Metrics that measure up!

Metrics that measure up!

As Revenue Professionals, we allunderstand the power of numbers. We love data, we live for data and often wecan drown in data... During these blogs and our webinars, we have oftenaddressed the issue of really diving deep into your figures and getting thevery best metric for you, but what is the best metric? Is ADR and RevParenough? Honestly, no, it is not. Today we need to understand the value ofTrevPar (Total Revenue per Available Room), COCA (Cost of CustomerAcquisition), Customer LTV (Life Time Value) and even plain old cost ofoccupied room. But before I make you head for the water cooler, I would like tothrow something else into the mix and I promise, it is not for the sake ofit...

We absolutely should measure many(probably all of the above metrics) but these focus solely on your own internalfigures ie how your own property is performing - period. But should we look athow we are bench-marking against our competitors and what does that even meanand most importantly, what actions should we take once we have the numbers?

Well, let's start with 3 well-knownmeasurements (known to most of us who use external bench-marking companies)such as the wonderful MPI or Market Penetration Index.Many of you are very aware of this but for those who aren't the calculation is:

Your occupancy % divided by your competitor's occupancy or as an example: Your occupancy is 80%/ Your comp set 76% or 80/76 = 105. As a guide, if your value is 100, you are completely in line with your competitors; below and you are trending behind, and above you are leading and gaining market share.

Now let's throw in ARI or AverageRate Index which again is simply your rate divided by yourcompetitor's rate eg £103.00/£109.00 or 94. You can see at a glance that youare trending behind on rate.

Add this into the first metricwere you are ahead on occupancy, but now you have the added layer ofinformation to tell you that you are behind on rate and surprise, surprise, youhave gone for occupancy to the detriment to rate and it looks very like yourcompetition may have outperformed you.

One last metric is RGI or RevenueGenerating Index which is your RevPar divided by your competitorsRevPar. Now it is a little trickier to ascertain without third party softwaresuch as SiteMinder but again the maths are simple: your RevPar divided by yourcompetitors Revpar. I am a big fan of RevPar as I do feel it is the mostinsightful metric you can use against your comp set, but even if you don't haveaccess to RevPar figures then MRI and ARI are a great place tostart.

So what happens when you track this over a period of time (and yes it is do-able even without the technology) - more manual of course - but simply chose your Comp Sep and track their daily selling rate. This isn't ideal, but it is a start and can start to give you a straightforward overview of your market. It will highlight seasonal changes and demand impacts that you may not even have realised mattered.

One other 'revenue 101' metric totrack is how you are performing each day and to assign a traffic light system.So for example:

1. Track each day what you are selling at eg Thu 01 Oct £98.00, Fri 02 Oct £102.00, Sat 03 Oct £120.00, Sun 04 Oct £85.00
2. Now apply a traffic light to your rates eg: under £100.00 red / between £101.00 and £115.00 amber / over £115.00 green.
3. Then do exactly the same for your competitors.

What does this tell you? Whatwould you understand if you applied occupancy and applied MRI and ARI to theabove?

We all know that understandingyour competitive set is important but it is not and should never be your mainmetric, otherwise you fall into the trap of 'commodity pricing', but it issomething that we should be aware of.

One final consideration (whichwould be a blog in itself) is choosing your competitive set... We allunderstand that studies confirm that different channels will present adiffering comp set, but if you want somewhere to start; if this metric is newto you; if you only have so-many-hours-in-the-day... my advice would be pickwhat you believe your comp set is for now and make that your starting point.

I hope this helps and that youhaven't all ran to the water cooler to escape the numbers and don't forget, forall things revenue, just ask@rightrevenue.wpengine.com