room (Rev-Par) Let us take the following example. The data collected on the particular day from three hotel as follows Hotel X(300 rooms): ADR is Rs . 250 with an occupancy percentage of 75. Hotel Y(200 rooms): ADR is Rs . 275 with an occupancy percentage of 70. Hotel Z(600 rooms): ADR is Rs . 200 with an occupancy percentage of 65. Now, Rev-par= ADR × occupancy percentage Rev-par of hotel X: 250 × 75/100 = Rs . 187.50 Rev-par of hotel Y: 275 × 70/100 = Rs . 192.50 Rev-par of hotel Z: 200 × 65/100 = Rs . 130.00 We see that on the basis of rev-par, hotel Y has outperformed than other two hotels. Thus rev-par is useful for comparing hotel of different sizes and their respective rates.

12. GOPPAR ( Gross Operating Profit Per Available Rooms ) GOPPAR refers to gross operating profit per available room. Considers revenue and expenses of all areas of the business Good metric for measuring hotel performance as a whole GOPPAR= Gross revenue-Gross Expenditure Available rooms

13. TRevPAR ( Total revenue per Available room) TRevPAR refers to total revenue per available room. Indicates overall financial performance of our business as it considers revenue from all the departments. TRevPAR = Total Revenue Total Available room

14. Market Share Index Market share is defined as a hotel’s occupancy performance in relation to other hotels within a predetermined competitive set. A major task in calculating the market share is the determination of the competitive set. The answer to the question if a guest is not staying at our hotel, where can he possibly stay?— constitutes the competitive set. The total market potential is the sum total of the number of rooms that are available in the total number of participating hotels. Market share index enables the managers to assess their hotel’s performance with respect to the competitors.

15. Evaluation of Hotels by Guests Guests base their evaluation of hotels on various criteria like: Location hotel staff service level cleanliness This is the reason why “ Guest Cycle ” in a hotel should run smoothly and perfectly. A 2007 survey of the hotel and restaurant industry in Europe concluded that 80 per cent of UK consumers are now researching online before booking a hotel Most of the traveler says that they have refrained from booking a hotel as a direct result of a negative review on travel information websites such as TripAdvisor . It is very important that the hotel provides consistent excellent services to all the guests so that no guest leaves the hotel with a negative experience, which might lead to negative word-of-mouth publicity and to the lowering of hotel sales, and thus affecting the revenue and performance of the hotel.

16. Trip Advisor A travel portal that provides travel information, booking and the largest online travel community. Allows map search of destinations, show local maps of attractions and offers from dealers in that location. It is wiki-enabled and as like wikipedia . Provides direct access to OTA (Online Travel Agent) like Expedia, hotel.com, booking.com etc.