My key KPI: ADR and RevPAR

My key KPI
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My key KPI is a recurring content series where we ask CFOs and FDs what metrics and measures they use to drive their businesses forward.

The aim is to understand how different finance professionals across a broad array of industries and sectors use data to inform their decision making.

In the latest edition of the series, AccountingWEB catches up with Colin Moore, the group FC of the Galgorm Collection, a luxury hospitality group.

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The Galgorm Collection, a luxury resort and spa group, recently made the leap from Sage 50 to Sage X3, Sage’s ERP product for established businesses.

The reason, explained Colin Moore, group financial controller, was that the hospitality chain -- which includes an hotel, two restaurants and another hotel in the offing -- had outgrown Sage’s bread-and-butter product.

As Galgorm multi-company structure ran up against the boundaries of what’s possible in Sage 50, Moore’s reporting capacity was slowed down. With X3, specifically tailored to the business by the software consultancy Percipient, the process has been sped up significantly.

It’s not quite perfect, though. “There are a number of metrics we tie into our reports, but it's not completely seamless yet. The ideal scenario would be that our hotel booking system would import key metrics into Sage X3 such as rooms available and rooms occupied.

“This would then allow us to calculate key hospitality metrics such as room occupancy and Average Daily Rate (ADR) automatically within Sage X3.”

ADR, or average daily room rate, is a KPI that’s frequently used in hospitality, explained Moore. It is calculated through a simple formula of total room revenue/total number of rooms sold. 

The measure is not meant to be a standalone metric, however. By multiplying a hotel’s ADR by its occupancy rate, it’s possible to arrive at revenue per available room (RevPAR). This measure, Moore said, is an excellent means of assessing the hotel’s performance.

If a room is a £100-per-night and occupancy is 90%, then the RevPAR is £90 (£100 x 90% occupancy rate). RevPAR lets hotel managers assess not only performance but the pricing of the rooms. So with a £100-per-night price and a RevPAR of £90, a hotel can lower its price to get to full capacity.

About Francois Badenhorst

Francois

Francois is a writer, editor and broadcaster specialising in business.

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