Maximizing Your Vacation Rental Hotel's Success with These 7 KPIs

Are you in the vacation rental hotel industry and want to ensure you are tracking the right metrics? Look no further, in this article we will cover the top seven key performance indicators (KPIs) that every vacation rental hotel owner should be tracking.

• Occupancy rate - The percentage of rooms that are occupied during a given time period.
• Average daily rate (ADR) - The average price of a rented room per day.
• Return on Investment (ROI) - The amount of income generated from an investment relative to the cost of that investment.

These are just a few of the critical KPIs that have a significant impact on your vacation rental hotel business's success. We will explore the remaining four KPIs, including customer satisfaction score, number of repeat customers, revenue per available room (RevPAR), and booking conversion rate.

• Customer satisfaction score - The percentage of guests satisfied with their stay.
• Number of repeat customers - The percentage of guests who return for another stay.
• Revenue per available room (RevPAR) - The total revenue generated divided by the number of available rooms.
• Booking conversion rate - The percentage of website visitors that turn into paying guests.

By understanding and tracking these KPIs accurately, you'll be able to identify areas of improvement, optimize your pricing strategies, and increase your bottom line. So, let's dive in and explore each KPI in more detail.

1. Occupancy rate

As a vacation rental hotel owner or manager, one of your primary concerns is making sure your property is occupied as much as possible. Occupancy rate is a key performance indicator (KPI) that can help you ensure high occupancy rates are met. The KPI is used for understanding the ability of a hotel to sell its available rooms and how efficient it is in managing its operations.

Definition

Occupancy rate is the percentage of available rooms occupied by guests within a specific period. Available rooms refer to the number of rooms that are ready and can be sold. The KPI measures the hotel's success in filling up the available rooms within a specific period.

Use Case

The occupancy rate KPI is important to track since it gives insight into several aspects of your business, including how desirable your property is in the market, how well you're managing your pricing strategy, and how effective your marketing campaigns are. Additionally, the KPI can indicate how successfully you're meeting market demand for specific periods, like weekends and holidays.

How To Calculate KPI

To calculate occupancy rate, you need to divide the number of occupied rooms by the number of available rooms and then multiply by 100. The formula for occupancy rate is:

Calculation Example

For example, let's say that a hotel has 50 rooms available and 45 rooms occupied. The occupancy rate would be:

KPI Advantages

• The KPI helps management to make informed pricing and revenue decisions.
• Provides insight on the challenge of attracting potential customers.
• Helps to plan for security, staffing, and maintenance requirements.

KPI Disadvantages

• The KPI may not be a true indicator of guest satisfaction.
• It overlooks the length of stay of guests.
• It does not take into account the quality of the guests or their expenses while in the hotel.

KPI Industry Benchmarks

The standard benchmark for occupancy rate in the hospitality industry is around 65% to 70% for a full-service hotel, although it varies based on location, seasonal demand, and hotel type. As a vacation rental property, aim to achieve an average of 60% to 75% occupancy rate, depending on your market and pricing strategy.

Top Seven Vacation Rentals Hotel KPI Metrics. How to Track and Calculate

2. Average daily rate (ADR)

Definition: ADR refers to the average rate a hotel charges for one night's stay.

Use Case: The ADR KPI is a popular metric used in the hotel industry to measure a hotel's average room rate on a daily basis. ADR helps hoteliers to analyze room rates and pricing strategies.

How To Calculate KPI: The formula for calculating ADR is total room revenue divided by the total number of rooms sold.

Calculation Example: If a hotel's total room revenue is $10,000 and the total number of rooms sold is 100, then the ADR is:

KPI Advantages:

• ADR helps hotels calculate revenue generated by room sales.
• ADR helps hotels measure their room pricing strategy.
• ADR is a standard industry metric and can help hotels compare their own performance to that of the competition.

KPI Disadvantages:

• ADR does not consider other revenue-generating facilities.
• ADR does not factor in the cost of other services offered by the hotel.
• ADR does not consider the occupancy rate.

KPI Industry Benchmarks for the ADR:

• Global: $130
• Asia Pacific: $104
• Europe: $112
• Middle East/Africa: $143
• U.S.: $130

3. Return on Investment (ROI)

Definition

Return on Investment (ROI) measures the amount of return on an investment relative to its cost. It is commonly used to evaluate the usefulness of an investment or compare the efficiency of different investments. ROI is expressed as a ratio or percentage.

Use Case

ROI is a critical metric in the vacation rentals hotel industry as it helps to measure the performance of a rental property and helps hotel managers to make data-driven decisions. By tracking ROI, you can identify if your vacation rental is providing enough profit to justify its cost

How to Calculate KPI

To calculate ROI, first, you need to determine your net income. Net income should include any income that comes from the vacation rental minus any expenses associated with it. Then, divide the net income by the cost of the property, and multiply the result by 100 to get the ROI as a percentage.

Calculation Example

Suppose you bought a vacation rental for $200,000, and the rental income for the year was $100,000. Annual expenses including property taxes, maintenance fees, and insurance were $25,000. Your net income for the year is $75,000 ($100,000 - $25,000). Your ROI calculation would be as follows:

• Net Income: $75,000
• Cost of Property: $200,000
• ROI: (75,000 / 200,000) x 100 = 37.5%

KPI Advantages

• Helps to evaluate the impact of investment with a high degree of accuracy.
• Helps to identify the most profitable rental properties that deserve more investment.
• Allows hotel managers to compare the performance of different properties to make effective business decisions.

KPI Disadvantages

• Does not account for inflation and time duration of the investment.
• May not accurately reflect the value of intangible benefits like brand reputation or customer satisfaction.
• May not be suitable for evaluating investments with long payback periods.

KPI Industry Benchmarks for the KPI: 'Return on Investment (ROI)'

According to data collected from the Global Vacation Rental Market report, the average ROI is around 22% to 35%, with 25% ​​being considered a good return on investment. However, ROI benchmarks can vary based on region, type of property, and business strategy.

4. Customer satisfaction score

Definition

Use Case

How To Calculate KPI

Calculation Example

KPI Advantages

KPI Disadvantages

KPI Industry Benchmarks

5. Number of repeat customers

Definition

The number of repeat customers is the KPI that measures the percentage of customers who return to stay at our vacation rental hotel. It is a valuable KPI for measuring customer loyalty and satisfaction.

Use Case

Knowing the percentage of repeat customers helps us determine the consistency of our services and customer satisfaction level. By tracking this KPI, we can make strategic decisions that improve customer retention and establish our vacation rental hotel as a brand of choice.

How To Calculate KPI

To calculate the number of repeat customers, we need to divide the total number of returning customers by the total number of customers.

Calculation Example

If we had 500 customers, and 75 customers returned to stay again, then:

KPI Advantages

• Provides a metric to measure customer loyalty and satisfaction level.
• Enables us to adjust our services to improve customer retention.
• It is a cost-effective way to increase our revenue as repeat customers are more likely to spend more.

KPI Disadvantages

• The calculation can be affected by seasonal variations of demand.
• It may not provide an accurate measure of customer satisfaction level since some customers may not return due to factors that are beyond our control.

KPI Industry Benchmarks

The industry benchmark for the number of repeat customers varies according to the type and location of the vacation rental hotel. It also changes from season to season and depends on the overall market demand and supply. It is essential to compare our KPI against our competitors and adjust accordingly.

6. Revenue per available room (RevPAR)

As a rental hotel owner or manager, determining how efficiently each room generates revenue is critical in ensuring profitable operations. Revenue per available room (RevPAR) is a KPI that provides such data. In this chapter, we will discuss the definition of RevPAR, its use case, how to calculate the KPI, an example of RevPAR calculation, and industry benchmarks for this metric. Additionally, we will cover the advantages and disadvantages of using RevPAR as a KPI.

Definition

Revenue per available room (RevPAR) is a metric used to measure the amount of revenue generated per available room. It is a KPI that factors in the average occupancy rate and the average daily room rate of a hotel.

Use Case

RevPAR is used to evaluate the performance of a rental hotel, as it provides insight into the hotel's revenue generation per room. This KPI allows management to make informed decisions regarding pricing strategies and marketing campaigns to increase RevPAR.

How To Calculate KPI

To calculate RevPAR, divide the total revenue generated from all rooms by the number of rooms available:

Calculation Example

Suppose a hotel has 200 rooms with an average daily room rate of $150 and an average occupancy rate of 80%. The total revenue generated from all rooms is:

The number of available rooms is 200. Thus the formula to calculate RevPAR is:

Therefore, the RevPAR for this hotel is $120.

KPI Advantages

• Measures Efficiency: RevPAR measures the efficiency of each room in a hotel at generating revenue
• Measures Hotel Performance: RevPAR is an essential KPI that serves as an indicator of the rental hotel's performance
• Financial Planning: RevPAR aids in financial planning by providing an accurate representation of the hotel's revenue generation

KPI Disadvantages

• Room Size Discrepancy: RevPAR does not consider room size discrepancies which could lead to different pricing strategies within the same category of a room
• Does Not Include Additional Revenue: RevPAR does not account for additional revenue streams, such as food and beverage, that contribute to the overall revenue of a hotel

KPI Industry Benchmarks for the KPI: '6. Revenue per available room (RevPAR)'

Industry benchmarks for this KPI may vary depending on the type of rental hotel, location and other factors. However, according to STR Global, the 2021 global average RevPAR is projected at $62.20.

7. Booking Conversion Rate

Definition

The booking conversion rate is a key performance indicator that measures the ratio of bookings to website visits.

Use Case

Measuring your booking conversion rate helps you to identify how well your website is converting visitors into paying customers. This KPI also allows you to compare your website’s conversion rate to the industry benchmarks and identify potential areas for improvement.

How To Calculate KPI

To calculate booking conversion rate, divide the number of bookings by the number of website visits and multiply by 100 to get a percentage:

Calculation Example

If your vacation rental hotel website had 10,000 visits last month and 400 of those visits resulted in a booking, your booking conversion rate would be:

KPI Advantages

• Allows you to track the effectiveness of your website in converting visitors to customers
• Enables you to identify areas for improvement in your website design and user experience
• Provides a benchmark for comparing your conversion rate to industry standards

KPI Disadvantages

• Does not take into account the quality of bookings, such as length of stay or total revenue generated
• Conversion rates can be affected by factors outside of your control, such as seasonality or external events
• Requires accurate tracking of website visits and bookings to get an accurate calculation

KPI Industry Benchmarks

The average booking conversion rate for a vacation rental website is around 2-4%. However, this can vary depending on the type of rental and the location.

In conclusion, if you're a vacation rental hotel owner, monitoring key performance indicators (KPIs) is essential for your business's success. The seven KPIs discussed in this article - occupancy rate, average daily rate (ADR), return on investment (ROI), customer satisfaction score, number of repeat customers, revenue per available room (RevPAR), and booking conversion rate - are critical metrics that can help you understand your business's performance and make informed decisions.

By keeping an eye on your occupancy rate, ADR, and ROI, you can determine if your business is running efficiently and generating enough revenue. Additionally, customer satisfaction score, number of repeat customers, RevPAR, and booking conversion rate can provide valuable insights into how well your hotel is satisfying guests, attracting new customers, and converting website visitors into paying guests.

Tracking these KPIs accurately and consistently is an essential part of running a successful vacation rental hotel business. Using this data to identify areas of improvement and optimize your pricing strategies can lead to increased revenues and enhanced customer satisfaction, ultimately paving the way for long-term success in the industry.