RevPar Room Type Index (ReRTi)® ENG

I’ve been thinking for a while about how to introduce new metrics into our daily lives (as if there were few). I am focusing on typologies and inventory, since these areas didn’t analyze Revenue Management that intensively.

One of my main objectives is to be able to measure to what extent is the sale balanced between base and premium types. This theory seems pretty simple, but it gets more complicated from day to day since we don’t have that much information to rely on and we just dispose with our historical records or a YOY (year over year).

While talking the other day about STR to my colleague and friend, Javier Serrano , he came up with the idea of trying to use a certain logic that STR makes with its metrics such as the ARI, the MPI and the RGI, which after can still be considered comparative indices.

While trying to bring these KPIS to an internal vision, I am working on a new metric to be able to compare certain variables with the objective of being able to relate the inventory to the contribution of each typology to the RevPar (both individually and as a group).  As a result, I have developed a new KPI that I think is very interesting to present, the RevPar Room Type Index (ReRTI)®:

The RevPar Room Type Index (ReRTI)® is a new metric intended to help determine whether the sale of our superior rooms is contributing to the RevPar

The idea was put into practice during a class I taught at my friend’s Javier Jimenez , FORST business school and I hope we can work on this new metric, improve it and, if possible, apply it to the sector. I am sure my friend Enzo Aita will help me 🙂

Initial calculations

Given the data in the table attempting to simulate only one day (or period) of any given hotel, let’s explain the initial metrics in the example:

ADR: Production / Room Sales

% Inventory Type: Inventory Type 1 / Total Inventory – % corresponding to that typology over 100% of the hotel

RevPar Hab*1: Room Production / Total Hotel Rooms

RevPar Room Type *2: Room  Type Production / Total Hotel Rooms

Advanced calculations

I call them advanced not because of their difficulty but because they are not usually seen much in everyday analysis so I recommend incorporating them more often.

RevPar Upselling: Upselling Production / Total Hotel Inventory – This metric indicates how much the hotel’s total Upselling contributes to RevPar

Hotel RevPar: (Room Production + Upselling Production) / Total Hotel Inventory – The sum of Room RevPar and Upselling RevPar

The RevpPar Upselling is a rarely used KPI within the industry and I think it should begin to be used widely as it helps to measure the efficiency of your Upselling program

% RevPar  per Room Type: Is the % corresponding to the RevPar room (without upselling) to each typology or group of typologies. It indicates how 100% of our RevPar is composed. In this case 95% of the RevPar has been obtained from the sales of the standard typologies.

% Total RevPar  ( Room + Upse) per Type: It is the % corresponding to the total RevPar (including the Upselling) to each typology or group of typologies and it indicates the same as the previous one, but with the integrated Upselling.

And finally, the combination of the two parameters in bold (the % of each type and their contribution to the RevPar) we can create our new KPI, the RevPar Room Type Index (ReRTI). The objective is to be able to analyze if the types of room are contributing to the revPar of the hotel in proportion to the inventory they have.

RevPar Room Type Index (ReRTI): This is the PKI that tells us whether the type offers more or less RevPar compared to the % of inventory it has. Assuming a hotel has 85% of standard types of rooms, it should be providing a similar % to RevPar.

RevPar Room Type Index (ReRTI): % RevPar Total x Tipo / % de Inventario x Tipo

Under this premise, the RevPar Room Type Index (ReRTI) is the relationship between the inventory of each typology and the contribution of each one of these typologies to the RevPar. A number greater than 1 means that the typology contributes more (proportionally speaking) to the Revpar than it should by volume. Oppositely, a number lower than 1 means the typology contributes less than it should by volume.

In an optimum scenario we would have a RevPar Room Type Index (ReRTI)®.

• Standard rooms: No more than 1 and the farther away the better, since that means that my superior rooms (which usually have better ADr and more profitability)
• Superior Rooms: More than 1 since it means that the room is contributing more than it should due to its inventory.

And to conclude, I would just like to say the following

PD. If I have invented a metric, I can retire in peace, and if it has been invented, I can just explain you my arguments on the subject.

PD. If any «Marketing expert» friend come with a better name, please go ahead 🙂

Remarks:

*1 In the calculation of the RevPar there are companies that incorporate the Upselling within their calculation. However, we don’t incorporate it in my case.

*2 In the case of RevPar by typology and in this specific calculation it is generated among the total typologies of the hotel instead of the typology itself.

Professionally translated : VC

This docummetn is under Licencia Creative Commons Attribution-NonCommercial 4.0 

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<span>Technical Analysis RevPar Room Type Index (ReRTI)</span> –
<span>CC by-nc 4.0</span> –
<span>Diego Fernandez</span>
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