Hotel Industry KPI

Author: Sayan Adhikary


Introduction:

A hotel is a managed building or establishment, which provides customers with a place to stay overnight on a short-term basis in exchange for money. The specific features and services provided to guests can differ quite drastically from one hotel to another, and hotel owners generally aim to attract a particular type of customer through their pricing model and marketing strategy, or via the range of services they offer.


When doing a business it is important to know the strengths and weaknesses one has. In the upcoming dashboards, we have provided an analysis of how each hotel chain is doing compared to its competitors in those locations primarily. This is particularly efficient when we have large hotel chains in the same area and they need to compete among themselves to be better at maintaining profits in that region. The data that we required for this is minimal from the hotels. The data are as follows: Hotel name, City where it is located, Room rates on a particular date, customers checked in that particular day, daily expenses, Online Bookings, Direct Bookings and Cancellation rate on that day, etc.


Dashboard with hotel metrics:

Given below is the snapshot of the first dashboard that we prepared for hotels from the data that we will have:



Here we will be trying to explain how each of these charts helps the hotel owners in performing a SWOT analysis. We have used similar colors in all the charts to represent the selected hotel and the average of the remaining hotels with orange and blue respectively. Here we have four different charts showing the hotel owners four different metrics which can help them in their SWOT analysis.


The first one is Online vs Offline bookings. Here only, the filtered data for a particular hotel is being shown. As we can see that the chart shows the offline bookings of this chain have been consistently more than its online bookings so from here we can instruct the hotel owner that he needs to market their hotels in the online domain for better results from the online domain as well.


In the second chart, we have shown the revenue generated daily and based on that we also have done a forecast on how much the average revenue will be in the upcoming few days. This can help the hotel plan its expenses accordingly.


In the occupancy rate chart, we have shown the daily occupancy of the hotel compared to its competitors in that city or region. This can give an idea to the chain owner how well they are doing in a particular region compared to their competitors. There can be scenarios where a hotel is having very less occupancy throughout but if it is doing well compared to its competitors it can tell the owners that the problem is not specific to their hotel. They can make decisions accordingly regarding rooms and other amenities.


For example, in the case of COVID, all the hotels suffered a huge blow but the hotels themselves were not at fault. It was just the pandemic. On the other hand, if the selected hotel is doing badly compared to its competitors it can be inferred that the hotel is not able to catch up with the competitors in that region and the problem might be specific to the particular hotel. This is when the hotel's team can amp up their services and marketing to catch up with their competitors based on our analysis.


Similar to the previous chart, the rate of cancellation chart shows how a particular hotel is performing in case of rate of cancellations compared to their competitors in that region.


Dashboard exhibiting the financial performance of hotels:

Following is the second dashboard that can be prepared using the data from hotels:



In the next dashboard, here we are focusing mainly on the financial perspective of the hotels selected. Firstly we are showing how the hotels are doing in terms of bookings compared to the other hotels in that region. As we showed in the last dashboard, we have the occupancy rate chart. Adding to that, the bookings chart can show the booking count in particular. For example, Radisson has more rooms compared to its competitors in that region so its occupancy rate can be low but if the bookings are better that will help the owner gain a perspective that maintaining that many rooms in that particular region are not beneficial.


Next, we have shown the return on investment in three different charts. In the first one, we have ROI over the past 7 years. Next, we have enabled filters so that we can show the ROI for a selected month for various years. Next, we are showing the ROI of the current month, previous month and the upcoming month for various years we have data for. The line charts in these also show how the other hotels in that particular region have fared during that time. This works in two ways. One, we are giving an idea of how profitable the hotel has been to its competitors. Two, we are showing how the profits have grown or reduced over time. This will help the hotel owners realize if there is any particular time or situation when cost cuts or better marketing is necessary for increasing sales to maintain a steady profit.



The ROI combined with bookings can give an idea of how well the customers are liking the hotels and how the hotel can capitalize on this. For example, if the ROI has been better for a hotel in spite of fewer bookings compared to the local average, then that gives the chain owners an idea that the customers prefer their hotel and they can renovate and include more rooms so as to capitalize on the customer's preference. When we go to the year 2020, as shown above, we can see a steep drop in the ROI for the unprecedented COVID situation. We can see that there have been many bad months starting from March when the lockdown started in India.


As we can see the ROI has been negative as well in those months indicating the losses incurred. From October, however, the restrictions were reduced gradually and we can see that the hotels started having visitors again and gaining momentum. The monthly ROI for December 2020 has been higher compared to 2019 and 2021 both. Not only that, apart from the Monthly ROI, the bookings chart also shows that the month of December has been really good after the dull period as it was a festive duration and after staying at home for such a long time people were really eager to go on vacations. These help the hotel owner gain a perspective of the customer behavior as well as what time is beneficial for gaining momentum in case of such unforeseen incidents in the future.



This dashboard shows how the hotel is performing in some KPIs which affect the hotel business heavily. We have analyzed the data of the hotel's competitors in that region. We have maintained the same colors to represent hotels and the local average. We have added the info button for showing what each KPI signifies. First, we have ADR which stands for Average Daily Rate. The average daily rate factor helps us in determining whether the hotel has been good at maximizing room rates. The bars show the hotel's ADR. If Hotel's ADR is greater, we can infer that the hotel has been successful in maximizing room rates to its competitors.


On the other hand, if it has not been successful in doing so in a region that will give the hotel owner an idea that the customers visiting that particular region can spend more on hotels so they can hike their prices if they are providing similar facilities. In the chart below it we have RevPAR which is revenue per available room. This signifies how good the hotel has been at filling its rooms. RevPAR is dependent on both occupancy and ADR. If the ADR is high and the occupancy is low then the RevPAR will be low as well and vice versa. If the RevPAR is low then the hotel owners might have to do something to reduce the costs incurred. If the RevPAR has been low consistently they might have to increase ADR or reduce the number of available rooms to catch up with the market.


Next, we have an MPI chart that shows the Market Penetration Index. This is dependent on the occupancy rate of the hotel and the local market's average occupancy rate. This index simplifies the occupancy chart we saw in the first dashboard and presents it to the chain owner. Similarly, we have RGI which stands for Revenue generation Index. This depends on the particular hotel's RevPAR and the local market's average RevPAR. For Radisson Blu Jaipur we can see that the MPI is good so we can say that the hotel has been good at maintaining an occupancy rate but as we can see the ADR has not been high for this compared to the competitors which affect the RevPAR and RGI. For the hotel to catch up, it needs to increase its ADR. Overall, these indices help the owner to get a better understanding of how well a hotel has been performing and which factors they can improve upon.


Dashboard for comparison of hotel chain’s internal statistics:

When maintaining large hotel chains, it is really important to have a clear idea about how each branch is performing. This is important because in case of surplus or losses the owner needs to have a clear idea of where to invest or from where he can cut back costs. The below dashboard can be really helpful in that case:



The inner part of the donut chart shows the overall revenue earned by the hotel chain in a particular month of a year and the outer part of the donut signifies what percent is earned from which branch. The tree chart has been used to calculate the average occupancy rate in the hotel chain and how the hotels are performing based on that average. Based on this average we can show which region will be a better option for expanding the chain. For example, we have a branch with above 100% occupancy based on the average of Radisson hotels. So, that shows us that this hotel is the user's favorite and that this can be the hotel where rooms can be added. Just as we planned this chart can give an idea to the chain owner of which hotel will be beneficial if renovated with rooms.


Next, we have the profit chart which shows the daily profit/loss differentiated by colors. The profit chart can be filtered using the donut chart and which will show the profit/loss of a particular branch as follows:



This chart can be used to see which region incurs loss during which time of the year. The marketing and finance team can work accordingly to improve the performance of the hotel during that time.


Conclusion:

These KPIs can be helpful for hotel owners for making better and more informed decisions regarding their business to cope with the competition. These dashboards can be used to help the hotel’s team to come up with strategies that allow them to gain a better footing against their competitors and grow their business. Keeping a track of the insights provided by these dashboards will help the business owners plan strategies to move forward.


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