In hospitality, we are always searching for that magic bullet, the next Key Performance Indicator (KPI) that promises to unlock new levels of understanding and profitability. Every conference and webinar seems to introduce a new acronym that claims to be the future of hotel metrics.
Here's the danger with all new KPIs: in our rush to innovate and quantify, we risk adopting metrics that sound impressive but are fundamentally flawed or poorly defined. Take the emerging concept, sometimes labeled "RevPAG" or Revenue Per Available Guest. While aiming for a guest-centric view is commendable, the metric itself stumbles on its definition. Unlike RevPAR (Revenue Per Available Room), where "Available Rooms" is a clear, fixed number, what exactly constitutes an "Available Guest"? Is it potential occupancy? The number of beds? The metric becomes unstable and confusing without a stable, universally understood denominator. Often, the calculation presented under this banner is simply Total Revenue divided by the number of guests who stayed – essentially, Average Guest Spending, a useful but distinctly different (and still average-based) measure.
This chase for shiny new acronyms, especially flawed ones, distracts from a more critical need. We don't necessarily need more KPIs cluttering our dashboards. We genuinely need deeper insights derived from the rich data we already collect, moving beyond the limitations of simple averages to understand what drives our business.
The Blind Spot: Why Averages Aren't Enough (Expanded)
It's easy to see why averages dominate our reporting. Metrics like RevPAR, ADR, or even a correctly calculated Average Guest Spend provide a quick snapshot, a single number that's simple to track and compare over time or against competitors. They offer a sense of control and understanding.
But that simplicity comes at a cost. Averages, by their very nature, smooth out the bumps and nuances in our data, effectively hiding the crucial variations in actual guest behavior. Think about it: an Average Guest Spend of €150 could mean most guests spend close to that amount. Or, it could mean half your guests spend only €50 while the other half spends €250 on ancillaries, dining, and experiences. The average is the same, but the reality of your guest spending – and the strategies needed to optimize it – are wildly different in each scenario.
This focus on averages often intertwines with traditional rate-setting practices and the pervasive "heads in beds" philosophy. We set base rates by room type and occupancy, then adjust based on demand forecasts. When demand is low, the pressure mounts to simply fill the room. The goal becomes getting someone – anyone – into that available space, often by finding the highest rate someone is willing to pay, which frequently translates to accepting progressively lower rates until a booking materializes. This prioritizes occupancy percentages over potentially higher revenue from fewer, higher-paying guests.
Many Revenue Management Systems, particularly older or less sophisticated models, can inadvertently reinforce this pull toward the average or lowest common denominator. Their algorithms are often designed to react to booking pace; if reservations aren't coming in at a certain rate level, the system automatically lowers the price until it triggers a booking. While intended to maximize occupancy based on demand, this systematic reduction can push the hotel's realized rates downwards, effectively optimizing for a booking rather than necessarily the most profitable mix of bookings. Without careful strategic oversight to protect value and target specific segments, the system's logic can contribute to a gravitational pull towards average (or even below-average) performance, especially in softer periods.
Ultimately, this combined reliance on average metrics, the drive for occupancy above all else, and reactive RMS pricing creates a significant blind spot. It masks your high-value guests – the ones spending significantly above the norm who deserve special attention and cultivation – and those on the lower end, representing untapped potential. When we strategize based purely on averages and let automated systems chase occupancy, we risk designing experiences and pricing structures for a theoretical "average guest" who may scarcely exist, potentially leaving significant revenue from higher-value segments on the table.
The Solution: See the Whole Picture with Histograms
So, if averages give us a blurry, potentially misleading picture and can even pull our strategies toward mediocrity, how do we get a clearer view? The answer lies in moving beyond single numbers and looking at the distribution of our data. One of the simplest and most powerful ways to do this is by using histograms.
Think of a histogram as a simple bar chart that, instead of comparing different categories, shows how many guests fall into different ranges or 'bins' for a particular metric, like total spending per stay. For instance, one bar might show the number of guests who spent between €0-€50, the next €51-€100, then €101-€150, and so on. Instantly, you move beyond just knowing the 'average' spend and start seeing the actual shape of your guest revenue contribution.
The key benefit is stark: unlike averages, which hide everything, histograms reveal the underlying patterns. You can immediately see:
- Clusters: Are there distinct groups of low, medium, and high spenders? Where do most of your guests fall?
- Spread: Is spending concentrated, or is it widely dispersed?
- Outliers: Who are the guests spending significantly more (or less) than the typical visitor?
This visual clarity unlocks far more targeted and effective actions than any average could:
- Nurture Your VIPs: Easily identify that smaller group of high-spending guests. Now you can analyze their behavior, preferences, and booking patterns to create tailored loyalty rewards, personalized communication, and specific offers that recognize their value and encourage repeat business.
- Address Low Engagement: See a large cluster of guests with minimal spending beyond the room rate. A histogram prompts you to investigate why. Are there friction points in accessing services? Are your ancillary offers not appealing to this segment? Are they primarily OTA guests unaware of direct booking benefits? This insight allows you to diagnose issues and develop targeted solutions, whether improving service delivery, adjusting offerings, or refining marketing.
- Optimize Services & Upselling: Understand which spending segments engage most with specific services (F&B, spa, activities). Then, you can tailor packages, promotions, and upselling tactics more effectively at relevant touchpoints (pre-arrival, check-in, during stay) based on demonstrated spending behaviors, not guesswork based on an average.
Histograms visualize the distribution of guest behavior and provide the foundation for strategies catering to real guest segments. Better insights pave the way for smarter pricing, personalized experiences, and ultimately increased profitability.
Empowering Decisions with Modern Hotel Business Intelligence
Understanding the power of concepts like histograms is the crucial first step. However, manually wrangling data from disparate systems (your PMS, POS, RMS, marketing platforms) and constantly generating these analyses can be time-consuming and complex. To truly operationalize this shift away from averages and toward deeper understanding, hoteliers need the right tools: modern Hotel Business Intelligence (BI) platforms.
These BI systems go far beyond basic reporting spreadsheets. They are designed to consolidate vast amounts of data across your entire operation into one unified, accessible place. More importantly, they provide the analytical power to slice, dice, and visualize this data meaningfully, effortlessly moving beyond simple averages to reveal trends, patterns, and distributions.
Tools like Demand Calendar exemplify this approach. They are built specifically to provide intuitive access to complex performance data, allowing hoteliers to see more than just the average nightly rate or average spend. These platforms generate actionable insights rather than raw numbers by presenting information visually, incorporating historical data, and often forward-looking demand indicators. A key strength lies in providing this instant, comprehensive information within a single system, making it accessible and understandable for all roles within the hotel, from revenue managers and marketers to general managers and operations teams.
When everyone is looking at the same, reliable, and deeply analyzed data, it breaks down departmental silos. This means that sales understand the profitability of group segments beyond just room nights, marketing can track the true ROI of campaigns based on guest value, and revenue management can make pricing decisions based on a granular understanding of demand and guest behavior patterns. Investing in and utilizing a capable BI platform transforms data from a rear-view mirror into a forward-looking navigation system, empowering your team to make informed, coordinated decisions that directly impact and improve overall profitability.
Conclusion: Measure Smarter, Not More
It's time to step off the KPI treadmill. Let's abandon the chase for the next potentially flawed buzzword, like the problematic concept of "RevPAG," which often obscures rather than clarifies. The path to truly data-driven success in hospitality isn't paved with an ever-growing list of acronyms.
Instead, the focus must shift to unlocking the wealth of insight already contained within our existing data. By embracing the power of distribution analysis – visualizing our data through tools like histograms and leveraging modern Business Intelligence platforms – we can finally move beyond the deceptive simplicity of averages.
Understanding the variety and nuances of guest behavior, spending patterns, and preferences is paramount. Seeing the clusters, the outliers, and the actual shape of our data allows for genuinely more innovative, targeted pricing, marketing, and operations strategies. This granular understanding, not just another metric, is the key to enhancing guest experiences, building loyalty, and, ultimately, driving sustainable profitability for your hotel. Measure depth, not just breadth. Measure smarter, not just more.
