How to adapt your objectives to your situation, the main KPIs to monitor, the essential tools for effective reporting?
How can you train your teams and, finally, how can you perfect these processes to improve your hotel’s profitability?
In this article, we’ll be answering these questions, as well as sharing the experience of an expert in the field, Simon Thomas, former business continuity consultant at TripAdvisor.
Analysis of hotel situation
First and foremost, it’s important to assess your hotel’s current situation. If you’re consistently full during the week, but struggle to attract guests at weekends, your goals will need to focus on how to balance your occupancy rate. Conversely, if your hotel is a seasonal vacation spot, think about strategies to capture off-season clientele. The bottom line is that you need to grab market share. To do this, analyze your current segment share in your position (e.g. through Booking.com) and study the levers you can use to increase this share.
The different objectives for a hotel
There are a multitude of objectives that a hotel can pursue: maximizing its RevPar (revenue per available room), improving its e-reputation or maintaining a consistently high occupancy rate. Each objective must be in line with your hotel’s specific reality and challenges.
Case study from Simon, expert in hotel reporting and KPIs
Simon, former assistant manager of a hotel in Angoulême, shares his experience. His hotel was fully booked on weekdays, but saw its occupancy rate fall the rest of the time. His strategy? Collaborate with tourist offices and other local points of interest such as museums and theaters to attract leisure groups during periods of low occupancy, and thus optimize his occupancy rate.
What are the main KPIs in hotel management?
To ensure optimal hotel management, it’s crucial to keep a close eye on certain key performance indicators (KPIs). These enable you to measure the effectiveness of your strategies and adjust operations accordingly. Here’s a list of the major KPIs and their definitions.
Occupancy rate
The occupancy rate is the ratio between the number of rooms occupied and the total number of rooms available. It gives a valuable indication of the popularity and effectiveness of a hotel’s marketing strategies. This KPI is generally monitored on an annual basis, taking seasonality into account.
Average price
The average price, often calculated per day, gives an insight into the hotel’s pricing strategy. It is determined by dividing total accommodation revenue (excluding extras) by the number of rooms sold, and reveals whether the hotel is attracting the desired clientele at the set rates.
ADR (Average Daily Rate)
ADR, or average daily rate, is similar to average price, but focuses on the revenue generated per room occupied each day. It highlights the average value each guest brings to the hotel. This ADR can be broken down by room category for a more segmented view.
LOS (Length of Stay)
Average length of stay (LOS) indicates the average time spent by guests in the establishment. This indicator helps to understand stay patterns, and can influence pricing and marketing decisions. For example, this study may give rise to the idea of imposing a min stay in rate plans for certain periods.
KPIs for e-reputation
Today, e-reputation is vital for a hotel. KPIs concerning e-reputation, such as ranking on review platforms and the number of positive or negative reviews, provide valuable indications of how customers perceive the establishment, and can have a significant impact on the choice of potential customers.
RevPar (Revenue per Available Room)
RevPar is the revenue generated per available room, whether occupied or not. It’s an excellent barometer of the effectiveness of your pricing strategy. Take the example of Simon, who managed a hotel on the Ile de Ré. He faced a challenge: his long-standing customers kept coming back year after year, but were still paying the same ten-year-old rate, despite a 100% rate increase in the meantime. To increase the average income of these loyal customers, Simon set up a loyalty program focusing on additional services, such as breakfast. This initiative increased the hotel’s RevPar, demonstrating the importance of adapting a loyalty strategy to optimize revenue.
Share of OTAs (Online Travel Agencies)
The share of OTAs in hotel sales is a key indicator for understanding the influence of online booking platforms on sales. Tracking this KPI helps determine the efforts needed to increase direct sales and reduce dependence on OTAs.
Why use KPIs?
Reporting and key performance indicators (KPIs) play a crucial role in the day-to-day running of a hotel. Whether for readjusting marketing and operational strategies or assessing the value of goodwill, these tools are indispensable for independent owners, franchisees and hotel managers alike. Let’s take a closer look at their importance.
Enhancing the hotel
KPIs are key elements in assessing the value of a hotel. For independent owners, knowing the real value of the business is essential. It enables them to set the right prices for the rooms and other services offered by the hotel. It is also an important benchmark for the potential sale of the establishment.
Reorienting strategy for franchised hotels
For franchised hotels, reports and KPIs provide valuable data that feed back to the parent company. This enables marketing strategies to be refined and redirected to align with overall brand objectives.
Improving profitability for owners
For owners, the focus is on profitability. Reporting and KPIs make it easier to forecast expenses, assess profitability and provide a clear picture of the hotel’s value. This information is essential for making informed decisions about the future sale of the hotel.
Yield Management, an optimization strategy
Finding the right balance between a quality product and an attractive price is essential. Yield Management is an approach that can help you optimize rates and room category allocation to meet your financial objectives.
Reducing the share of OTAs
Simon teaches us that the share of bookings made by OTAs (online travel agencies) is a determining factor in the value of a hotel. A share in excess of 25% means that the hotel does not have full control over its marketing, which can be a negative point for potential buyers and affect the sale value of the establishment.
Reporting and KPIs are more than just analytical tools; they are the strategic core of effective hotel management. They enable performance to be assessed, strategies to be readjusted accordingly and the value of the property to be estimated, which is crucial both for day-to-day management and for longer-term decisions such as increasing the value of the hotel, for example.
What tools or software should you use to create clear, effective reporting?
In hotel management, clear and effective reporting is fundamental to monitoring KPIs and making informed strategic decisions. Various tools are available to help you in this task, from specialized software to more accessible solutions. Let’s take a look at these tools.
The PMS (Property Management System)
The PMS is a high-performance management software package for reporting and monitoring KPIs. It extracts data directly from the hotel’s management system, enabling real-time monitoring of the establishment’s performance. However, some of the tools provided by PMS remain incomplete, and will sometimes require cross-analysis.
Excel for small plants
For a small hotel, an Excel file updated daily can be a highly effective tool. Simple and customizable, Excel lets you track key indicators without investing in complex systems. Beware, however, of human error, which is also time-consuming.
Advanced marketing tools
Tools like Experience can provide advanced marketing reports, compiling data from different sources via APIs and centralizing it in data silos. In addition to marketing, Experience provides a wide range of data on buyer persona, stay data, customer satisfaction, e-reputation and much more!
Looker Studio
Formerly known as Google Data Studio, Looker Studio is a tool for analyzing large data sets to identify performance anomalies. For example, you can use this tool to analyze seasonal trends in your business. Its automatic updating is a real operational time-saver, and the only thing you’ll need to invest in it is a quick payback. What’s more, Experience provides an API for synchronizing data with Looker Studio!
Power BI for large hotel groups
Microsoft Power BI is the ideal Business Intelligence (BI) solution for large hotel groups. It enables the cross-referencing of large volumes of data from different departments, such as the SPA, restaurant or thalassotherapy, and provides a global view of the establishment’s performance.
The choice of reporting tool depends on the size and specific features of your hotel. A PMS is ideal for an instant overview, while Excel may be suitable for smaller operations. When data is more complex or voluminous, solutions such as Looker Studio or Power BI can be valuable allies. Whatever the case, a good reporting tool should help you make decisions that will ensure the success of your hotel business.
How do you train a team in the use of reporting tools, and how do you get all teams involved in monitoring KPIs?
For a hotel to operate efficiently, it is essential that all teams are trained and involved in the use of reporting tools and the monitoring of key performance indicators. This applies not only to operational departments, but also to management and all staff. How did Simon manage to do this in his establishment? Let’s find out together.
Centralized and shared reporting
In the hotel group where Simon worked, the front desks were responsible for sending the reports generated by the PMS. Simon then used Looker Studio to centralize and compare data from each establishment. Having a dedicated person to centralize the reports and then share the analyses with the teams concerned means that the data collected is easier to understand and more responsive.
Motivating teams with e-reputation-based incentives
To involve teams in E-reputation monitoring, Simon set up two types of incentive. The first was aimed at maintaining the establishment’s average rating on the platforms, by setting the objective of maintaining a quality rating (for example, maintaining a rating of 9/10). The second incentive rewarded any points gained on the rating, with financial compensation for all departments concerned, thus increasing their commitment.
Managerial KPIs: responsiveness and Yield Management
For more managerial KPIs such as occupancy rate (TO) and average price (PM), these are figures that can be adjusted in real time. For example, at the height of the season on the Ile de Ré, if a single room remained unsold, Simon had to make a strategic decision: raise the price, underwriting the risk of not filling the room, or lower it to ensure a sale. This requires an understanding of Yield Management on the part of the teams to act effectively.
Training in the use of reporting tools and the involvement of teams in monitoring KPIs are essential to a hotel’s performance. Whether this means centralizing data, setting up incentive systems based on E-reputation or understanding Yield Management, all members must be committed to this collective effort. This is how Simon’s establishment has managed to optimize its operations and improve its customer service.
How can you evaluate and continually improve the effectiveness of your hotel reporting system?
An effective reporting system is crucial to a hotel’s success. Analyzed over time, it can identify successes and areas for improvement. But how can the effectiveness of this system be regularly assessed, and how can it be improved? Let’s take a look at some of the ways in which this can be achieved.
Long-term follow-up
It is essential to monitor reporting over a significant period to gain a reliable overview of trends and performance. Analysis must not be limited to a few months; it must be continuous to enable adjustment based on a thorough understanding of the data.
KPI actionability
Accumulating KPIs is not enough; they must lead to concrete actions. Each KPI must be linked to a specific business model objective. If a period shows an occupancy rate of 30%, you need to develop strategies to improve it, and measure the effectiveness of these actions over time.
Decision-making and marketing
For Simon, marketing KPIs were essential for understanding the ROI of marketing actions. For example, certain keywords in Google Ads campaigns might seem unprofitable on the surface, but were essential because they generated a lot of bookings. You have to continually re-evaluate these investments to maximize profitability.
Risk and Price Evaluation
When a hotel reaches an occupancy rate of 100% in high season, the temptation is great to raise prices to improve profitability. However, higher rates lead to higher customer expectations, which can affect e-reputation. It is therefore crucial to determine the right price that improves certain KPIs while avoiding damaging others.
The key to continually improving the effectiveness of a hotel’s reporting system lies in its ability to generate meaningful, measurable actions. It’s not just about collecting data, but also about using it to make informed decisions, constantly assessing risks and opportunities. The aim is to fine-tune strategies to achieve optimum performance without compromising customer expectations.
Conclusion
In short, the success of a reporting system and the relevance of its KPIs for a hotel depend entirely on its adaptability to the hotel’s business model, location, product characteristics and range of services.
Adherence to business model
The choice of KPIs and the reporting strategy must be in line with the hotel’s established business model. Having a clear vision of this model and the services offered enables the selection of KPIs that best reflect performance objectives and specific needs.
KPI analysis and maintenance
Once the KPIs have been established, it’s crucial to maintain and monitor them over time. For a seasonal hotel, like the one on the Ile de Ré, operating from June to September, it’s essential to maintain the defined KPIs and avoid impromptu strategy changes that could disrupt the action plan in place.
Flexibility and responsiveness
However, it is important to remain flexible and reactive in certain situations. While it’s important not to make radical changes without thought, analysis of pivotal periods can lead to measured strategic adjustments. For marketing-related KPIs, adjustments can be made more quickly, in response to their real-time performance. For example, if an advertising campaign is not producing the expected results, it’s wise to reallocate the budget to better-performing keywords.
Consequently, reporting and KPIs are not static tools; they require continuous observation and adaptability to the factors influencing hotel performance. It is by finding the harmony between fidelity to the business model and flexibility in the face of performance data that effective and profitable hotel management is achieved.
