All businesses aim to be profitable which requires generating more revenue than expenses (payroll, utilities, overhead). However, profitability isn’t the only metric that owners and managers regularly measure and analyze when making decisions. In fact, there are several key performance indicators (KPIs) that play a major role in a hotel’s overall success and are consistently reviewed and utilized to better inform operations. From an individual level to team metrics and organizational performance goals – KPIs allow for strong and effective leadership and continuous improvement in the workplace.

What is a Key Performance Indicator?

A KPI is a data point used to measure performance – generally against specific goals or expectations. Some KPIs are set at the individual level, while others are team- or organization-wide. In any case, key performance indicators allow individuals and teams to assess how well they are performing and make adjustments as needed. In the workplace, establishing clear KPIs is critical for successful performance. Also, these metrics must be clearly articulated to staff to guide their performance in the workplace. Unclarity about what success looks like often causes unhealthy workplaces, demotivated staff, and poor performance overall.

Common KPIs in the Hotel Industry

Success in the hotel industry seems simple enough – keep rooms filled to generate revenue. However, goals around occupancy and other metrics need to be specific and measurable.  Most hotels regularly measure occupancy rate as a KPI clearly indicating success (or not). This rate refers to the percentage of occupied rooms in an establishment at any given moment (or length of time). Within the industry overall, 2023 has seen occupancy rates hovering around 65%. However, most hoteliers aim for a rate of 70-90%.

While often the strongest indicator of a hotel’s performance during a given period, occupancy rates aren’t the only KPI utilized to determine success. Other indicators include:

Average Daily Rate:  Unlike occupancy rate, average daily rate (ADR) factors in the pricing of rooms. This KPI signifies the average revenue earned per booked room (per day). In order to execute a strong pricing strategy, hoteliers need to keep a dynamic perspective and make adjustments as needed.

Net Promoter Score: While not specific to the hotel industry, a net promoter score (NPS) measures customer experience and how likely they are to both return as customers themselves and recommend the business to others. At one end of the scale, you have “promoters” – those likely to return as customers and recommend to others. You have “passive” individuals in the middle – who are satisfied but may or may not return. On the opposite end from promoters, you have “detractors” who are unhappy with their experience, will not return, and will articulate their dissatisfaction to others. NPS is reflected by taking the percentage of promoters a business has and subtracting the percentage of detractors (ignoring the passive section). Using this method, an excellent NPS is anything above 30 or 40. A negative NPS signals to management that more people are leaving very dissatisfied than happy guests.

Cost Per Acquisition: Even hotels that remain completely booked each day won’t survive if the cost of acquiring those customers/stays outweighs the revenue they bring in. While hotels do not pay customers directly for booking with them, cost per acquisition (CPA) refers to the marketing cost of generating a booking.

Gross Operating Profit: There are several profitability metrics a hotelier utilizes in running operations, but gross operating profit (GOP) is one of the most telling. Essentially, GOP is the amount of profit a hotel has after subtracting acquisition costs from revenue generated.

Net Operating Income: Unlike GOP, the net operating income (NOI) of a hotel also deducts operating expenses from revenue after deducting acquisition costs. It’s important to note that neither GOP nor NOI include interest and taxes in their calculations.

Who uses KPIs in Hotels?

The above-mentioned KPIs are generally just analyzed by management and/or hotel ownership. However, key performance indicators are utilized by everyone working within a hotel. Within a housekeeping department, metrics like rooms cleaned per hour are used to budget and staff appropriately. On a maintenance team, work order completion time or frequency of security issues might be of interest. Individual contributors have personal goals or metrics to keep in mind to gauge their own performance in the workplace as well. Like any expectation, these need to be communicated adequately to staff to avoid misalignment with them.

Finding a Hotel Job in 2024

The year 2023 meant a change in career for many members of the U.S. workforce. It seems the upcoming year will be no different. For those looking to explore a new career path (or a new role in an established path) – the hotel industry offers opportunities to grow. Finding that first role with an organization in the industry is just a step in what can become a rewarding career trajectory. 

At the Westmont Hospitality Group, we value our employees as much as our guests – even the ones we haven’t met yet. So, we’ve created a database of job opportunities within the organization that can be used by job seekers across the country to find that stepping stone. Industry veterans and newcomers alike can find opportunities across all hotel departments and at all levels of seniority. Looking to potentially make a career move in 2024? Here is your sign to see what opportunities await.