Hotel revenue management glossary

 

7 minute read

 

Hotel revenue management has its own language filled with acronyms and a jungle of jargon. Unfamiliar terms are an unnecessary frustration when you’re starting to build a customized revenue management strategy. To help, we’ve broken down the most common industry phrases and defined them in plain language so you can minimize the time you spend away from your guests.

A-C
D-F
G-M
N-P
Q-Z

A-C

average daily rate (ADR)
The average rate achieved across all room types in a given time period. This is calculated by dividing room revenue by rooms sold.

average length of stay (ALOS)
The average number of days that guests stay, calculated by dividing total occupied room nights by total bookings. It can be determined for a subset of rooms or the whole hotel.

average rate index (ARI)
This metric measures a property’s ADR performance compared to their competitive set. It helps determine if a property is capturing its fair share of the market. It is calculated by dividing the property’s ADR by the ADR of the competitive set. An ADR of above 1.00 indicates that the property is achieving more than its fair share, while below 1.00 suggests that the property is achieving less than its fair share.

best available rate (BAR)
This is a property’s publicly available base rate, which doesn’t require pre-payment, and doesn’t impose additional cancellation fees outside of their standard policy. It’s also the commonly used metric for comparison between properties.

booking curve
A visual representation of bookings over a period of time. It can include number of bookings, room pickup (number of bookings made during the time period), availability, and yielding capacity.

booking engine
Technology that allows reservations to be made on a website.

booking window
The period of time between when a guest makes a reservation and their actual arrival date.

capacity
The number of rooms in a property.

central reservation system (CRS)
A system used by multiple hotels in a chain to maintain hotel information, inventories, rates and facilitate reservations.

channel management
The techniques and systems hotels use to update property information, room inventory, and rates in each of their distribution channels.

channels
The various methods that customers use to make reservations, including travel agents, OTAs, or your own website.

closed to arrival (CTA)
An inventory control tool that prevents new reservations on certain dates.

commissions
Payments made to a travel agency or OTA for each reservation they facilitate.

competitive set
A group of direct competitors (hotels or other properties) that can be used as a benchmark when a property assesses their performance.

D-F

day(s) before arrival (DBA)
The number of days remaining before the stay date.

demand
The amount of interest and need for a product, such as beds, rooms, or event space.

displacement analysis
Calculation used to determine if a group booking should be accepted. Compares the value of a group booking to the value of walk-in bookings for the same rooms. Calculated by multiplying the number of rooms by the higher average rate for transient travelers.

dynamic pricing
The process of maximizing revenue by selling the same products at different prices to different customers. For example, you might sell the same room type at a lower rate to a business group and at a higher rate to a last-minute leisure guest.

fair market share
A metric measuring a hotel’s performance against its immediate competitors. Refers to the number of rooms a property would sell if the demand was distributed evenly across the hotel and its relevant competitive set. If one hotel’s performance increases, thereby increasing its share of the reference market, this leaves less market demand for the remaining hotels to capture.

fenced rate
A rate with conditions that must be met. For example, non-refundable or advanced purchase reservations.

forecast
Expected revenue results based on analysis (occupancy and average rate included).

G-M

global distribution systems (GDS)
Computer networks such as Amadeus, Galileo, Sabre, Worldspan that pass hotel inventory and rates to travel agents and allow them to make bookings. Generally, facilitated with older technology, not connected through the Internet.

gross operating profit per available room (GOPPAR)
A metric that measures total revenue less operational and departmental expenses, expressed as a proportion of the available rooms.

group displacement
A measure of inventory that will be unavailable to other segments (such as transient business) due to a group booking. Usually considered in displacement analysis.

leisure traveler
Non-business traveler, or someone traveling for personal reasons and not work.

length of stay
The number of nights a guest has booked at the hotel during one stay.

lose-it rate
An unprofitable rate at which the hotel would be better off leaving a room unsold than selling at this rate.

market penetration index (MPI)
A metric used to determine whether the property is achieving its fair share of occupancy as
compared to a specific group of hotels. It is calculated by dividing the occupancy percentage of the hotel by the occupancy percentage of the competitive set (from a third-party provider such as STR). An MPI of above 1.00 indicates that the property is achieving more than its fair share, while below 1.00 suggests that the property is achieving less than its fair share.

metasearch
A type of search engine that aggregates inventory from several sources and presents it in one place.

minimum length of stay (MinLOS)
A room inventory control function that requires a reservation to meet or exceed a certain length of stay. This helps hotels maximize profits and occupancy during the low-demand periods either side of a high-demand period by ensuring that peak demand nights aren’t filled with one-night stays.

N-P

net rate
The sell rate not including the commission for a booking facilitated by a distribution partner, such as an OTA or travel agent.

occupancy
Measures the number of rooms sold at a hotel, expressed as a percentage of total rooms available in a given time period. Occupancy is calculated by dividing the number of rooms sold by rooms available.

occupancy index
Determines a hotel’s market share performance relative to an aggregated grouping of hotels, competitive set or market. It is calculated by dividing a property’s occupancy by its competitive set occupancy.

online travel agency (OTA)
An internet-based hotel and travel reservations system. Hotels typically provide inventory
to OTAs, to facilitate bookings in exchange for a commission.

opaque
A booking channel where the property name remains hidden until after the purchase is complete.

open pricing
The ability to price all room types, channels and dates independently of each other to maximize revenue without having to make rooms unavailable for sale in other channels, such as OTAs.

overbooking
The practice of confirming reservations beyond capacity, either in expectation of
cancellations or no-shows, or in error.

pace
Also called pickup, pace is the rate at which reservations are made for a particular date.

predictive analytics
Extracting information from data and using it to predict trends and behavior patterns.

price elasticity
An economic measure that shows the responsiveness or “elasticity” of the demand for a
product based on a change in its price.

profits per available room (ProPAR)
An emerging metric, also known as Net RevPAR, that factors in customer acquisition costs and other expenses to determine net revenue instead of gross revenue.

property management system (PMS)
Used onsite in an individual hotel to allow for guest check-in and check-out.

Q-Z

rate parity
The strategy to maintain rate consistency across sales channels, usually enforced
through contractual agreements between hotel companies and third-party vendors.

revenue per available room (RevPAR)
Measures the revenue contribution of each room, regardless of whether it was sold or not. Calculated by multiplying occupancy by ADR, it is used to assess how well a hotel has managed their inventory and rates to optimize revenue.

revenue generated index (RGI) or RevPAR Index (RPI)
RevPAR (Yield) Index measures a hotel’s fair market share of their competitor set’s revenue, per available room.

revenue management
The art and science of predicting real-time customer demand and optimizing the price and
availability of products to match that demand.

STR report
A report that aggregates self-reported operating data from participating hotels (including ADR, Occupancy and total rooms) so they can compare their KPIs. Participating hotels can access market performance information for free, or pay a fee for a report that compares their information with a competitive set of their choosing.

shoulder date
The days next to peak days. If a Friday and Saturday are forecasted to be sold out, and Sunday is not, then Sunday would be considered a shoulder date.

total revenue per available room (TrevPAR)
Measures the contribution of all profit centers in a hotel, expressed as a proportion of the total rooms available. It is calculated by dividing total revenue by available rooms.

unconstrained demand
The forecast of how many rooms could be sold if rooms were unlimited.

yield management
The price optimization aspect of a revenue management strategy.

 

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