Popular Acronyms in Hotel Revenue Management
As an industry, we are often accused of being ‘acronym heavy’, something I didn’t necessarily agree with until one of our wonderful partners asked for some help pulling together a ‘cheat sheet’ for one of their new revenue professionals. As you can see, we got to just over 60 very quickly!
There may be many more to add but if you have someone new to revenue in your team, I hope this helps.
ADR - Average Daily Rate: A metric that calculates the average rate a hotel charges for its rooms sold in a specific time period. This is calculated by dividing the nett revenue by the number of ACTUAL rooms sold. Eg. I have 100 rooms in my hotel and I have sold 60 rooms. My revenue is £6372.50. My ADR is therefore £6372.50/60 = £106.21
ARR - Average Room Rate: Another way of saying ADR.
RevPAR - Revenue Per Available Room: A performance metric that takes into account both the occupancy rate and the revenue to measure a hotel's overall revenue generation. This is calculated by dividing the nett revenue by the number of rooms available to sell. This should not include Out of Service rooms as these are technically not available to sell and therefore should not be included. Eg. I have 100 rooms in my hotel and I have sold 60 rooms. My revenue is £6372.50. But 5 of my rooms are Out of Service and cannot be sold. The calculation for RevPar is therefore £6372.50/95 = £67.07
Occupancy - A percentage that represents the number of rooms occupied in a hotel compared to the total number of rooms available. Eg. I have 92 rooms in my hotel and I have sold 67. 67/92 = 73% (remember to round up!)
ARI - Availability, Rate, and Inventory - A holistic approach to revenue management that involves monitoring and adjusting room availability, rates, and inventory in real time.
BOB – Business on the Books: How many rooms you have sold today for any given date.
BAR - Best Available Rate: The highest, non-restricted room rate that a hotel offers for a particular room type. This rate is flexible and gives you the greatest opportunity to maximise revenue.
Forecast – The predicted demand on any given day. This is crucial as rate decisions should NEVER be made based on how many rooms you have sold, but how many rooms you have sold and where you forecast you will end up!
Base Rate – The lowest rate that should sell on any given day and a rate which forms a ‘base’ for you to increase from. This base rate will be different based on day or week or week of month. As an example, you would never start at the same base rate (even with zero rooms sold) for a Saturday in July, compared to a Saturday in January.
Nett – This is usually calculated by removing VAT and breakfast from your bedroom rates.
Rack Rate – The highest rate that you can sell on any given day.
Hurdle Rate – This the minimum rate you should sell on any given day.
Rate Fence – Rate fences are rules or restrictions that allow customers to segment themselves into appropriate rate categories based on their needs, behaviour, or willingness to pay. Rate fences are commonly used to force customers into higher-paying or lower-paying groups. This is usually managed by adding or removing restrictions.
LNR - Local Negotiated Rate: A special rate negotiated between a hotel and a local organization or business for their employees or members.
Close outs – A term used when you either close out availability or close out lower rates as you need to protect higher-valued business.
KPI - Key Performance Indicator: A measurable value that helps hoteliers assess the performance and effectiveness of their revenue management strategies.
TrevPar – Total Revenue per Available Room: A great way to understand your properties total revenue. This is calculated by taking the total NETT revenue of rooms / bars / restaurants and dividing it by the number of rooms sold. Note: some hotels refer to NETT as less VAT and breakfast and others will also take off the COCA ie also remove the commission costs from rooms revenue before dividing by the number of rooms sold.
GOPPAR – Gross Operating Profit per Available Room: this is calculated usually at management level but the calculation itself is reached by dividing the Gross Operating Profit (after deducting all direct and indirect operating expenses per available room) by the total available rooms for sale each night.
RevPASM – A recent addition to our available acronyms: this is Revenue per Available Square Metre: this calculation is used in Meetings and Events and is the best way to work out profitability in your meeting space. This calculation is completed by dividing the total Meetings & Events revenue by the total square meterage of your event space (which will stay static eg 1000 sq metres)
RevPASH – Revenue per available seat hour: used in restaurants and bars. This is calculated by taking your total NETT revenue and dividing it by the available seat hour. Eg: You have a 40-seater restaurant that you can turn twice in one evening, giving you a capacity of 80 seats. You then take the revenue you made in one evening – as an example £5432.00 and divide that by 80. £5432.00/80 = £67.90
RGI (sometimes called ARI – average rate index if you use STR) - Revenue Generation Index: A metric that compares a hotel's revenue performance to a competitive set of properties in the same market. It is calculated by dividing your RevPar by the aggregate RevPar of your competitive set.
Lead Time – the amount of days a customer books before arrival date.
Pick-up – The amount of rooms or revenue you have picked-up or gained in a set time period for a set time period. Eg: I picked up 75 rooms in the past 7 days for the 15th of January 2024.
Booking Pace – The speed at which bookings are coming in with lead time taken into account. Each segment will have a different booking pace ie number of days before arrival and a different occupancy percentage predicted. It is our job as revenue professionals to understand the expected pace of each segment – when they book and at what price - and when to close out lower rates, so that higher rated business can be protected.
Displacement – The number of rooms that may be displaced if you chose to take (as an example) a group reservation. As revenue professionals we need to predict/forecast how many rooms we should have and then calculate if a new piece of business is profitable – even if it means displacing some of the business we were expecting.
Unconstrained demand – If you are pacing ahead of where you normally predict, you may experience unconstrained demand. This is where you are predicting more demand than you can accommodate. As an example, you might have 100 rooms in your hotel, but your revenue system is predicting an unconstrained demand of 10. This means that if you had 10 extra rooms available on that night, you would be able to sell them. This is therefore a day when you need to hold rate and not discount!
Market Segmentation – How we determine our customer base eg Corporate / Leisure / Wedding etc. This is important as each segment will have a different lead time, booking pace, risk of cancellation and most importantly, price point. Ps Booking.com is not a segment!
Channel – This describes the channel that a booking actually came through. As an example: booking.com/Expedia/Direct/Travel Agent
LYSPIT or LY Point in Time – Last year Same Point in Time: great for measuring where you were at the same point in time last year. This can be measured day on day or date on date. Eg: how am I sitting today (31 Oct) for December 2023, compared to how I was sitting on the same day or date last year for December 2022.
Flexible Rates – Rates than can be flexed ie increased or decreased. These include BAR (see above) and packages.
Derived Pricing – This is when pricing follows one room type ie the parent rate. As an example. Your standard room is the Parent rate and your superior is always £20.00 more and your Deluxe £50.00 more. So if you move your standard rate from £100 to £120, the others will follow at £140 and £170 (£120 plus £20 and plus £50)
Dynamic Pricing / Full Open Pricing – This is where every room type is priced individually and will ebb and flow with their own unique demand patterns. This is more widely used in city centre hotels than resort or country hotels.
Incremental spend – The potential that a customer has to spend in your outlets eg bar/restaurant/spa etc
Opaque pricing – This is where you disguise a room rate by adding other incremental spend eg dinner in the restaurant; wine; spa treatment or golf. This ensures a customer can’t work out the revenue allocated to cover the bedroom portion of their stay and therefore protects your rate integrity
Contracted Rates – Any rate which cannot be flexed. Examples are tour operators / some wedding business and corporate contracts.
LOS - Length of Stay: A metric that measures the average number of nights guests stay at a hotel.
MLOS – Minimum Length of Stay: Often used by hotels at weekends or over events, this will ensure that guests are blocked from booking (as an example) just one night and are forced to stay two eg Friday and Saturday.
Stay through – Meaning that your guests must ‘stay through’ as an example, Saturday. In real terms this would mean a Fri/Sat stay or a Sat/Sun stay but you must ‘stay through’ the Saturday night.
Closed for Arrival – No arrivals allowed
Closed for Departure – No departures allowed
LRA – Last Room Availability: Occasionally negotiated as part of a sales contract, this means that the company in question can have their negotiated rate available, even if you have just one room left to sell ie their rate cannot be closed out (even if you are selling at a higher rate everywhere else)
FIT – Frequent Independent Traveller: An FIT rate is usually a nett rate offered to a travel operator so that they can add commission and publicise in their brochure. This rate is never disclosed to a customer.
Run of House - Again, occasionally used as part of a sales negotiation, this means that the contracted rate in question, can have this rate applied to any standard of room eg their rate might be based on standard rooms but if you only have superior available, they can secure that room at the lower rate.
In house – How many guests you have staying or expected to stay on any given day.
Group Room Block - A set of hotel rooms reserved for a specific group or event, often at a negotiated rate.
Allocation – The number of rooms that you need to bank off or save for a particular group or tour series OR this can mean the allocation of revenue you give from a rate to a particular department eg what the chef might be allocated from a £100.00 rate to cover the cost of breakfast.
OTA - Online Travel Agency: These are third-party websites and platforms that allow customers to book hotel rooms and other travel services online, such as Expedia or Booking.com.
OTA Parity - Online Travel Agency Parity: Ensuring that the rates and availability offered on a hotel's website match those offered through online travel agencies. Note: this is now a thing of the past and hotels are not now bound by parity restrictions.
BE – Booking engine: Your brand website.
CTR – Click through rate: The percentage of people who click on your booking engine as a percentage of the total number of visitors to your website.
Conversion Rate: The percentage of visitors who actually proceed to make a booking compared to the total number of visitors to your website.
COCA – Cost of Customer Acquisition: How much does it cost to bring a booking to you eg the cost of OTA commission.
CTA - Call to Action: A strategy or element on a hotel's website or marketing materials that encourages potential guests to take action, such as booking a room.
PPC – Pay per Click: The amount of money that your sales or marketing department allocates to a Digital Marketing Campaign – usually Google. Google charge each time an Ad is clicked on for your hotel and this is attributed to ‘pay per click’ This cost of sale should be attributed to your overall ‘cost of occupied room’.
PMS - Property Management System: A software system used by hotels to manage front desk operations, reservations, and other essential functions.
RMS - Revenue Management System: A software or platform that assists hotels in optimising pricing and availability to maximize revenue.
CRM – Customer Relationship Management: Usually an emailing system or a product that is used to communicate with guests before, during and after stay.
CRS – Central Reservation System: this is the technology that sits above your PMS and will distribute rates and availability to both online booking sites such as Expedia and Booking and also the GDS.
GDS – Global Distribution System: This is a distribution network traditionally used by Travel Agents from which they can book rooms and access your rates. This is mainly used for corporate bookings ie business bookings. There are 4 main suppliers ie Amadeus / Sabre / Galileo and Travelport. There is a high cost of acquisition for this channel as they take both commission and a ‘pass through’ fee for each reservation.
CRO - Central Reservations Office: The central hub for handling room reservations, often used in hotel chains to manage bookings across multiple properties.
RFP - Request for Proposal: A formal document that hotels receive from organizations or event planners looking to book a block of rooms or meeting space for a specific event. This is usually the responsibility of the sales team but revenue need to be very involved in the negotiation.
M&E – describes any revenue or activity in your meetings and events department
F&B – describes any revenue or activity in your bars or restaurants.
Wish/Walk – Often used within sales negotiation and sets boundaries for the lowest rate they would like to achieve before ‘walking’ the business and the rate they ‘wish’ for.
Tech Stack – Your whole tech eco-system which usually centres around your PMS. See the diagram below (and courtesy of Hospitality Net)
