The Power of the Hotel Indicator

Access your KPIs online;
Measure your success;

Navigation: All Balanced Scorecard Articles > General

Unlike other business organizations, in the hotel industry, hotel indicators undergo dynamic changes from time to time, being constantly affected by factors that depend on seasonality cycles and trends. Check additional information about Hotel Indicator.

Key performance indicators are the solutions developed and implemented in most performance management settings - complete with targets and thresholds that seem to appear as constant all throughout the year. However, in the real world, especially in the real world of the hotel industry, hotel indicators fluctuate either from week to week or month to month due to the dynamic changes of business trends, sequence, and seasonality. In a whole year, the monthly key performance indicator levels can go as high as 30% per shift between peak and trough values due to seasonal or peak seasons alone. In the world of hospitality, weather forecasts, major holidays, and vacation periods can result in the dramatic fluctuation of tourist demands from month to month or season to season.

The most important factor that must be accepted, however reluctantly, is that key performance indicators target the requirement to be regulated, to reflect the unbalanced customer demand over the span of a year. This inhibits the predictable roller coaster ride of emotions as the targets go over or miss dues plainly because of seasonal aberrations. It is proper to investigate the basic technique of "de-seasonalization" to be able to decode the stationary indicators into more seasonal dynamic indicators. The influence can be quite intense.

Standards, such as the revenue per available room, average daily rates, and the rooms sold divided by rooms available should be developed to capture financial and operational quality in the hospitality area. Focus must be placed on the seasonal attributes of the occupancy indicator, with which the two approaches can be applied to both revenue per available room and average daily rates indicators, as well as the demand patterns of consumers in several other businesses, such as food products, liquor, pharmaceutical, and oil companies.

To separate fact from fiction, it should be illustrated how hotel properties incorporate seasonality into their calculation of key performance indicator targets to provide more believable values that will capture the real month-to-month differences. If the resulting index is more than the value of 1, the occupancy level is stated as above the targeted KPI average of 73.3%. When, on the other hand, the seasonal index is less than the value of 1, the occupancy is then believed to be below the targeted average. The actual monthly occupancy level should then be divided by the monthly seasonality index to create the "de-seasonalized" KPI metric of monthly occupancy. The resulting value should then be the real KPI monthly target instead of the actual KPI.

The steps in the process of seasonality indices development and analysis should be in the following order:

* A KPI variable is selected to undergo the "de-seasonalization" process.

* The KPI monthly target value is to be determined.

* Monthly indices are then developed.

* Monthly KPI targets are to be determined.

* Develop prescriptive statistics.

The resulting calculations will then be segmented into four specific sections, which focus on the seasonality indices, KPI metrics both the "de-seasonalized" and non "de-seasonalized", and the reversing status. This calculation will dramatically reveal that for every month of the year, the results are distinctly different from that of the yearly KPI target. Once the values are changed into the seasonality indices, it becomes more apparent that seasonality is rampant all throughout the year.

The hospitality business should always keep in mind that hotel indicators will only be as effective in its implementation as the data and the metrics systems that push the tracking and measurement processes.

If you are interested in Hotel Indicator, check this link to find out more about hotel metric. Also, you can check other articles in General category.

Balanced Scorecard Toolkit includes step-by-step manuals, documents, presentations, check lists designed to help business professionals with successful development and implementation of Balanced Scorecard. Learn more about BSC Toolkit.