KPI #1: Net Promoter Score (NPS)
I have always been passionate about creating and delivering exceptional guest experiences. My curiosity has prompted me to want to know how well we do our job and how we can improve. The NPS is a core KPI, but you also need to talk to guests, read reviews, and conduct deeper surveys and interviews to truly understand how to become better at servicing your guests.
Definition and calculation
- Define NPS: Net Promoter Score (NPS) is a powerful metric tracking customer satisfaction and loyalty. You ask your guests one simple question: "How likely are you to recommend this hotel to a friend or colleague?" Guests respond on a scale from 0 (not at all likely) to 10 (extremely likely).
- How it's calculated: Based on their responses, categorize guests as:
- Promoters (score 9-10): Loyal enthusiasts, likely to spread positive word-of-mouth.
- Passives (score 7-8): Satisfied but unenthusiastic, vulnerable to competitors.
- Detractors (score 0-6): Unhappy guests, potentially damaging your reputation. To calculate your NPS, subtract the percentage of Detractors from the percentage of Promoters.
Why it matters
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- Gauges guest loyalty: NPS goes beyond simple satisfaction to uncover your most ardent supporters, who fuel growth through recommendations.
- Provides actionable insights: NPS surveys often include follow-up questions to pinpoint the reasons behind guest ratings. This granular feedback offers invaluable information on where to improve your operations.
- Allows benchmarking: Comparing your NPS to industry standards and competitors helps you assess your performance and identify areas to outshine the competition.
How to Improve NPS
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- Deliver exceptional service: This is the foundation of high NPS. Go beyond the basics to anticipate guest needs and resolve any issues swiftly.
- Personalize the experience: Recognize returning guests and tailor their stay based on preferences.
- Collect and act on feedback: Regularly collect NPS data and implement changes based on the most common themes in guest feedback.
KPI #2: NetRevPAR
Focusing on NetRevPAR will keep the commercial team sharper. They must understand which revenue is the most profitable and will improve the bottom line. Focusing on NetRevPAR fosters better teamwork between marketing, sales, and revenue management since they all focus on the same goal.
Definition and calculation
- Define NetRevPAR: NetRevPAR stands for Net Revenue Per Available Room. It's a more sophisticated metric than the traditional RevPAR (Revenue Per Available Room) calculation. NetRevPAR takes it further by factoring in customer acquisition costs associated with each booking.
- How it differs from RevPAR: RevPAR is calculated by multiplying your average daily rate (ADR) by your occupancy rate. NetRevPAR subtracts distribution costs (like online travel agency commissions, marketing costs, etc.) from your room revenue before dividing by the number of available rooms.
Why it matters
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- More comprehensive revenue picture: NetRevPAR reveals the true revenue you generate per room after accounting for the cost of acquiring that booking.
- Distribution channel profitability: NetRevPAR allows you to compare the profitability of channels such as your website, online travel agencies (OTAs), and metasearch sites.
- Guides marketing investments: By understanding which channels bring in the highest net revenue per room, you can decide where to allocate your marketing budget.
- Multi-variable profitability analysis: Analyze the profitability of various segments and factors like market segments, distribution channels, feeder markets, room types, day of the week, season, and marketing campaigns. This granular insight allows you to make data-driven pricing and yield management decisions.
How to improve NetRevPAR
- Analyze multi-variable profitability to find the most profitable guests: Focus your marketing efforts on the types of guests who drive the highest net revenue. Use data to identify valuable segments based on demographics, booking patterns, and additional spending habits.
- Optimize distribution mix: Prioritize direct bookings with the lowest acquisition costs. Explore ways to drive more traffic to your website.
- Negotiate better commissions: With a clear picture of your net revenue, you can negotiate lower commissions with distribution partners.
KPI #3: Gross Operating Profit % (GOP%)
Flow-through is a key favorite of mine because it emphasizes a holistic approach to financial performance. By tracking flow-through, we're not just looking at increasing revenue; we're also scrutinizing expenses to ensure that any growth on the top line translates to a healthy bottom line. This KPI underscores the importance of efficiency and optimization for true profitability.
Definition and calculation
- Define GOP%: Gross Operating Profit Percent is a key financial metric that shows the overall profitability of a hotel's operations. It's calculated by taking your Gross Operating Profit (GOP) and dividing it by your total revenue, then multiplying by 100 to express it as a percentage.
- How it's calculated:
- GOP = Total Revenue - Customer Acquisition Costs - COGS - Operating Expenses
- COGS (Cost of Goods Sold): Directly associated with the rooms you sell (e.g., in-room amenities, cleaning supplies)
- Operating Expenses: Costs tied to running the hotel (e.g., salaries, property taxes, utilities, non-room supplies)
- GOP% = (GOP / Total Revenue) * 100
Why it matters
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- A quick snapshot of profit generation: GOP% shows how much of the revenue you bring in that you manage to convert to profit.
- Highlights operational efficiency: A high GOP% suggests efficient management across your operations. A low GOP% indicates a need to examine operational processes in more detail.
- Identifies areas for efficiency improvement: By analyzing the processes for delivering the guest experience, you can pinpoint where potential savings might lie.
How to improve GOP%
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- Analyze revenue: Find the revenue that will drive the least costs and generate the highest flow-through.
- Optimize labor costs: Labor is often a hotel's most significant expense. Use dynamic scheduling based on the guest flow to balance the guest service and efficiency level. Cross-training and using technology can help.
- Explore operational efficiencies: Look for ways to streamline processes, reduce waste, and harness technology to improve productivity. Consider negotiating better rates with suppliers and explore ways to increase revenue from additional services.
Conclusion
NPS, NetRevPAR, and GOP% form a powerful trio of KPIs essential to understanding your hotel's overall performance. They provide an exceptionally well-rounded view, balancing guest sentiment with a granular financial analysis.
By working with these KPIs in tandem, you can:
- Understand guest satisfaction and financial health: These insights will help you pinpoint areas where you can improve the guest experience while ensuring profitable outcomes.
- Make more profitable and guest-centric decisions: Informed by these metrics, you can make strategic choices that enhance guest experiences and drive strong financial performance.
- Remain competitive through continuous monitoring: Monitoring these KPIs lets you quickly identify emerging guest expectations, optimize your pricing, and make necessary adjustments to drive success.
Start tracking
Start tracking NPS, NetRevPAR, and GOP% in your hotel today! These crucial metrics will illuminate the path toward exceptional guest service and long-term sustainable profitability.