Glossary - Hotel Management Glossary | Verdant® (2024)

Average Collection Period
Average Payment Period (APP)
Average Rate Index (ARI)
Average Room Rate (ARR)
Average Spend Per Customer
Average Treatment Rate (ATR)
Benchmarking
Booking Curves
Cost per Occupied Room (CPOR)
Cost of Sales Ratio
Current Ratio
Demand Calendar
Displacement Calculations
EBITDA
EBITDAR
Forecasting
Gross Operating Profit (GOP)
Gross Operating Profit per Available Room (GOPPAR)
Gross Profit Ratio
Labour Cost Ratio
Market Penetration Index (MPI)
Market Segmentation
Net Profit Ratio
Net Revenue Per Available Room (NRevPAR)
Occupancy Rate
Operating Profit Ratio
Price Positioning
Profit Per Available Room (PROFPAR)
Rate Fences
Revenue Per Available Room (RevPAR)
Revenue Per Available Seat Hour (RevPASH)
Revenue Per Available Square Meter (RevPAM)
Revenue Per Available Treatment Hour (RevPATH)
Revenue Per Occupied Room (RevPOR)
Spa Revenue Per Occupied Room (SRevPOR)
Stay Controls
Spa Utilization Ratio (SUR)
Total Revenue Per Available Room (TRevPAR)
Total Revenue Per Client (TRevPEC)
Unconstrained Demand

Average Collection Period

Average collection period is the amount of time required for a business to receive payments from clients. It can be thought of as the time that elapses between the date that a credit sale is made and the date that the full amount is collected from the customer. It is usually calculated in terms of accounts receivable (AR). A shorter average collection period is viewed more favorably than a longer one, as this signals that a property collects payments faster.

Average collection period is calculated so that a hotel or resort property can be sure they have enough cash on hand to meet its financial obligations. It is also used to calculate the effectiveness of a property’s credit granting policy and collection efforts.

Managing the average collection period is an essential tool for hotels to manage efficient operations. It allows revenue managers to evaluate credit terms and determine whether they are too strict or too lenient.

While most hotels or resorts will seek to shorten their average collection period, there is a downside to this strategy. A very short average collection period can signal that the property’s credit terms are too strict. In some cases, this can cause guests to seek out competitor’s with more lenient collection terms.

Average collection period is calculated by dividing the number of days in a calendar year (365) by the accounts receivable turnover ratio. This ratio is determined by dividing credit sales for the year by the average amount of accounts receivable for that same year.

Average Collection Period = Average Accounts Receivable / (Annual Credit Sales / 365) Average Annual Accounts Receivable = $50,000 Total Annual Credit Sales = $500,000 Number of Days in Year = 365 Average Collection Period = $50,000 / ($500,000 / 365) = 36.5 This indicates that an average of 36.5 days elapsed between when credit sales were made and when the full amount is collected from customers.

Average Payment Period (APP)

Average payment period (APP) is the length of time a hotel, resort, or company takes to pay off credit purchases. It is used for accounting purposes to track when payments are due so that no penalties or excess interest are accrued. It does not have an effect on the company’s working capital. Because of this, APP has little to no effect on a company’s valuation during a merger or acquisition. APP is also known as days payable outstanding (DPO).

APP is used to help companies manage cash flow. When APP increases, cash should also increase, although the amount of working capital stays the same. By lowering APP, companies can more effectively keep suppliers happy and work to negotiate trade discounts.

Calculating APP helps accounting departments know when they need to take action to pay creditors. Knowing APP and working to decrease this metric helps companies keep suppliers happy and necessary supply relationships intact.

Market trends can have an effect on APP. When the trickle-down effect of payments is working as it should, APP can naturally increase. Companies need to strike a balance between maintaining supply relationships and pushing to increase APP as much as possible to increase cash flow.

APP is calculated by first dividing total annual credit purchases by the number of days in a calendar year (365). The result of that calculation is then divided into average accounts payable. Average accounts payable is calculated by adding beginning accounts payable to closing accounts payable and dividing by 2. Average Payment Period = Average Accounts Payable / (Annual Credit Purchases / 365) Average Accounts Payable = (Beginning Accounts Payable + Closing Accounts Payable) / 2

Beginning Accounts Payable = $148,000 Closing Accounts Payable = $160,000 Average Accounts Payable = ($148,000 + $160,000) / 2 = $154,000 Average Accounts Payable = $154,000 Annual Credit Purchases = $1,500,000 Calendar Days = 365 Average Payment Period = $154,000 / ($1,500,000 / 365) = 37.47 For the calculation above, the company’s average payment period is 37.47 days.

Average Rate Index (ARI)

The Average Rate Index (ARI) is a property management performance metric that compares Average Daily Rate (ADR) with the property’s competitive set for a given period of time. A property’s competitive set includes other brands and competitors with a similar target market. The competitive set (comp set) is obtained by calculating the Average Daily Rate (ADR) for a group of competitors. If a property’s ADR is equal to the aggregate ADR of its competition, it is historically believed that the property is achieving “fair share.”

Calculating Average Rate Index helps a property compare its rates with competitor’s rates. These comparisons help them make decisions to lower, raise, or hold room rates for selected periods. An ARI greater than 1 indicates that rates are higher than the competition on average. An ARI lower than 1 suggests that rates are lower than the competition on average.

Knowing ARI helps a property decide when to adjust rates to achieve higher or lower occupancy rates and/or maximize booking revenue. For instance, a property might decide that lowering rates will help increase occupancy and overall revenue or a given period. Similarly, ARI might also indicate that the best strategy for a period is to raise rates and achieve higher revenue even if occupancy falls for that period.

Average Rate Index is calculated by comparing a property’s Average Daily Rate (ADR) against a range of competing properties. An ADR for these competing properties must be calculated before dividing a property’s ADR by the ADR for all competing properties. Some properties multiply the resulting calculation by 100 to achieve the final ARI. In that case, 100 signals that a property’s ADR is equal to the average ADR of competition. Higher than 100 signals that ADR is higher than competition on average and lower than 100 signals that ADR is lower than competition on average.

Property ADR = $150 Aggregate Competitor ADR = $120 ARI = $150 (Property ADR) / $120 (Aggregate ADR of Competition) = 1.25 This calculation suggests that a property’s ADR is 25% higher (on average) than the competition.

Average Room Rate (ARR)

Average Room Rate (ARR) is a hotel KPI that measures the average rate of an available room. As opposed to Average Daily Rate (ADR) which measures what rate a room might earn on any given day, ARR measures the average rate of rooms available over a longer period of time. It can be calculated for monthly, quarterly, or annual averages. It can also be thought of as the average price that a guest pays per room at a hotel. Accordingly, ARR is an important metric for measuring the financial performance of a property.

The purpose of calculating ARR in hotel revenue management is to compare room revenue generated for a specific period against room revenue paid by guests during that same period. It is also used to compare against how many rooms were actually occupied during that time so that hotels can better understand revenue generated versus costs of operation.

Calculating ARR for longer periods allows revenue managers to track long-term rate trends. This allows hotels to optimize their future pricing and maximize hotel revenue. This is helpful during peak and low seasons when hotels are planning seasonal campaigns and promotional packages.

Average room rate does not account for costs of operation. Pricing decisions made solely based on ARR will not account for the daily costs associated with operating the room and property as a whole.

ARR is calculated by dividing total room revenue by the number of rooms sold (or occupied).

Total Room Revenue (for selected time period) = $2,000,000 Total Number of Rooms Sold/Occupied (for selected time period) = 6,000 ARR = $2,000,000 (Total Room Revenue) / 6,000 (Total # Rooms Sold) = $333.33

Average Spend Per Customer

Average spend per customer is a metric that is most commonly used in hotel food and beverage operations. But it can also be applied to other areas of hotel operations and services. It gives revenue managers an idea of how much each customer spends on varying products and services during their stay, on average. It is also sometimes referred to as Average Spend per Head.

Average spend per customer is used to help hotel and property managers better understand customer behavior. It can take a marketing department the same amount of time to generate a customer, regardless of how much that customer spends. So calculating average spend per customer helps managers target different customer demographics to increase average spend per customer.

The major benefit of calculating average spend per customer is a better understanding of customer behavior. When broken down by sales channel, time of day, day of the week, product type, or other factors, average spend per customer gives managers a much more holistic picture of how consumers behave at a hotel or resort property.

The limitations of this metric includes the fact that only successful purchases made for amounts over $0 are included. Also, any refunds or chargebacks issued are typically not deducted when this metric is calculated. Additionally, any revenue made through subscription services are not included in this KPI.

Average spend per customer is calculated by dividing the total sales revenue made to date by the total number of customers to date.

Total Sales Revenue To Date = $560,000 Total Number of Customers To Date =1600 Average spend per customer = $560,000 (Sales Revenue) / 1600 (# of Customers) = $350

Average Treatment Rate (ATR)

Average Treatment Rate (ATR) is most relevant for spa or wellness operations in a hotel or resort property. It can apply to spa operations within a hotel or from an independent operator. It determines the average rate for treatments that guests receive in the spa. It can also be used to calculate the average spa revenue per occupied room in a hotel or resort. ATR helps with revenue management because it gives a clearer picture of overall spa performance across the variety of treatment packages offered.

Average Treatment Rate (ATR) is used to calculate the average rate guests pay for treatment at the property’s spa or wellness center. Because many spas offer different treatment packages, ATR helps revenue managers better understand the overall performance of spa operations within a hotel or resort property.

Analyzing spa operations can be complex because of the variety of treatment packages offered. Calculating ATR gives revenue managers a reliable metric for analyzing overall spa performance without having to calculate the profitability of each individual treatment offered. ATR is a great indicator of spa performance and it helps revenue managers more effectively analyze and apply dynamic pricing to spa treatment services.

ATR can be greatly impacted by a spa’s variety of treatment services. Average duration of services and various pricing packages also influence ATR. The adoption of fluctuating pricing in the spa industry, had made ATR a more accurate and meaningful metric for revenue management.

ATR is calculated by dividiing total treatment revenue for spa operations by the total number of treatments sold.

Total Treatment Revenue = $15,000 Total Number of Treatments Sold =$300 ATR = $15,000 (Total Treatment Revenue) / $300 (Total # of Treatments Sold) = $50

Rate Fences

Rate fences are rules that are applied to specific room rates. They are set by revenue managers to prevent customers who are willing to pay higher amounts from having access to promotions or discounts. From the consumer’s perspective, certain rules will apply to a reservation in order to complete a booking at a certain rate. Rate fences allow hotels to offer different rates to new clients than to existing or returning clients.

Rate fences are used to help revenue managers differentiate and optimize products and/or services. For example, a hotel might offer special holiday rates to attract new customers. But a hotel can set rate fences so that existing or returning clients are unable to book a room at the same special rates as new customers. This is how a hotel can use a “flash sale” to attract new customers while not giving away all of its rooms to customers that are willing to pay a standard rate.

Rate fences allow revenue managers to increase room yield and optimize revenue. They can also be used to protect room inventory during high demand periods and to generate more long term stays. Other benefits of setting rate fences include avoiding revenue loss from last-minute cancellations, increasing demand potential with conditional discounted offers, targeting specific niche markets, and offering promotional campaigns through targeted sales channels.

One of the challenges of setting Rate Fences is that customers must perceive the restrictions placed on their bookings as acceptable. Revenue managers must balance the need to protect a hotel’s interests with the potential to allow customers to book at lower-than-average market rates.

There are two main types of Rate Fences: physical and non-physical. Non-physical Rate Fences can be further broken down into multiple categories, such as fences based on customer demographic, fences based on transactional characteristics, and fences based on controlling availability.

Here are some examples of the most common types of Rate Fences: 1. Physical Rate Fences a. Room Location b. Room Size c. Room View d. Amenities 2. Fences Based on Transactional Characteristics a. Time of Purchase b. Quantity of Purchase c. Location of Purchase 3. Fences Based On Buyer Characteristics a. Age b. Industry Affiliation c. Purchase Frequency 4. Fences Based On Availability a. Geographic Criteria b. Distribution Channels

Revenue Generation Index (RGI)

A Revenue Generation Index (RGI) is a useful metric for comparing hotel revenue to the average RevPAR of the competition. Because it uses RevPAR as its primary KPI, an RGI also accounts for occupancy rates.

An RGI is used to determine whether or not a hotel is earning its fair share of revenue. Comparisons are made against a chosen competitive set that usually consists of hotels or resort properties with similar offerings.

Calculating RGI allows revenue managers to determine if a hotel is receiving a good share of market revenue when compared against its competitors. It is a great way to evaluate whether a hotel is falling short of, remaining on target of, or exceeding expected market share.

RGI is calculated using a specific competitive set. The hotels that a revenue manager decides to use to make these comparisons can have a large impact on the resulting RGI. As such, the competitive set used to determine ‘average market RevPAR’ should be chosen carefully.

An RGI is calculated by dividing your hotel’s RevPAR by the average hotel market RevPAR.

When RGI is equal to 1, your hotel’s RevPAR is equal to the average market RevPAR.

When RGI is greater than 1, your hotel’s RevPAR is higher than the average market RevPAR.

When RGI is less than 1, your hotel’s RevPAR is lower than the average market RevPAR.

RGI = Your Hotel’s RevPAR / Hotel Market RevPAR

Your Hotel’s RevPAR = $10,000

Hotel Market RevPAR = $12,000

RGI = $10,000 (Your RevPAR) / $12,000 (Hotel Market RevPAR) = 0.83

From this RGI result, we can infer that the hotel in question is currently earning less than its fair market share of RevPAR.

Revenue Per Available Room (RevPAR)

Revenue per Available Room (RevPAR) is a critical metric for hotels to plan for high and low seasons. It helps hotels measure the efficiency of their operations by tracking how well they’re filling available rooms at their Average Daily Rate (ADR). And since RevPAR measures revenue made during a certain period of time, it can be used to compare any given time period against previous periods, and measure the long-term performance of a property.

RevPAR is used to evaluate the overall performance of a hotel. Room revenue and occupancy rate are the major criteria that factor into RevPAR. So a marked increase in RevPAR is a signal that average room rates or occupancy rates are increasing.

RevPAR allows revenue managers to compare revenue for a given period against previous periods. For example, it allows revenue comparisons for the current calendar year against the previous year’s numbers. This helps managers understand long-term performance and forecast future trends.

RevPAR only allows comparisons of income as a percentage of room sales. This does not factor in additional services offered at a hotel property, such as tour sales, room services, spa bookings, and other upsells. Also, unlike GOPPAR, it does not factor in the operating costs incurred in generating that revenue. RevPAR is also subject to fluctuations resulting from seasonality, economic trends, and consumer preferences. These fluctuations make it a difficult KPI for hotels to track accurately. For these reasons, RevPAR has limitations in terms of determining a hotel’s overall profitability.

RevPAR is calculated in one of two ways. Either by multiplying the property’s average daily room rate (ADR) by the property’s occupancy rate, or by dividing total room revenue by the total number of rooms available during the period in question.

We’ll calculate RevPAR using both the multiplication and division methods here. Multiplication Method Average Daily Rate = $200 Occupancy Rate = 80% RevPAR = 30 (ADR) x 0.75 (Occupancy Rate) = $250 Division Method Total Rooms Revenue = $10,000 Total Number of Rooms = 40 RevPAR = 10,000 (Total Rooms Revenue) / 40 (Total # of Rooms) = $250

Revenue Per Available Seat Hour (RevPASH)

Revenue Per Available Seat Hour (RevPASH) is a KPI used by food and beverage outlets in a hotel. It is similar to RevPAR, which is used to evaluate room revenue. RevPASH measures revenue generated by a food and beverage (F&B) outlet per hour based on available seats. It can be calculated daily, weekly, and monthly.

RevPASH is used to measure seat usage in a given F&B outlet. It also measures the revenue generated per available seat hour. Because all F&B visitors don’t always make a reservation before their visit, this metric is a useful way for food and beverage managers to evaluate revenue generated by walk-in guests during opening hours.

RevPASH is a useful KPI for food and beverage managers to get a better understanding of how a hotel’s various F&B outlets are performing. It is also used to plan F&B promotions, labour scheduling, food purchasing, marketing tools, and budgeting during periods of lowest hotel occupancy.

RevPASH does not provide the full picture of an F&B outlet’s financial performance. Food and beverage managers should also evaluate the margins of individual menu items, rather than focusing solely on total revenue.

RevPASH is calculated by first multiplying available seats by opening hours. Then you can divide total outlet revenue by the above result for a final RevPASH calculation. When calculating RevPASH, the number of opening hours you use depends on the time period for which you wish to calculate it.

RevPASH = Total Outlet Revenue / (Available Seats x Opening Hours) We’ll make this RevPASH calculation for a weekly period based on a 60-seat restaurant open six days a week for six hours per day. Total Outlet Revenue = $44,000 Available Seats = 60 Opening Hours = 36 RevPASH = $44,000 (Total Outlet Revenue) / (60 (Seats) x 36 (Opening Hours)) = $20.37

Revenue Per Available Square Meter (RevPAM)

Revenue Per Available Square Meter (RevPAM) is a hotel KPI that measures a hotel’s ability to generate revenue from its banquet and conference spaces. Consequently, RevPAM only applied to hotels that rent space for banquets or conferences, and does not include revenue from room charges or breakfast offerings.

RevPAM is a calculation of the revenue a hotel generates per available square meter when it rents rooms for a banquet or conference. It is a good measurement of the efficiency of a hotel’s sales department in maximizing revenue from banquet and conference sales.

RevPAM is a good metric of how well a hotel is utilizing its banquet and conference space. RevPAM can be used in conjunction with other hotel revenue KPIs (such as RevPAR) to better understand the pros and cons of accepting group bookings. Because RevPAM does not include revenue from room charges or breakfast, it can be used to evaluate in-hour conference and banquet guests, as well as guests that aren’t staying at a hotel.

RevPAM is not a useful KPI for a hotel that does not regularly rent out its hotel or banquet space. It also does not tell the full story of a hotel’s profitability because it only applies to a hotel’s events department.

RevPAM is calculated by dividing revenue by a hotel’s available square meters of banquet space. For this metric, revenue should not include room charges or revenue from breakfast F&B.

RevPAM = Revenue / Available Square Meters of Banquet Space (m²) Revenue = $580,000 Available Square Meters of Banquet Space = 2,000 RevPAM = $580,000 (Revenue) / 2,000 (Square Meters of Banquet Space) = $290

Revenue Per Available Treatment Hour (RevPATH)

Revenue Per Available Treatment Hour (RevPATH) is used to measure profitability of spa operations in a hotel or resort property. It measures revenue generated by treatments and accounts for the number of rooms available during normal hours of operation. It is a very useful metric used in yield management for spa managers.

RevPATH works similar to how RevPAR measures the efficiency of hotel room bookings. RevPATH can be used to identify the times of the day (or days of the week) where a spa is bringing in the most revenue. This allows spa managers to design premium products for upsells during high demand periods. It also helps with identifying periods of low demand where a spa can use promotions to drive additional revenue.

RevPATH is a useful KPI for measuring spa operations because it accounts for spa turnover. Instead of simply looking at total spa revenue, RevPATH helps spa managers identify hours that achieve a higher yield. This helps spas manage their time more effectively and identify opportunities to drive increased revenue.

One limitation of RevPATH is that different spas will often calculate RevPATH depending on their specific revenue goals. While RevPATH is a very useful internal metric for improving time management in spa operations, it may not be a good KPI for comparing spa operations across different hotels or resorts.

RevPATH is calculated by multiplying a spa’s occupancy rate by its average treatment rate. Average treatment rate is calculated by dividing Total Treatment Revenue by the number of Total Treatments sold. Because occupancy rate is usually expressed as a percentage, it can be easier to convert to a decimal and then multiply it by average treatment rate to achieve RevPATH.

RevPATH = Spa Occupancy x Average Treatment Rate

Spa Occupancy = 70%

Average Treatment Rate (ATR) = $240

RevPATH = 70% (Occupancy Rate) x $240 (ATR) = $168

Revenue Per Occupied Room (RevPOR)

Revenue Per Occupied Room (RevPOR) differs from RevPAR because it accounts for all revenue a hotel earns when a room is occupied. It accounts for optional services guests can purchase at the hotel, as well as any additional sales made during a stay. RevPOR can be measured daily, weekly, monthly, or annually. The choice that a hotel makes largely depends on the types of insights that that hotel is seeking.

RevPOR is used to determine how much profit a hotel earns when a customer enters the hotel. It gives hotel revenue managers a very useful metric for evaluating a hotel’s overall performance when guests actually stay at a property. Because of this, RevPOR can be a more useful metric for hotel revenue management than a KPI like Occupancy Rate.

RevPOR is an especially useful KPI for evaluating hotel performance during seasonal periods of low demand. While seasonal trends can drive down other KPIs, RevPOR prioritizes an evaluation of how much an average guest spends on hotel products and services. This is a departure from many other KPIs (like RevPAR) that look at the overall number of guests.

While RevPOR is useful for evaluating how much the average guest spends at a hotel, it can be limited precisely because it does not account for occupancy rates. This means that RevPOR should be used alongside other hotel KPIs when making strategic revenue management decisions. Most revenue managers, for instance, will also tell you that Occupancy Rate is a very key metric for evaluating a hotel’s bottom line, illustrating why RevPOR is limited by not accounting for actual occupancy.

RevPOR is calculated by dividing a hotel’s total revenue by the number of rooms actually sold to guests. Total Revenue should account for all revenue from accommodations, breakfast, spa services, bar and mini bar sales, and any additional revenue.

RevPOR = Total Revenue / Total Occupied Rooms

Total Revenue = Room Revenue + Breakfast + Bar + Mini Bar + Spa + Any Additional Revenue

(This calculation is made for annual RevPOR)

Total Revenue = $3,560,000

Total Occupied Rooms = 51,00

RevPOR = $3,560,000 (Total Revenue) / 51,000 (Total Occupied Rooms) = $69.80

Spa Revenue Per Occupied Room (SRevPOR)

Spa Revenue Per Occupied Room is a KPI specific to hotel spa operations. It helps both spa and hotel revenue managers identify the relationship between spa operations and hotel occupancy. The data used to calculate SRevPOR is pulled from a hotel’s Spa Management System. SRevPOR in the spa industry typically falls between $40 and $70.

SRevPOR is used to help spa managers optimize time management by allowing them to analyze the differences between internal and external utilization levels. This ultimately helps them make informed changes to a spa’s revenue management strategy. SRevPOR is often used alongside a hotel’s RevPOR calculation.

SRevPOR is an effective KPI for analyzing a hotel’s strategic marketing plan. It allows managers to measure the amount of spa revenue being generated per occupied room in the hotel, as well as identify trends based on seasonal demand, promotions, and other factors.

SRevPOR can vary greatly depending on seasonality and the specific client mix staying at a hotel in any given period. It can also vary depending on the size of the spa and viability of local business. As such, it should be analyzed in conjunction with factors, such as Occupancy Rate and RevPOR.

SRevPOR is calculated by dividing total spa revenue by the total number of occupied rooms. For the most accurate SRevPOR calculation, spa revenue should only include revenue from treatments, product sales, facility fees, and other ancillary sales.

SRevPOR = Total Spa Revenue / Total Number of Occupied Rooms

Total Spa Revenue = $28,000

Total Number of Occupied Rooms = 460

SRevPOR = $28,000 (Spa Revenue) / 460 (# of Occupied Rooms) = $60.87

Stay Controls

Stay Controls are methods for hotels to restrict bookings. They can depend on a variety of factors and are generally based on a hotel’s booking patterns. Essentially, Stay Controls are restrictions that help a hotel realize higher revenue potential.

Stay Controls are used by hotel revenue managers to achieve as close to full occupancy as possible, for as many weeks as possible during a calendar year, and into the future. There are many ways for a hotel to place controls on a visitor’s stay, but the specific controls that will be most useful for a given hotel will require an in-depth evaluation of that hotel’s booking patterns.

Stay Controls allow a hotel to maximize revenue potential during seasons of lower demand. By analyzing booking and stay patterns, a hotel can implement controls that minimize periods of low occupancy. In turn, these controls can help a hotel manager identify changes to a hotel’s reservation policy that will ultimately increase hotel profitability.

A hotel’s ability to implement Stay Controls may greatly depend on the regulations of the county, state, or region in which they operate. For example, certain counties may place restrictions on both length-of-stay controls, as well as a hotel’s ability to leverage dynamic pricing.

Additionally, certain Stay Controls come with risk. As a hotel, building customer loyalty can be just as important as maximizing daily revenue potential. A hotel must weigh the pros and cons of implementing Stay Controls in order to avoid alienating return guests.

Stay Controls should be implemented carefully. While the goal of Stay Controls is to boost hotel revenue, there are a number of ethical and legal questions that can impact a hotel’s bottom line when it comes to implementing Stay Controls.

Here are some examples of Stay Controls:

• Minimum Length of Stay
• Maximum Length of Stay
• A Combination of Minimum and Maximum Length of Stay
• Dates Closed to Arrival (CTA)
• Dates Closed to Departure (CTD)
• Stay-Through Restrictions

Spa Utilization Ratio (SUR)

Spa Utilization Ratio (SUR) is a hotel spa KPI that signals how effective a spa is in selling its treatment hours. It is very similar to how Occupancy Rate evaluates how many rooms are filled in a hotel for a given period.

SUR is used for spa managers to evaluate how efficiently a spa is managing time and utilizing open hours. Much like Occupancy Rate, SUR is evaluated for a given time period. SUR may be calculated daily, weekly, monthly, or annually. Before calculating SUR, a spa must determine the time and space units to be measured.

The main benefit of SUR is that it helps spa managers identify utilization rates. By analyzing how effectively (or ineffectively) a hotel is selling treatment hours, managers can identify strategies for improving guest usage, as well as plan promotions to maximize utilization during periods of high (or low) demand.

SUR is most effective when evaluated on a daily basis. It also helps to differentiate services when evaluating SUR because different services translate to higher revenue than others. Spas with very high turnover rates should even consider evaluating SUR on an hourly basis.

Most spas operate between 35 and 40 percent utilization, so it is also important to consider industry averages when evaluating a hotel’s SUR. This will help you prevent making overly-reactive strategic decisions before considering industry trends.

SUR is calculated by dividing the hours of treatment sold by the hours of treatment available. That result is then multiplied by 100 so that the final calculation is expressed as a percentage out of 100.

SUR = (Hours of Treatment Sold / Hours of Treatment Available) x 100

For the below calculation, the following data is used:

• The spa has 6 rooms available
• Spa hours are 9 am to 5pm, 7 days per week
• This gives a possible total of 336 hours of treatment available during a given week
• However, for the purposes of this calculation, we’re going to say the spa only sold 280 hours for the week

Hours of Treatment Sold = 200

Hours of Treatment Available = 336

SUR = (200 (Hours Sold) / 336 (Hours Available)) x 100 = 59.5%