The 14 numbers every small hotel owner should know

Fourteen numbers tell a small hotel owner almost everything about how the rooms are earning: occupancy, average daily rate and RevPAR for the result; pickup, pace, lead time and length of stay for what is coming; BAR, commission, channel mix and parity for how you sell; compression nights for the opportunities; and your position against the market and how often you review a price, which keep the rest in view. Know these, and you can answer most pricing questions in a few minutes.

Below, each one gets a short section: what it is, the figure for our 24-room example hotel on the Welsh coast, and why it is worth knowing. Each links to its glossary entry for the full definition.

Why fourteen, and why these?

Because they are the numbers that come up when owner-managers price rooms in the evening, and the ones that a revenue manager at a large hotel would look at first. Nothing here needs a revenue team. All of it can be worked out from your own bookings and a look at the hotels around you.

Our example hotel has 24 rooms. It sells around £110 a night midweek in autumn and £165 on a summer Saturday, runs at 68% occupancy across the year, and takes about 40% of its bookings through online travel agents.

The result: how the rooms earned

1. Occupancy

Rooms sold divided by rooms available. Across a year, our hotel has 24 × 365 = 8,760 room nights to sell and sells about 5,960 of them: 68%. Occupancy tells you how full you were, not how well you did; a hotel can be full and underpriced. Occupancy in the glossary.

2. ADR (average daily rate)

Room revenue divided by rooms sold. If our hotel takes about £745,000 in room revenue from 5,960 room nights, its ADR is about £125. ADR tells you what guests actually paid on average, which is often lower than the rate you think you charge. ADR in the glossary.

3. RevPAR (revenue per available room)

Room revenue divided by rooms available, or ADR × occupancy. For our hotel: £125 × 68% = £85. It is the number that combines price and fill, so it is the one to compare month on month and year on year. Try the RevPAR calculator with your own figures. RevPAR in the glossary.

What is coming: the forward view

4. Pickup

Rooms booked over a recent period for a future night. If Saturday 14 November had 9 rooms on the books last Monday and 13 today, pickup this week is 4. Pickup tells you which nights are moving now. Pickup in the glossary.

5. Pace

Rooms on the books for a future night now, against rooms on the books for the equivalent night at the same point last year. Thirteen against ten means you are three rooms ahead. Pace is the clearest signal of whether a rate is right. Pace in the glossary.

6. Lead time

Days between booking and arrival. If our hotel’s summer weekends book on average 34 days ahead and its November midweek nights 9 days ahead, the November rate set today mostly will not be seen for weeks. Lead time tells you when a rate decision takes effect. Lead time in the glossary.

7. Length of stay

Nights per booking. If the average stay is 1.8 nights in summer and 1.2 in winter, each winter room sold means more changeovers per pound earned. It is also the number behind minimum-stay rules; our post on length-of-stay rules shows when they pay. Length of stay in the glossary.

How you sell

8. BAR (best available rate)

Your lowest public price for a night with standard terms. Every other rate (packages, advance purchase, member discounts) should be set from it. For our hotel, BAR on an autumn Tuesday is about £110, and the rest follows. BAR in the glossary.

9. OTA commission

The share of each booking you pay an online travel agent such as Booking.com or Expedia. At 15% on about £298,000 of agent-booked room revenue, our hotel pays roughly £44,700 a year. Our post on what OTA commission really costs works through the arithmetic, and the OTA commission calculator does it for one booking. OTA commission in the glossary.

10. Channel mix

Not a glossary entry on its own, but it is the number your channel manager makes possible: the share of bookings from each channel. For our hotel, 40% agents and 60% direct, phone and repeat. Move five points from agents to direct and, at 15% commission, that is about £5,600 a year kept.

11. Rate parity

The number of gaps you find when you compare the same room, same terms and same night across every channel. The target is zero. One gap on a busy night can send direct guests to an agent and cost you the commission. Rate parity in the glossary.

The opportunities

12. Compression nights

The nights a year when demand in town outruns supply and most hotels fill. A coastal hotel might have ten to twenty. Sell each one £20 too cheaply across ten remaining rooms and that is £200 a night lost. Our post on reading a compression night covers what to do. Compression nights in the glossary.

The tools that keep the rest in view

13. Your position against the market

The number a rate shopper gives you: where your price sits against the hotels a guest would compare you with, night by night. If our hotel is at £110 and the middle of the market is £118, it is £8 under. Whether that is right depends on pace; the position on its own is just a fact.

14. How often you make a pricing decision

A revenue management system exists to make more and better pricing decisions than a person can by hand. Whether or not you use one, count how many nights you actually reviewed last week. At our hotels, the honest answer used to be “the next weekend and nothing else”. Reviewing ninety nights a week, even briefly, changes the result more than any single clever price.

What should you watch out for?

• Looking at one number alone. High occupancy with a low ADR may be a worse month than lower occupancy at a good rate. RevPAR settles the argument.
• Comparing with the wrong period. Compare with the same month last year, and with equivalent weekdays, not the same calendar date.
• Forgetting cost. None of these numbers include the cost of servicing a room. A booking can raise occupancy and still lose money if it was sold below your floor.
• Rounding away the small hotel. In a 24-room hotel, one room is more than four points of occupancy. Small numbers move a lot; look at trends over weeks, not days.

What should you do next?

Take a sheet of paper and write the fourteen headings down the side. Fill in what you know for last month, from your bookings and your commission invoices, and mark the ones you cannot answer. Those are the gaps. Our guide on how to price hotel rooms shows how the numbers fit into a weekly routine, and our comparison of rate shopping tools covers the options if you want software to help. If you would like to see most of these for your own hotel without filling in the sheet, you can start a 14-day trial of RatePulse.

Start with the three you cannot answer.