Here are some common industry terms that every hotelier should know –
1. Average Room Rate (ARR) - ARR is the average rental income received by hotel per occupied room. It is calculated by dividing the total revenue earned by the number of occupied rooms. As it does not incorporate time, it is a less accurate metric than ADR but is still quite important.
2. Average Daily Rate (ADR) - ADR provides the average rental income earned by hotel per occupied room for a given time period. It is one of the most popular financial metric used in the hotel industry and can be calculated by dividing the total revenue earned by the number of occupied rooms for a stated time period.
3. Revenue Per Available Room (RevPAR) - RevPAR is another financial metric that is popular in the hotel industry. It can be arrived at by multiplying the ADR with the percentage of occupied rooms. It is important to note that RevPAR is a measure in a point of time so the comparison of two RevPAR figures should be done carefully, i.e. the RevPAR of a Christmas weekend should not be compared with the RevPAR of a non-holiday weekend.
4. Rack Rate - This is the published tariff for a particular hotel. It is the rate that a walk-in customer pays.
5. Best Available Rate (BAR) - Hotels around the world may offer different rates for the same room for different nights depending on demand forecasting. This rate is known as BAR and these rates do not generally impose cancellation charges or other penalties.
6. No Show - Anyone booking a room and not showing up is a No Show.
7. Walk In - A guest who does not have a prior reservation and arrives at the hotel.
8. Close To Arrival (CTA) - CTA is an inventory control mechanism that sets restrictions on check-in for certain dates. It helps in better stay pattern management.
9. Close To Departure (CTD) - CTD is an inventory control mechanism that sets restrictions on check-out for certain dates. This, along with CTA, helps in better stay pattern management.
10. Gross Operating Profit Per Available Room (GOPPAR) - GOPPAP is a key performance indicator in the hotel industry. It can be arrived at by dividing the Gross Operating Profit (GOP) by the number of available rooms. The GOP is equal to total revenue minus the operating expenses. It demonstrates the profitability of the property as a whole.
11. Blocked Room - A room held without any deposit.
13. Destination Marketing - The practice of promoting a specific city, area, region or state to possible tourists.
14. Head in Beds - A term used by the industry to refer to the primary objective of hotels – increasing the number of overnight stays.
16. Fallback Rate - A technique generally used for over the phone bookings. This is a rate that would be the lowest the hotel is willing to go for fear of losing a booking. This has now been mostly abandoned.
17. Rate Fences - These are the terms and conditions that go hand in hand with discounted rates. These fences keep that rate from resulting in lower hotel revenues because all the higher priced customers simply purchase the lower rate. In general, no discount rate should ever be offered without fences, like advance purchase required, minimum stay length, non-refundable, etc.
18. Stay Pattern Management - It is a revenue management process that seeks to make optimum use of the hotel’s inventory capacity. This is done by studying the stay patterns over a period of time and offering rate differentials, minimum and maximum length of stay etc.
19. Lose-it rate - This is the rate at which the hotel would be better off leaving the room vacant than selling it.
20. Best Rate Guarantee (BRG) - This is the promise that hotels make to customers that they will offer the best rates on their own website as compared to any other travel site for the same product. |
