Escape KPI Paralysis: Streamline Your Hotel's Performance Metrics

Relevance

1. Alignment with strategic goals: A relevant KPI should directly support the organization's strategic goals, helping to track progress toward achieving those goals. Ensure that marketing, sales, and revenue management KPIs are aligned.
2. Industry-specific: The KPI should be relevant to the specific industry, addressing key performance aspects unique to that industry. Typical industry KPIs are RevPAR, TRevPAR, Occupance, ADR, RGI, ARI, MPI, and many others.
3. Reflects core business processes: The KPI should represent the organization's core business processes, measuring the efficiency and effectiveness of those processes. Guest satisfaction should be on top of the list, with a KPI measuring how the hotel utilizes its capacity.
4. Supports decision-making: A relevant KPI should provide insights that aid in decision-making at various levels of the organization, guiding operational and strategic decisions. A decrease in a leading indicator, such as guest satisfaction, should trigger immediate action.
5. Helps identify improvement opportunities: Relevant KPIs enable organizations to identify areas where performance can be improved, leading to better overall results. RGI shows if the hotel captures its fair share of the market. If not, this is an opportunity to enhance the performance.
6. Addresses stakeholder needs: A relevant KPI should address the needs and expectations of key stakeholders, including employees, customers, investors, and regulators. Measuring employee satisfaction can lead to improved working conditions. ROI for the owner is an important KPI; new ESG measurements might become mandatory by law.
7. Reflects current priorities: The KPI should be relevant to the organization's current priorities, ensuring it remains focused on the most pressing issues and opportunities. Traditionally, hotels measure the same KPIs all the time. Focusing on specific KPIs until they show a satisfactory level would be better.
8. Easy to communicate: A relevant KPI should be simple and easy to communicate to all levels of the organization, ensuring that everyone understands its importance and purpose. Volume is the easiest KPI to understand. One example is how many rooms to clean. The next level is money, which is more difficult to understand. For example, what does it mean if the hotel had a room revenue of $10,000? Finally, the most difficult to understand is a KPI combining two variables such as occupancy, RevPAR, and RGI. It takes more effort to explain what RGI means and at what level it is considered good.
9. Drives desired behaviors: The KPI should encourage desired behaviors within the organization, supporting a culture of continuous improvement and performance excellence. Use leading KPIs to drive changing behavior; if the behavior changes, the hotel's performance will improve. For example, measure the time it takes to check in a guest. If shorter, guest satisfaction will improve, and guests will recommend the hotel to others, leading to an increase in revenue.
10. Adaptable to change: A relevant KPI should be flexible to changing business conditions, ensuring that it remains valuable and effective in guiding the organization through periods of growth, contraction, or transformation. For example, occupancy was less relevant during the pandemic, but RGI remained relevant as it shows how much of the market the hotel captured.

Clarity

1. Clear definition: A clear KPI should have an unambiguous definition that explicitly states what it measures and how it is calculated. Are upgrades and extra beds included in room revenue that will be used to calculate ADR and RevPAR?
2. Consistent terminology: When defining and communicating the KPI, use consistent language to avoid stakeholder confusion.
3. Simple language: The KPI should be described in simple, easy-to-understand language, avoiding jargon or complex terminology. For outsiders of the hotel industry, some KPIs are confusing and only relevant and applicable in hotels.
4. Detailed documentation: Provide detailed documentation on the KPI, including its purpose, calculation method, data sources, and any assumptions made. Hotels are good at documenting Standard Operating Procedures (SOP), so documenting KPIs should be straightforward.
5. Visual representation: Use clear and easy-to-understand visual representations (e.g., charts, graphs, infographics) to communicate the KPI and its trends. Use the easy-to-understand concept that a curve that points up is good, and a curve that goes down is bad.
6. Communication and education: Ensure that all stakeholders, including employees at various levels, are educated on the KPI, its importance, and how to interpret and act upon it. KPI education should be part of onboarding new employees.
7. Context and benchmarks: Provide context and benchmarks for the KPI to help stakeholders understand what constitutes good performance and how the organization compares to industry standards or competitors. One example is RGI which is considered good if it is above 1.
8. Data accessibility: Ensure that the data used for the KPI is easily accessible, transparent, and well-organized, enabling stakeholders to understand and validate the metric. This is easily solved with real-time dashboards available for many employees.
9. Regular reviews: Periodically review and update the KPI definition and documentation, ensuring it remains clear, relevant, and easily understood by all stakeholders.
10. Feedback loops: Establish feedback loops with stakeholders to ensure their understanding of the KPI and address any questions, concerns, or suggestions for improvement.

Measurability

1. Accuracy: Having precise data guarantees that the KPI measurements accurately reflect the performance, reducing the chances of making incorrect decisions based on erroneous information. Hotels depend on employees to verify or add correct data in the hotel PMS and other systems, so hotels need to stress the importance of data quality.
2. Completeness: Complete data sets ensure that all relevant aspects of a KPI are considered, providing a comprehensive view of performance and enabling well-informed decision-making.
3. Consistency: Consistent data sources and measurement methods ensure that KPIs can be compared over time or across different departments or locations, enabling benchmarking and trend analysis.
4. Timeliness: Up-to-date data ensure that KPI measurements reflect current performance, allowing organizations to promptly identify and address issues or capitalize on opportunities. Today, up-to-date data often means real-time data so hotels can seize the opportunities immediately.
5. Reliability: Reliable data sources and measurement methods provide confidence in the accuracy and consistency of KPI measurements, enabling stakeholders to trust the insights derived from the KPI. More automation secures that data is accurate from the source and not manually transferred from one system to another.
6. Granularity: Sufficient data granularity enables organizations to drill down into specific aspects of performance, identify root causes of issues, and develop targeted improvement actions. Start with the big picture and then, if needed, drill down to verify root causes and issues.
7. Integration: Integration of data sources ensures that KPI measurements can be correlated with other relevant metrics, providing a more comprehensive view of performance and enabling better decision-making. Hotels can create new, more relevant KPIs by integrating external and internal data sources.
8. Accessibility: Easy access to quality data enables stakeholders to analyze and interpret KPI measurements, promoting data-driven decision-making across the organization.
9. Scalability: Sufficient data quantity ensures that KPI measurements can be scaled up as the organization grows or as new data sources become available, maintaining the relevance and effectiveness of the KPI. The system must be able to add more hotels when the hotel company expands.
10. Data governance: Effective processes ensure that data quality and quantity are maintained over time, enabling consistent and meaningful KPI measurement and promoting a data-driven culture within the organization.