A hotel is an economic activity and, as such, a business. All businesses must abide by the laws that govern economics . It is important to respect these rules if the hotel is to generate a profit and thus survive. The creation of a for-profit company occurs precisely to allow those who assume the risk to profit from business management. From this perspective, constant monitoring of company performance is necessary. To accomplish this task, numerous indicators are available in economic literature , which provide information on various aspects of the business . But what are hotel performance indicators? Let's explore them together.

With reference to hotel management, we mention: ADR, RevPAR, GOPPAR, TRevPar and OR. These, just listed, are the most commonly used indices.

ADR – Average daily price
ADR is an acronym, which stands for Average Daily Rate (Average daily rate). This indicator measures the average sales price per room over a given period of time. Its value allows you to understand what the average sales rate is. The ADR should not be taken as the only parameter because it does not take into account unsold rooms. The index is calculated by dividing the turnover generated by the number of rooms sold in a given period:

ADR= Turnover/No. of rooms sold

To increase it, you need to increase revenue per guest, through room upgrades or up-selling.

RevPAR – Revenue per available room
RevPar refers to real revenue, i.e. the turnover generated on all rooms. The RevPAR it differs from the ADR because this index also takes into account unsold rooms, which always represent a cost for the hotelier.
This index is the main one on which the Revenue Manager's activity is most focused. To calculate it, divide the total revenue from occupied rooms by the number of total rooms in the hotel:

RevPar = Revenue/Total number of rooms

You can also multiply the ADR by the hotel's occupancy rate.

To improve revenues per single room, it is possible to adopt restrictions for the duration of stays, together with adopting a correct segmentation and pricing policy.

What are the performance indicators of hotels? Others you don't know yet

GOPPAR – Hotel Net Profit
Il GOPPAR, Gross Operating Profit Per Available Room, allows us to understand how operational choices are impacting economic results. It takes into consideration not only all revenues from the sale of rooms, but also from ancillary services and all costs (fixed and variable) of the structure.

It is calculated simply by dividing the hotel's net profit by the number of available rooms:

GOPPAR = GOP/Available rooms

The GOP = Total Revenue – Total Costs = (revenue + change in inventory) – raw material costs – service costs – personnel costs – other overhead costs, allows for a much more accurate assessment of company profitability.

Unlike the previous ones, to improve this index, it's necessary to not only consider rooms sold, but also carefully manage other revenue streams. That is, you need to work on the property's spending capacity.

TRevPAR – Total Revenue Per Available Room
TrevPAR offers an additional parameter compared to RevPar, because it includes all the revenue generated by the hotel (breakfast, bar, restaurant, wellness center and every other service that the structure offers).

To calculate it, the formula to use is:

TRevPar = Total Revenue/Number of Rooms Available

To improve it, you need to act on the service that presents the worst performance.

OR – Employment rate
The occupancy rate is the percentage ratio between available rooms and rooms sold in the same period. To calculate it, the formula is as follows:

Occupancy rate = Number of rooms occupied/Total number of rooms available

This indicator should not be used alone either.
Many hoteliers show great stubbornness in wanting to increase the occupancy rate. It must be kept in mind, however, that a high employment rate does not necessarily lead to a higher profit. Often many hotel managers, to record the sold out, they lower the rates. However, there is a way to improve it. Add value to the offer, keeping rates competitive.

All these indices, if appropriately combined and considered, provide guidance to hotel management.