How to Measure Hotel Performance?

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Hotel industry requires evaluation more than others due to high competition. Read this article to learn more about hotel BSC and set of KPIs to be evaluated. Check additional information about hotel performance.

One can hardly find a business niche without tough competition. Customers have a wide choice when going shopping just for anything. The said reality is - if a customer does not buy from company X, he or she will most certainly buy from company Y. This is how modern markets work. In order to withstand a tough competition and further develop, businesses need to design plan for the future. It means that if a company is not aware of where it is going and what goals it wants to achieve, such a company is almost certainly doomed to fail. Strategy is all important in any business, from production of electronics and IT to hotel business. Buy the way, competition in a hotel business is especially intense. When holiday season begins hotels and inns are fighting for guests who will spend much money there.

It is possible to design any strategic plans without being aware of what is going on in the company (hotel right now?) Is it reasonable to set strategic goals but evaluate obtained results using just financial indicators? Well, there is nothing wrong is financial indicators to evaluate hotel performance. However, the problem is that financial indicators show past trends. In other words, it shows something that has already happened. It is not very reasonable to use this info only in strategic planning. This is where Balanced Scorecard comes into play. This is the first strategic management and performance evaluation system that uses both financial and non financial indicators. In such a way, hotel chain top management can stay informed on how well they are implementing strategic goals.

What are the most important key performance indicators in hotel evaluation with BSC? As already said above, financial indicators are rather important. Thus, such KPIs as wages costs as % to overall total sales, food costs as % of food sales will tell much about efficiency of hotel functioning. However, it should be repeatedly stressed that non-financial indicators play a great role in overall performance evaluation in a hotel or inn. Thus, let's consider customer satisfaction, for example. This is a primary goal for every hotel. Satisfied customers are regular customers and thus - regular sources of income for a hotel chain. In order to differentiate customers it is really important to measure such KPI as income per customer. To optimize expenses related to maintenance of a hotel, evaluation of such KPI as gross operating profit per available room will help greatly. There are also other KPIs such as total revenue per available room, room revenue per available room, conference and banqueting revenue per available space etc.

Of course, there is no universal set of KPIs that will be suitable for every hotel or inn. It is not a secret that every business is individual and thus requires personal approach, including implementation of Balanced Scorecard. Thus, top managers and those in charge of BSC implementation should take into account hotel's strengths and weaknesses before designing BSC. It is imperative to set the right weights for indicators and BSC categories as well.

If you are interested in hotel performance, check this link to find out more about hotel performance. Also, you can check other articles in BSC Guides category.

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