10 Metrics for Analyzing Your Sales and Distribution
The possibilities the Internet offers are endless. Advances in hotel technology let you trace and quantify all hotel actions carried out. This helps you be more aware of each investment made in each business process (an intelligence that greatly impacts your hotel’s profitability).
The goal of revenue management is to use data to predict consumer behavior, optimize room availability and pricing and maximize revenue growth. Revenue management systems (RMS) offer new capabilities for your hotel and can support your revenue management strategy and daily rate decisions.You don’t have to waste time updating excel spreadsheets and can take the guesswork out of rate-setting. Working with indicators that have no relevancy or focused on metrics based on intuition, unnecessarily increases your risk for error.
It’s important to optimize metrics during specific time periods. For a dynamic pricing strategy, it’s best to use historical data and forecasting. In revenue management, there’s a lot that needs to be considered, that’s why we’ve found inspiration in the flexibility and freshness startups transmit to help you improve your marketing processes.
In this post we’ve listed 10 metrics worth using to analyze your hotel’s sales and distribution processes. The hospitality industry is constantly changing, so it worth analyzing the new systems implemented by new technology. Let’s start by identifying these 10 parameters:
Source of acquisition. This is the number of clients/users (depending on the business model) that you’ve attracted and have segmented by source or channel. It also indicates the volume of potential travelers that you can convert into guests according to source channel.
Activation. Determines your ability to convert an interested party into a potential guest. In other words, it measures the percentage of your hotel’s interested parties who’ve taken the action you’ve considered necessary to become a potential guest. In this case, it’s usually more related to the booking process, but it can also include actions such as subscribing to your newsletter or registering for your loyalty program.
Commitment. It’s important to know how frequent guests interact with your hotel’s product. This metric helps you determine how loyal guests are with your brand and promotes processes that drive bookings, at no additional cost.
Customer turnover (or churn rate). Customer turnover, or churn rate, is the percentage of customers who have cut ties with your hotel during a given period of time (1 month, 1 year, etc.). This helps you determine the rate at which you’re losing customers and understand the reasoning behind this churn.
Conversion. Conversion rate is one of the best known metrics. It measures the percentage of the interested parties that ended up booking (monetizing). This metric also gives you the percentage of guests you’ve converted and the total traffic/target audience that you’ve attracted.
Customer acquisition cost (CAC). This metric indicates how much money, on average, it costs to attract a new customer during a given period of time. This metric helps you determine the effectiveness of your actions in different periods to optimize your process for attracting new guests.
Customer lifetime value (CLTV). The lifetime value of a customer predicts all the value your hotel will obtain from your entire relationship with a customer. Not only does this metric assess how much profit you gain from your guests’, but also predicts the profit your guests will leave with future bookings.
Profitability ratio. This number shows how successful you are at converting guests. In other words, it tells you how much money you’ve generated with each invested euro.
Cash Burn Rate. An appropriate figure for a startup. Burn rate refers to the rate at which your hotel “burns” its supply of cash monthly, including salaries, marketing expenses, etc. It shows you how fast you’re consuming funds in relation to what your hotel is bringing in.
References. It’s a metric that shows the number of new guests referenced by others who have already consumed your hotel’s services. If you determine how much it costs to attract a new guest to your hotel, you can figure out your profit margin.
Every hotel is unique and so are the metrics that are used. For a digital business like hotel distribution, it’s advisable to have a clear set of parameters. This does not mean that you should disregard the “traditional” metrics such as income, the balance sheet, the profit and loss statement, etc. Instead use traditional metrics along with those that we’ve shared with you today. This will help you check and maintain the overall health of your hotel.