What is the ADR?
Average daily rate is an index used to calculate the average price of each room sold.
The ADR formula is: turnover of rooms / rooms sold = ADR.
What is the ALOS?
The average length of stay (i.e. number of days) for guests can be calculated for either a subset of rooms or the entire hotel.
The ALOS formula is: total nights occupied / total bookings = ALOS.
What is meant by RO, BB, HB, FB, and All Inclusive?
RO, or Room Only, is a type of rate in which just the accommodation
BB, or Bed and Breakfast, is a type of rate in which the breakfast is included.
HB, or Half Board, is a type of rate in which two meals (usually, breakfast and dinner) are included.
FB, or Full Board, is a type of rate in which all meals (breakfast, lunch and dinner) are included.
All inclusive is a type of rate in which all services (accommodation, food, drink etc) are included.
What is the Allotment?
Allotment is a term used to describe a certain number of rooms, optioned or purchased from wholesalers, tour operators, travel agencies or OTAs under specific negotiated conditions. These conditions usually include: the sale price, the number of rooms assigned, the allocation period and the release date, also known as “Release”.
What is the ARG?
Since rooms can be sold for 2, 3, or 4 people, in some cases it may be useful to calculate the average rate per person rather than the rate per room.
The formula is: total room revenue / total number of guests = ARG
What is the ARI?
This is an index that represents the average selling price of a property (i.e. ADR) in comparison to competing hotels. If the ARI is greater than 1, then the average rate of the property is higher than the market average. If not, then the average rate is lower than the market average.
The formula is: your property ADR / average competitor ADR = ARI
What is meant by B2B and B2C?
B2B, or “Business to Business”, describes the sale of products or services from one company to another, as opposed to from a company to individual customers. Examples of B2B bookings are those that arrive from Tour Operators, Travel Agencies, and Wholesalers.
B2C, or “Business to Customer”, describes the sale of products or services from a company to an individual customer or consumer.
What is meant by BAR?
The BAR, acronym for Best Available Rate, is the best flexible rate available to the public. By flexible, we mean that the rate does not cover advance payments, commissions or any penalties that are triggered with the booking. For example, a non-refundable booking cannot be the BAR.
What is meant by Blackout Dates?
These are dates in which no discounts, conventions and promotions of any kind are active. They coincide with periods of high traffic during peak season or, occasionally, when large-scale events attract higher-than-expected occupancy rates during the year.
What is the Booking Engine?
A booking engine is the software installed on, or connected to, a property’s official website that allows potential guests to check the availability of rooms and to make direct and independent bookings, in addition to purchasing any related services.
What is the Booking Pace?
This is a key metric that indicates how frequently bookings are made on a specific date over time. This booking “rhythm” reveals whether the current offer (i.e. tariff) is suitable for the current demand. It is therefore a useful tool for monitoring and optimizing dynamic tariffs.
What is the Booking Curve?
The booking curve is a graphical representation of bookings over a specific period of time. The curve usually shows the number of bookings made or the property’s availability (i.e. rooms unsold).
What is the Booking Window?
The Booking Window, or BW, is the number of days between a customer reserving a room and actually arriving at the property. Understanding the natural booking windows throughout the year is essential for optimum revenue management.
What is the Bottom Rate?
The Bottom Rate, or BR, represents the price below which a property can never afford to sell its rooms. It is the minimum possible rate a property can set without losing money.
What is meant by a property’s budget?
A property’s budget defines its revenue targets. The budget is built based on a hypothetical “simulation” of likely market scenarios combined with the property’s expected strategies and resources. To be reliable, the budget must be estimated using models and values from real historical market scenarios.
What is meant by Blank For Full?
Blank for Full (“Vuoto per pieno”, in italian) is an optional contract between a property and an intermediary. The contract usually establishes a number of rooms—reserved for the intermediary—and an agreed price. However, there is no release option and the rooms will be paid for, in full, regardless of whether they are eventually occupied by the intermediary or not.
What is meant by the property’s capacity?
A property’s capacity is the total number of resources (i.e. rooms or apartments) that it can physically sell, at a given point in time.
What is a Customer Relationship Management, or CRM?
The CRM or Customer Relationship Management, is a customer care software used to collect data from customers (and prospects) for the purpose of marketing and sales campaigns.
What is a Channel Manager, or CM?
A Channel Manager, or CM, is a piece of software that allows any property to market and sell its rooms on multiple different platforms simultaneously, including OTAs and the property’s own website. Channel managers also allow users to manage all room rates.
What is meant by “Complimentary Room”?
A complimentary room is any room in the hotel in which a guest is staying free of charge.
What is the Conversation Rate?
A property’s conversion rate is the ratio between the number of prospects (e.g. by website visits, email campaigns, organic search) that become leads (by performing a specific action, such as requesting a quote or booking a stay).
What is meant by Cross Selling and Up Selling?
The Cross Selling is a communication strategy that targets customers that have already purchased their stay and which aims, through various actions and tactics, both before and during their stay, to sell additional services. Examples of such services are car rentals, airport transfers, wellness center bookings etc.
The Up Selling is a sales strategy aimed at selling a high-end product to a customer that has already purchased a lower-end product. In the hospitality sector, this usually refers to some form of upgrade.
What is meant by CTA and CTD?
CTA and CTD are a inventory control tool that allow a property to prevent bookings with arrivals on specific dates—regardless of the length of stay (= CTA - Closed to Arrival) and with departures on specific dates (= CTD - Closed to Departure)
What is meant by CO (Cut Off)?
The Cut Off describes the minimum number of days, prior to arrival, that customers must make their reservations. For example, a Cut Off of 2 days means that a customer cannot book for today or tomorrow, but can make a reservation for the following day
What are the Commissions?
The brokerage commission is the percentage fee that is paid to any third party that promotes or resells rooms or services on behalf of the property. Typically, commissions are paid to travel agencies, tour operators, booking portals (OTA) and so on.
What is the Competitive Set?
This is the group of properties chosen as a “stable” reference point, used to compare the performance of a property with an approximate market average.
What is meant by DBA (Days Before Arrival)?
DBA represents the number of days between today and the arrival date for a specific reservation
What is meant by Day Use?
“Day Use” describes the limited hours, during the day, during which a hotel room may be reserved. The same room can be sold multiple times per day, in specific time slots, to increase profitability.
What is meant by Demand?
Demand is the level of consumer interest or need in products or services such as beds, rooms or event spaces.
What is meant by Displacement Analysis?
Displacement analysis is the practice of determining the total “customer worth” of competing aspects of a hotel or property. The aspect which generates the highest customer should be prioritized in most cases.
What is meant by DSU (Double for Single Use)?
“Double room for single use” is the method of selling a double room to a single occupant.
What is meant by Dynamic Pricing?
This is a revenue management strategy based on the continuous optimization of hotel rates in response to market demand. Dynamic pricing varies constantly. If plotted, it would typically show significant peaks and valleys, i.e. times of higher or lower room pricing.
What is meant by Early Booking?
This describes room bookings which are made a long time in advance. Many properties encourage early bookings by offering advantageous rates.
What is meant by FIT Rate (For Individual Travelers)?
FIT rates are net rates supplied to intermediaries such as tour operators and travel agencies, to which they will add their own markup. This mark-up may be mutually-agreed in advance or be managed privately at the discretion of the intermediary.
What is meant by Forecast?
The Forecast is an estimate of future tourism demand. The purpose of forecasting is to enable properties to set rates which will be as effective as possible in the most likely future scenario. Properties can create various forecasts, for example allowing for higher or lower than anticipated demand.
What is the F&B (Food & Beverage)?
The food and beverage department is responsible for all catering activities. F&B will usually have its own budget, management staff and specific cost and revenue centers that are distinct from the accommodation itself.
What is the Fenced Rate?
This rate includes specific restrictions, conditions or benefits afforded to bookers unders certain conditions. An example of a fenced rate is the non-refundable booking, as well as other reservations which require prepayment.
What are the GDS (Global Distribution Systems)?
These are a special type of software that connect to global databases offering rates and availability to travel agencies. This allows agencies to make reservations on behalf of their customers. Note that these databases are not accessible to the public (unlike OTAs) but are reserved exclusively for professional operators.
What is meant by GOP (Gross Operating Profit)?
The Gross Operating Profit is a measure of the difference between a property’s operating revenue and operating expenses. It is one of many different profitability indicators employed in the hospitality industry.
What is meant by GOPPAR (Gross Operating Profit Per Available Room)?
While the GOP is useful, in reality it’s more common to measure the GOPPAR since it makes the direct comparison between properties of different sizes much easier.
The formula is: gross operating margin / rooms available = GOPPAR.
What is meant by Incentive?
An incentive is a type of “premium” stay that companies purchase as a form of corporate benefit for employees. They can be augmented with additional services or through upgrading the reservation to be, for example, all-inclusive.
What is meant by Inventory?
Inventory is the number of unsold rooms within a property at a given time. In practice, inventory is the difference between the total theoretical capacity of the property, and any rooms that have been sold, optioned or made unavailable for any reason.
What is meant by KPI (Key Performance Indicator)?
KPIs are parameters that are considered to be closely linked to the achievement of business objectives. In our industry, traditional KPIs include GOP, GOPPAR, REVPAR and ADR.
What is meant by Last Minute?
The Last Minute is a type of offer that is used to sell off unsold rooms very soon before the arrival date. The idea is that it’s better to make less margin than no sale at all. It is the equivalent of a market seller slashing the prices of fruit and vegetables just before they go off.
What is meant by LV (Lifetime Value)?
Lifetime value is the total amount of money that one specific customer, or group of customers, spend at your property over their lifetime. It is a useful metric in marketing and, in particular, in the evaluation of customer acquisition costs (CAC).
What is a Loyalty Program?
The Loyalty Program is an initiative that aims to increase a customer’s lifetime value. This can be seen in “rewards points” programs and in coupons that incentivize repeat purchases.
What are Leisure Traveler and Business Traveler?
One of the many categories used to 'profile' customers is their purpose for traveling. The Leisure Traveler is a customer who typically travels for pleasure rather than for corporate reasons. It can generally be assumed that the leisure traveler is more flexible in terms of travel dates and less sensitive to price.
The Business Traveler, on the other hand, is a customer who typically travels for business purposes
What is meant by LOS (Length of Stay)?
The length of stay is the total number of nights that make up a reservation. While simple, it is essential for calculating the average length of stay (ALOS) which, in turn, is fundamental for regulating a property’s tariff strategy.
What is meant by mLOS (Minimum Length of Stay)?
The mLOS is a restriction on the minimum number of nights for which a reservation can be made. If a property has a 3-nights mLOS, it means that no reservation for less than 3 nights is allowed. It is a useful digital inventory tool: MinLOS can usually be automated on your website and on third-party booking platforms.
What is meant by Mark-up?
This is the difference between the total costs of providing a service, and the final price allocated. In other words, it’s the amount of profit hotels make on the sale of rooms and services.
The formula is: (sales price - net tariff) / production costs = mark up.
For markup, it can also refer to an increase intended for OTAs and calculated based on the direct rate, used by many hoteliers to protect their net rate from the commissions to be paid to the OTAs themselves.
What is meant by MPI (Market Penetration Index)?
The market penetration index is used to compare occupancy levels between a given property and the market average, usually through direct competitors.
The formula is: occupancy rate / market average occupancy rate * 100%
What is the Occupancy Metasearch?
A metasearch engine is a tool that aggregates data from different sources in one place. Trivago, for example, is a meta engine because it collects various data points on hotels and rental properties, from dozens of sources, and displays them all together.
What is meant by MICE (Meeting, Incentive, Congress and Events)?
This is another market segment (just like business traveler and leisure traveler) which describes guests which are using your property for meetings, conferences, events or corporate away-days.
What is meant by Nesting?
This is a revenue management strategy that involves “removing” rooms of a property’s inventory (i.e. making them temporarily unavailable) before reintroducing them, at a reduced price, at a later date.
What is the Net Rate?
The net rate is the selling price of rooms after any commissions have been subtracted, or before any markup has been added.
What is meant by No Show?
A “No Show” is a guest that fails to arrive and check-in for their stay. The term applies to those who have already paid in full, and those who have yet to pay.
What is meant by NOI?
NOI means Net Operating Income and stands for the delta between the income and the expenses related to operational management.
What is meant by NOTREF, NOREF or Non Refundable?
NOTREF, NOREF or Non Refundable is a form of fenced tariff. It stipulates that a percentage of room price (from 1% to 100%) must be paid by the customer—even if they later cancel their reservation.
What is and how is the occupancy rate calculated?
One of the main KPIs for the hospitality sector, occupancy rate describes the percentage of occupied rooms compared to the total number of rooms in a property.
The formula is: rooms sold / rooms available * 100% = OCC
What is meant by OTB (On The Book) or SPIT (Same Point In Time)?
OTB or SPIT data refers only to any data tied to future dates, clearly distinguished from “historical data”. Metrics like turnover, occupancy, and number of bookings can all be forecast OTB or viewed in a historical context.
What is meant by Opaque?
Opaque tariffs are those used by intermediaries selling “package deals”. Customers will see one single price for the entire bundle, rather than the specific price of each element.
What is meant by Open Pricing?
Open pricing allows hotels to price all room types, channels and dates independently of each other in order to maximize revenues, by following natural fluctuations in demand.
What are the OTAs (Online Travel Agencies)?
OTAs like booking.com and Expedia are virtual platforms that, by charging commission to the properties involved, allow customers to compare offers for hotel rooms and rental properties, make reservations, and view additional services (like transport, insurance or experiences) on one website.
What is the Overbooking?
The Overbooking is a powerful sales technique adopted by some properties to maximize occupancy rate. It consists of selling more rooms than are actually available, in order to avoid unsold rooms.
What is meant by Oversale?
Oversale is essentially an involuntary overbooking, caused by mis-management of a property’s availability. In practice, oversale occurs when more rooms have been sold than are actually available, and these have not been re-protected in time.
What is the Package?
The Package is a special rate that includes additional services on top of the room reservation, such as access to the spa, beauty treatments, welcome kits or other services provided by the property or external partners.
What is meant by Pick Up?
Pickup is a value that represents the variation in rooms available on a specific date, at two different periods in time—for example, New Year’s week last year compared with the year before. This pickup is used as a reference point for assessing the effect of demand on a hotel's “inventory” of rooms.
What is a PMS (Property Management System)?
This software is extremely useful for integrating and managing a property’s rates, distribution channels, reservations and, in general, all operations related to reception, cleaning, maintenance and accounting.
What is meant by Rate Parity?
The Parity Rate or Rate Parity is a rate policy that allows properties to list consistent and identical prices across all platforms including its own price list, sales portals, OTAs etc.
What is meant by Rack Rate?
The Rack Rate is defined as the upper reference limit for prices available to the public. In other words, it’s the exact opposite of the bottom rate. While the rack rate can be exceeded, this only happens in special cases and is, generally, the subject of a private negotiation.
What is meant by Revenue Management?
This is a management system designed to maximize and optimize revenue for a hotel or property. “Doing revenue management" means, quite simply, managing the prices of your rooms.
Who is the Revenue Manager?
This is the person responsible for monitoring and managing prices in any property or hotel.
What is meant by RevPAR (Revenue Per Available Room)?
Considered one of the most crucial KPIs in hospitality, RevPAR combines the value of the sale price and occupancy in a single index.
The formula is: net revenue of rooms / available rooms = RevPAR
Look at that LAB’s video → Dal RevPAR all’OTB: tutti i KPI del Revenue Management
What is a Reprotection?
The Reprotection technique is strongly tied to the strategic use of overbooking, and involves purchasing stays at other properties in order to provide a sort-of “guarantee”where they can send excess guests if all reserved parties do actually show up.
What is a RMS (Revenue Management System)?
A RMS is a suite of advanced tools dedicated to Revenue Management. An RMS typically integrates with a property’s traditional management software and aims to support and facilitate the work of revenue managers.
What is the ROI (Return On Investment)?
ROI is a profitability index and describes the ratio between the amount invested in a particular activity (usually marketing) and the revenue generated as a direct result of that activity.
The formula is: net profit / invested capital = ROI
What is meant by Spillage?
When a property has sold all of its available rooms too early (and therefore undercharged due to the unforecast, or poorly forecast, high demand) this is known as spillage. Timely price increases are needed to avoid spillage.
What is meant by Spoilage?
When a property has sold too few of its available rooms close to the arrival date (as a result of overcharging based on an inaccurate demand forecast) this is known as spoilage. Timely price reductions are needed to avoid spoilage.
What is meant by Shoulder (or Shoulder Dates)?
Shoulder is the term used to describe dates close to peak dates. For example, if huge demand is expected for Friday and Saturday evenings, then Thursdays and Sundays should be considered "shoulder dates". The management of shoulder dates is important since they tie directly to the value of the average stay and, in particular, weekly occupancy levels.
What is the Total Revenue?
This is the summation of all revenue from the different areas of any accommodation or property. Typically, sales from restaurants, health clubs, meeting rooms and other areas can be optimized in a similar way to rooms.
On the Smartpricing Dashboard, revenue is the sum of the amounts from all bookings processed by the algorithm
Who is the TO (Tour Operator)?
A Tour Operator is an organization that distributes tourist “packages” that include a stay at your facility, as well as other services such as transport, insurance, and activities.
What is the TrevPAR (Total Revenue Per Available Room)?
Closely related to RevPAR, TrevPAR also includes turnover from other revenue centers such as ancillary goods and additional services available at the property.
The formula is: total turnover / number of rooms = TrevPAR
What is meant by Unconstrained Demand?
When demand exceeds the property’s maximum capacity, this is known as unconstrained demand. Predicting the quantity and quality of this demand allows owners to optimize occupancy and maximize average room rates, by leveraging their tariff strategies appropriately.
What is the Upgrade?
An upgrade is the improvement of a guest’s booking, for example to a room of higher quality, or the addition of new services to the booking. Upgrades happen for many reasons, including paid upgrades as part of a hotel’s upselling strategy.
What is a Walk-In?
A walk-in is a guest that visits and stays in a hotel without a prior reservation. The rate for walk-ins varies considerably depending on the season, current occupancy and other factors.
Who are the Wholesalers?
Wholesalers are companies that reserve beds in large quantities at advantageous prices, and then resell them with a retail mark-up to travel agencies and OTAs. This strategy is only usually applied by larger properties or chains, since it requires selling a huge quantity of rooms for below market prices.
What is the Yield Management?
This describes the process of maximizing revenues through the proper management of inventory. At the heart of yield management is the segmentation of specific rates for specific types of customers and channels, as well as the search for maximum occupancy and the highest possible room price.
What is the CostPAR?
The costPAR is the cost per room and is calculated by dividing the total costs (fixed + variable) by the total number of available rooms.
The CostPAR formula is: (fixed costs + variable costs) / (number of available rooms + number of days open).
A property’s capacity is the total number of resources (i.e. rooms or apartments) that it can physically sell, at a given point in time.
What is the SWOT Analysis?
The SWOT Analysis is a focus on the Strenghts, the Weaknesses, the Opportunities and the Threats of a investment or a business. It involves identifying internal factors (Strengths and Weaknesses) and external factors (Opportunities and Threats) that may impact the success of the project or business. The goal of a SWOT Analysis is to leverage strengths, mitigate weaknesses, capitalize on opportunities, and minimize threats to achieve strategic objectives.
What are the Flash Sales?
The Flash Sales are promotions that offer a special rate for a very limited period of time.
What does EBITDA mean?
Earnings Before Interest, Taxes, Depreciation, and Amortization