11 Key Hospitality KPIs to Track

By the time a dissatisfied customer gets around to posting a negative review of a hotel stay or restaurant meal, all a business can do is react with an apology, offer a refund or provide an incentive to try the establishment again. But what if hospitality companies were able to proactively monitor and adjust their operations ahead of receiving these complaints?

They can if they’re tracking key performance indicators (KPIs), such as occupancy rate and total revenue per available room (TRevPAR), that provide hospitality businesses with insights that can drive continuous improvement. This article explores 11 industry-specific KPIs along with formulas and examples to help companies identify trends, spot inefficiencies, maximize revenue and stay ahead of the competition.

What Are KPIs?

KPIs are metrics that business executives and managers, analysts, lenders, investors and other interested parties use to gauge a company’s financial health, operational efficiency and success. Common KPIs include gross profit margin, inventory turnover and customer conversion rate, among many others. By tracking and analyzing KPIs, organizations are able to quantify their performance and gain data-driven insights that help them make better-informed decisions, boost productivity, reduce costs, increase profitability and improve customer service. KPIs are most useful when viewed in a larger business context, such as through trend analysis and comparisons to industry benchmarks. Importantly, KPIs also help organizations identify areas that need improvement. For example, a year-over-year decline in average order value could signal that it’s time for a business to adjust its pricing or marketing tactics.

What Are Hospitality KPIs?

Hospitality KPIs are specific measurements that hotels, resorts, restaurants and other types of hospitality businesses use to assess their performance. These KPIs cater to the unique features and goals of the hospitality industry, such as the average cost, revenue and profit of an occupied hotel room. By regularly monitoring these metrics, hospitality businesses can readily see and maximize their strengths and identify and fix weaknesses. And with 94% of Americans planning travel in the second half of 2024, according to the latest “American Travel Sentiment Study,” KPI monitoring is well worth the effort for hospitality companies that hope to grow.

Ongoing KPI analysis is particularly important for resource-constrained small to midsize (SMB) hospitality businesses. By focusing on the KPIs that matter most to their businesses, hospitality companies can effectively balance short-term efficiency gains with long-term financial strength. Additionally, tracking KPIs over time helps businesses spot trends early, such as seasonal sales patterns, so they can remain flexible and adopt new best practices, as needed, without losing the appeal and reliable service that their customers expect.

Key Takeaways

• KPIs are quantifiable metrics used to evaluate a company’s financial and operational effectiveness.
• In hospitality, KPIs include occupancy rate, average daily rate and revenue per available room.
• By regularly monitoring KPIs, hospitality businesses can optimize what’s working, identify areas in need of improvement and benchmark their performance against that of competitors.
• Modern businesses leverage advanced technologies and integrated platforms to track, analyze and report KPIs in real time, empowering them to strategically adapt to changing market conditions and evolving customer expectations.

Hospitality KPIs Explained

Hospitality business owners and managers rely on a wide range of KPIs — including revenue per available room (RevPAR), average daily rate (ADR) and gross operating profit per available room (GOPPAR), which we’ll detail in a later section — to gain a holistic view of their businesses. Collectively, these metrics provide leaders with important insights into their overall performance, sales and revenue growth, the effectiveness of budgeting strategies, profitability and other critical aspects of operations. These insights then guide data-informed financial decisions related to setting appropriate room rates, managing inventory, controlling costs and more.

But hospitality KPIs reveal more than just financial trends. Some measure efficiency and productivity, while others cover more qualitative categories, such as customer loyalty. Decision-makers can use these findings to understand demand patterns, decide how to allocate resources and schedule staff, develop marketing campaigns and more. Through robust KPI analysis, determinations can be made that are based on hard data and real-world results, rather than gut instinct or guesswork.

Utilizing KPIs for Competitive Advantage in Hospitality

Demand for short-term rentals is expected to grow by 10.7% in 2024, according to a recent industry report, so hospitality businesses would be wise to use every tool at their disposal to earn those sales over their competitors. Industry-specific KPIs yield the data needed to optimize operations, heighten guest experiences and outperform rivals in this highly competitive market. For example, by benchmarking average length of stay and average daily rate at their establishments against similar data from other properties in the region, hotels can assess their market position and adjust their pricing and promotional strategies to attract more guests and extend their stays.

Moreover, with access to real-time KPIs, hospitality businesses can stay in tune with — and adapt to — market conditions and customer preferences better than others that rely solely on shallow analysis or lagging indicators that reflect past performance. By monitoring booking channels, for example, hotels can identify their most effective distribution methods and amplify their marketing efforts there. Through targeted data analysis, SMBs also can figure out ways to differentiate themselves. For example, if a popular hotel opens in a nearby tourist spot, local boutique hotels could use KPI analysis to monitor the impact on their occupancy rates or lengths of stay. A decline in either might prompt them to offer special packages or a partnership with local attractions to differentiate their services and attract guests.

11 Important Hospitality KPIs to Track

A best practice for a hospitality business calls for monitoring KPIs that directly relate to the organization’s specific goals and challenges. But these tailored insights are often most helpful when viewed in the context of broader metrics, including the ones that follow, which are geared for hotels, motels, bed and breakfasts, resorts and other businesses that provide lodging and accommodations.

1. Occupancy Rate

Occupancy rate measures the percentage of available rooms occupied at a given time. A higher occupancy rate indicates that an accommodation is efficiently usng its capacity and making sales. The formula to calculate occupancy rate is:

Occupancy rate = Occupied rooms / Available rooms x 100

Let’s say a 300-room hotel currently has 240 rooms booked. Its occupancy rate would be 80% (240 / 300 x 100).

Monitoring occupancy rate helps hoteliers identify peak seasons, adjust room rates and implement targeted marketing strategies to attract guests. By improving occupancy rates, hotels maximize their revenue potential by minimizing the number of unsold rooms, which also supports a steady, positive cash flow.

2. Average Daily Rate (ADR)

ADR is the average revenue earned per occupied room per day. This metric helps hoteliers assess their pricing strategies and revenue management. The formula to calculate ADR is:

ADR = Total room revenue / Occupied rooms

If a hotel generates $50,000 in room revenue from 200 rooms sold, its ADR would be $250 ($50,000 / 200).

By analyzing ADR trends and correlating them with pricing strategies, managers can make targeted rate adjustments based on factors such as seasonality, competition and market demand. ADR data is also useful for benchmarking performance against that of the competition and identifying opportunities to increase revenue and/or occupancy, both of which can increase profitability. Hotels can boost their ADR through marketing that prioritizes filling empty rooms, dynamic pricing strategies to increase revenue during busy periods, or upselling additional amenities to increase the average spend per guest.

3. Revenue Per Available Room (RevPAR)

RevPAR measures the ability to generate revenue from every room, as opposed to ADR, which considers revenue from occupied rooms only. A high RevPAR typically signifies that a company is effectively selling its inventory through a high occupancy rate, a high ADR or, ideally, both.

RevPAR can be calculated using one of two formulas:

RevPAR = Average daily rate x Occupancy rate

Or:

RevPAR = Total room revenue / Total available rooms

If a hotel has an ADR of $150 and an occupancy rate of 80%, its RevPAR would be $120 ($150 x 0.80). This means the hotel is earning $120 for each room, regardless of occupied status. By tracking RevPAR over time, companies can assess the overall financial position of a property and make strategic decisions to optimize revenue. Some common strategies to increase RevPAR include adjusting room prices, targeting high-value guests or creating add-on packages to drive sales.

4. Average Length of Stay (ALOS)

ALOS measures the average number of nights that guests stay at an accommodation during a specific time period. The formula to calculate ALOS is:

Average length of stay = Total occupied room nights / Number of bookings

For instance, if a hotel has 1,200 occupied room nights and 600 bookings in a typical week, its ALOS would be 2 nights (1,200 / 600 bookings).

Generally speaking, a higher ALOS is better, because it reduces operational costs associated with guest turnover, such as cleaning, laundry and check-in/check-out procedures. By encouraging longer stays, often through loyalty programs and promotional bundles, hotels can improve their profitability, build stronger guest relationships and increase customer retention. Additionally, guests who stay longer have more opportunities to fully experience the hotel’s amenities and create a more memorable stay.

Of note, since many businesses collect guest payments at the end of their stay, it is worthwhile for hotels to consider the impact of extended bookings on cash flow.

5. Cost Per Occupied Room (CPOR)

CPOR calculates the average cost of servicing an occupied room. This KPI considers various expenses, including housekeeping, laundry, utilities and amenities, and shows the direct expense of room bookings. The formula to calculate CPOR is:

Cost per occupied room = Total costs of room operations / Number of rooms sold

If a hotel sells 1,000 rooms that cost a total of $50,000 to operate, its CPOR would be $50 ($50,000 / 1,000).

By monitoring CPOR, hoteliers can identify rising costs and make cuts or adjustments before the increases begin to affect profitability or the guest experience. CPOR can be improved by implementing energy-efficient practices, streamlining housekeeping processes, negotiating better rates with suppliers or finding new vendors that offer more competitive prices. By increasing room rates and/or adding upgrade fees for services, such as high-speed Wi-Fi or premium television channels, revenue can increase, which also helps reduce CPOR.

6. Gross Operating Profit Per Available Room (GOPPAR)

GOPPAR measures gross operating profit relative to the total number of available rooms for a specific time period. Gross operating profit, which is shown on a company’s income statement, reflects how much profit (or income) remains after the cost of goods sold and other operating expenses, such as payroll, are deducted from revenue. GOPPAR provides a more comprehensive financial picture than room rentals alone. The formula to calculate GOPPAR is:

GOPPAR = Gross operating profit / Total number of available room nights

If a hotel has a gross operating profit of $175,000 and 1,000 available room nights, its GOPPAR would be $175 ($175,000 / 1,000). This means that for each available room, the hotel brings in $175 in profit, on average, including additional purchases, such as room service.

By closely monitoring GOPPAR, hoteliers can detect changes in profitability and, if necessary, implement cost-cutting measures or cross-selling services to minimize expenses and increase revenue.

7. Total Revenue Per Available Room (TRevPAR)

TRevPAR assesses the total income a company generates from all of its revenue sources—rooms, restaurants, spa—on a per-available-room basis over a given period of time. This metric is similar to GOPPAR but does not deduct costs or expenses; rather, it focuses on incoming revenue only.

TRevPAR = Total net revenue / Number of available rooms

If a hotel has a total net revenue of $250,000 and 5,000 available rooms in a month, its TRevPAR would be $500 ($250,000 / 500 available rooms).

Hotel stakeholders track this KPI to evaluate the overall performance of their properties. By comparing TRevPAR to other KPIs, such as RevPAR, financial analysts can look for changes in tertiary revenue streams, such as event catering, alongside room revenue for a granular evaluation of performance. This is especially important because some services or products may be loss-leaders used to attract customers or gain an edge over competitors, such as free breakfast. These programs must be carefully monitored, though, so as not to overlook any negative impact they might have on the bottom line.

8. Transient Segment Mix

Transient segment mix is the percentage of business that comes from individual travelers or small groups who occupy fewer than 10 rooms per night and book for short-term stays. This metric helps companies understand the composition of their customer base and, therefore, tailor their services, amenities, room types and marketing efforts accordingly. Transient segment mix is often calculated as a percentage of total bookings or revenue, using this formula:

Transient segment mix (bookings) = Transient segment bookings / Total bookings x 100

Or:

Transient segment mix (revenue) = Transient segment revenue / Total revenue x 100

For example, a hotel with 700 transient bookings out of 1,000 total bookings would have a transient segment mix of 70% (700 / 1,000 bookings x 100).

Hoteliers can improve this KPI by emphasizing direct booking channels, offering personalized experiences and leveraging customer data to create targeted marketing campaigns that inspire another stay.

9. Group Mix

Group mix is the percentage of total business that comes from large parties — typically bookings of 10 or more rooms — such as for conventions, weddings or corporate events in a specific time period. This metric helps assess the impact of group bookings on overall revenue and aids planning for room allocation, promotions, marketing and business relationships.

Like transient segment mix, group mix can be calculated based on bookings or revenue:

Group mix (bookings) = Group segment bookings / Total bookings x 100

Or:

Group mix (revenue) = Group revenue / Total revenue x 100

If, in a given quarter, a hotel earned $80,000 in revenue and $20,000 of that came from group bookings, its group mix (revenue) would be 25% ($20,000 / $80,000 x 100).

The group mix metric helps companies allocate their resources, set prices and make booking decisions that maximize revenue, often thanks to dedicated sales teams, flexible event spaces and tailored packages. For instance, hotels with a high seasonal group mix may block off areas or entire floors to accommodate wedding guests in the month of June. To increase this KPI, hotels can reach out to local businesses, such as conference centers or wedding venues, for mutually beneficial partnerships, including preferred-hotel status, shared client discounts or cross-promotional opportunities.

Companies should set an ideal target balance of group and transient guests to avoid overreliance on one or the other in case an event is canceled or customer preferences suddenly change.

10. Loyalty Mix

Loyalty mix is the percentage of business that comes from repeat visitors who are enrolled in a loyalty program. This KPI helps companies gauge the effectiveness of their loyalty initiatives. Loyalty mix can be calculated using either of the following formulas:

Loyalty mix (bookings) = Loyalty program bookings / Total bookings x 100

Or:

Loyalty mix (revenue) = Loyalty program revenue / Total revenue x 100

If a hotel has a total revenue of $1,000,000 and loyalty program members account for $300,000, its revenue loyalty mix is 30% ($300,000 / $1,000,000 x 100).

By tracking loyalty mix, businesses can compare the success rates of various loyalty programs over time to inform future offerings. A higher loyalty mix indicates success in retaining customers and encouraging repeat visits, critical factors for maintaining or expanding market share. It is important to view loyalty mix in relation to other KPIs, however, as it may also point to fewer new customers, especially if total revenue is decreasing.

Companies can improve their loyalty mix by offering attractive rewards, personalized experiences and exclusive benefits to loyalty program members, such as high-speed internet, in-room amenities or exclusive access to areas like gyms and lounges. Additionally, by analyzing the preferences and behaviors of loyal customers, businesses also can refine their offerings and marketing strategies to better meet evolving customer demands and preferences.

11. Channel Mix

Channel mix is the percentage of business that comes from a specific booking channel, such as online travel agencies or direct bookings. This metric helps companies grasp the performance and profitability of each distribution channel. Channel mix can be calculated using either of the following formulas:

Channel mix (bookings) = Bookings from channel / Total bookings x 100

Or:

Channel mix (revenue) = Revenue from channel / Total revenue x 100

If 1,500 of a hotel’s 5,000 bookings came directly through its website, its channel mix for bookings through its website would be 30% (1,500 / 5,000 x 100).

Channel mix helps companies assess the effectiveness of their distribution strategies. What they learn from this can provide the foundation for future forecasts and investments, resource allocation and commission structures. A high channel mix for direct bookings, for instance, may indicate a strong brand presence and successful marketing campaigns, while a strong third-party channel mix can show the value and potential return on investment of continuing those partnerships, despite their higher acquisition costs. By focusing on profitable channels, negotiating better commission rates and implementing targeted marketing initiatives and partnerships, businesses can keep their channel mix aligned with overall business goals and risk management strategies. Diversity is key to reducing dependence on any single source.

New Hospitality KPIs Are Driven by Changing Technology

New technologies are constantly driving changes in the way hospitality businesses operate and measure success. In addition to the traditional metrics outlined in the previous section, companies should monitor more modern KPIs linked to the effectiveness of the digital tools and marketing platforms they now employ. These KPIs include website conversion rates, click-through rates for third-party aggregators, mobile app downloads and social media engagement.

Additionally, the rise of interconnected cloud-based business platforms, such as enterprise resource planning (ERP) systems, has transformed the way hospitality businesses gather and analyze KPIs. ERP systems integrate data from various departments and systems in real time, enabling organizations to uncover meaningful correlations, identify causal relationships and create a holistic view of operations through advanced data synthesis and cross-functional analytics. This visibility enables stakeholders to quickly make fully informed, strategic decisions and optimize operations when required.

Meet and Beat Your Benchmarks With NetSuite for Hospitality

Hospitality businesses require real-time visibility into every room they book and every dollar they earn if they hope to succeed. With NetSuite for Restaurants and Hospitality, businesses can integrate all core processes into one unified system. NetSuite’s cloud-based ERP platform gives authorized users immediate access to real-time KPI dashboards, empowering them to make data-driven decisions for both quick pivots and long-term strategic planning. Staff can easily view the metrics that matter most to their roles, from broad overviews to deep dives into granular data.

Additionally, NetSuite’s scalable analytics and forecasting tools help businesses identify trends, anticipate challenges and seize profit opportunities. By leveraging NetSuite’s platform, businesses can automate operations, enhance their guest experiences and stand out from the competition.

In today’s hospitality industry, where customers rely on third-party reviews and aggregate platforms to make travel decisions, businesses must stay at the top of their games to remain competitive. By tracking and analyzing industry-specific KPIs that reflect progress toward their strategic goals, businesses can optimize their operations, maximize profitability and reduce costs without sacrificing exceptional guest experiences. Through a deep understanding of these KPIs and a commitment to continuous improvement, hospitality businesses can build success while exceeding customer expectations long into the future.

Hospitality KPIs FAQs

What are KPIs in the hospitality industry?

Key performance indicators (KPIs) are quantifiable measurements used to gauge financial strength and progress toward business objectives. In the hospitality industry, managers and owners use industry-specific KPIs, such as occupancy rate, average daily rate and revenue per available room, to find areas where they can improve profitability and efficiency.

How do you measure hospitality performance?

Hospitality performance is measured through various key performance indicators (KPIs) that track different aspects of a hotel’s operations and financial health, including revenue metrics and occupancy calculations. Decision-makers should choose which KPIs to follow based on the specific insights they seek. These KPIs often rely on financial reports, historical data and guest feedback to find relevant and targeted areas for analysis. By regularly monitoring these KPIs, hotel managers can assess performance over time and compare results against industry benchmarks.

What are five key performance indicators for customer service?

Five important customer service KPIs in the hospitality industry are occupancy rate, average daily rate, revenue per available room, gross operating profit per available room and loyalty mix. By tracking these and other metrics, hotels gauge financial performance, customer service efforts and marketing strategies to identify areas that need improvement, such as staff training or financial investments.

How do you calculate KPIs in the hotel industry?

Hotel key performance indicators (KPIs) are calculated using comprehensive data from multiple sources, such as property management systems, point-of-sale systems, financial reports and guest surveys. Specific KPI formulas vary, but they generally involve dividing a targeted metric, such as room revenue or number of bookings, by a broader figure, such as total revenue or total bookings. By consistently calculating and tracking KPIs over time, hotels can identify trends, assess changes to performance and plan future strategies.