‘It’s Not About Finding One Replacement for RevPAR’

Participants at HSMAI’s recent Global Curate event brainstormed dozens of KPIs for the post-pandemic hospitality market. We share them below — along with insights and analysis from HSMAI’s KPI Workgroup.

By Christopher Durso, Vice President of Content Development, Hospitality Sales & Marketing Association International (HSMAI)

When we decided that the most relevant topic for our Global Curate event to address last month would be “Defining Success in the New Market,” we knew we were treading on territory that HSMAI’s KPI Workgroup had already staked out. Even before the pandemic, the Workgroup was focused on identifying and defining the most relevant KPIs for hospitality sales, marketing, and revenue professionals; the COVID crisis only made their work more urgent.

Our goal was for Global Curate — a virtual event for HSMAI Organizational Member companies co-hosted by HSMAI Americas and HSMAI Europe on May 11, 2021 — to complement the KPI Workgroup, which was in the process of finalizing its master list of 65 KPIs. Our more than 100 attendees representing a cross-section of sales, marketing, revenue, and distribution in the two regions brainstormed nearly 80 KPIs that will most accurately define success in the new market, we turned to the Workgroup to help clarify and contextualize the results.

RESULTS FROM GLOBAL CURATE

In many ways, those results validated the Workgroup’s efforts, with much overlap between the two lists of KPIs, plus a great deal of repetition and redundancy within the Global Curate list. Workgroup Chair Lori Kiel took the lead in editing and consolidating the Global Curate results according to the Workgroup’s master list. Her final list of Global Curate results is below, with the number after each indicating the number of Global Curate groups that brainstormed that particular KPI; any KPI in italics is not part of the Workgroup’s master list, meaning it’s unique to Global Curate:

Reputation score — 6

Loyalty mix — 4

ST2Y/WOW/MOM benchmarks — 4

Brand contribution —3

Channel mix — 3

Employee satisfaction — 3

GOP (gross operating profit) — 3

GOPPAR (gross operating profit per available room) — 3

Index (fair share) — 3

TRevPAR (total revenue per available room) — 3

ADR (average daily rate) — 2

Ancillary revenue per room — 2

Client engagement mix — 2

Occupancy — 2

RevPAR (revenue per available room) — 2

RFP conversation rate — 2

RGI (revenue generating index) — 2

ROAS (return on advertising spend) — 2

Business mix/source markets — 1

Consumer confidence (travel) — 1

Demand change YOY — 1

EBITDA (earnings before interest, taxes, depreciation, and amortization) — 1

Local revenue vs total revenue — 1

Net revenue — 1

NOI/EBIT (net operating income/earnings before income and taxes) — 1

Segment mix — 1

Total spend per guest — 1

Transient segment mix — 1

ANALYZING THE RESULTS

Once we had a viable list of results from Global Curate, we asked members of the KPI Workgroup to compare them to their master list. What were the similarities? The differences? What do they tell us about how hospitality professionals are thinking about — and should be thinking bout — defining success in the new market?

Do you see any common themes or dominant trends in the Global Curate results?

• Lori Kiel, KPI Workgroup chair and chief marketing/revenue officer for The Kessler Collection: The obvious theme for me is in the GOP being a KPI with a mixed value of 7. Profitability is what counts, and revenue managers are having to understand the cost of distribution now more than ever.
• Dan Skodol, KPI Workgroup member and vice president of data science and analytics for Cendyn: I think it’s the lack of a unifying theme or trend that stands out the most. Out of 18 tables, only six at most agreed on a common KPI — reputation score. I would have expected to see more agreement around KPIs that relate directly to profit/profitability (GOP, GOPPAR, NOI, etc.).
• Mehernosh Jehangir, KPI Workgroup member and corporate director of revenue management for Lowes Hotels & Co.: The big common theme I saw is that the old metrics didn’t work in the pandemic. Our industry colleagues were very sharp in either switching to metrics that made more sense or, in some cases, creating them.
• Dana Cariss, KPI Workgroup member and vice president of revenue strategy and distribution for CoralTree Hospitality: Actually, they were pretty all over the board, which I think represents just how many different ways people are approaching performance measurement these days. The common themes continue to be profitability and guest value (length of stay, total spend, etc.).

Are there any surprises for you in the Global Curate results?

• Kiel: Reputation score as top score is surprising over profitability. However, we all realize the power of the customer’s voice. One comment at the top of a page or thread can impact a business more than any other key factor. Decisions are made off of reviews and scores more than rates these days.
• Skodol: The emphasis on some nontraditional metrics like reputation score and employee satisfaction, and the deemphasis to a large extent on the more traditional metrics like RevPAR (though participants were likely trying to think outside the box with this exercise).
• Jehangir: It was a pleasant surprise to see how far revenue management and the industry have come, with a growing focus on the bottom line and the big picture instead of just rooms revenue/RevPAR and RPI.
• Christian Boerger, CRME, CHBA, CHDM, KPI Workgroup member and vice president of revenue strategy for Oxford Collection: The fact that three tables discussed index/fair share. Unless they discussed fair share in relation to other KPIs, this is a concern. I am curious to learn more about the less tangible KPIs of client engagement mix, business confidence, employee satisfaction, or reputation score. The employee satisfaction score is probably in line with hospitality’s current challenges to attract talent.

How do the results from Global Curate square with the work that the KPI Workgroup has done before and during the pandemic? Do they make you rethink anything?

• Kiel: The Workgroup identified profitability as a key factor early on due to Kalibri Labs really forcing our discipline as a whole to net our ADRs of channel costs. This shift below the top line has made our revenue management discipline more relevant as now we are not only held accountable to the top line but to the bottom-line profitability of any distribution decision. One of the thoughts after reviewing the Curate KPI findings was the need to truly define KPI in its true form. Many of the submissions were more benchmarks than KPIs, and therefore I think this is a good place to start in getting a conversation flowing. Ultimately, a key performance indicator is that one value that indicates performance, success or failure. Benchmarks are those goals that allow you to compare against — year over year, month over month, brand average, etc.
• Skodol: The industry is clearly thinking outside the realm of financial measures; either they feel strongly or have evidence that some of the metrics mentioned above are tied to longer-term financial gain. I think it’s a positive thing if the industry does shift away from short-term measures that might be good indicators of short-term financial success toward measures that might be leading indicators of long-term financial success, though I’d want to ensure that the “assumed” relationship exists and still put an emphasis around measures that focus on profitability.
• Cariss: I think it validates a lot of the conversations we have been having. People are reviewing new metrics and finding new ways to measure their performance. The days of only reviewing RevPAR seem to be a thing of the past, and hotel leaders are focused more on break-even profitability and performance optimization.
• Boerger: I think the workgroup was spot on when defining the core KPIs that will be important for years to come. There are always additional metrics to consider depending on current circumstances.

Of the nine KPIs from Global Curate that were not already part of the KPI Workgroup’s master list, are they any that you think are particularly relevant to the post-pandemic hospitality market?

• Kiel: The most obvious is ST2Y, as we cannot look back at 2020 as a benchmark to anything, so at this point everyone is having to look at 2019 to understand recovery. The least obvious but scariest might be both reputation and employee satisfaction scores. In both cases, we are working in the least ideal environment. Those employees that are working are burnt-out from the amount of work and our reputation scores are suffering because of it. The scariest metric therefore goes back to the reputation score being the most identified KPI in the Curate breakouts, as that score is likely a representation of a temporary staffing shortage, but the ramifications of the score can cause permanent damage.
• Skodol: As mentioned, I think there is consideration to be given to reputation score and employee satisfaction — I think there may be additional similar metrics that could be added to the list. I don’t think any mix-related metric belongs as a KPI. It is too difficult to identify a benchmark (whether internal or from a comp set) that represents a “strong” or “optimal” mix; plus, what is considered “strong” or “optimal” can easily change from one period to another, as evidenced by the post-pandemic environment versus earlier periods.
• Jehangir: I think some of the metrics are interesting to look at but wouldn’t call them KPIs.
• Cariss: For me, total spend per guest is probably the most relevant from the Global Curate list. It underscores some of the germane topics these days around the value of a booking and total spend and profitability.
• Boerger: Some of those metrics will continue to play a key role for specific departments — e.g., employee satisfaction for HR and operations, reputation score for operations, client engagement mix for marketing. None of those, however, can be used in isolation; they will have to be reviewed in conjunction with some of the financial metrics, especially those measuring profitability.

How should hospitality sales, marketing, and revenue professionals approach identifying the KPIs that will be most relevant to them in the months ahead?

• Kiel: First, as defined by their companies, they have to acknowledge those KPIs that their stakeholders value as priority. Second, being a part of the conversation among industry colleagues to bring their ownership the KPIs that other like companies are watching adds relevance. Last, they need to test out variations using a balanced scorecard to come up with a meaningful metric that gives a snapshot of their current state and then allows benchmarks to define future states of success.
• Skodol: I’ll stick with my belief that if a KPI doesn’t directly contribute to profit, it doesn’t belong as a KPI. Occupancy is a great example — maximizing it does not maximize profit, and it’s too difficult to quantify and compare what might be considered the “optimal” occupancy level as it relates to driving profit. There’s also the similar problem of incentives in certain siloed areas of the organization that don’t align with the overall financial results of the property or company — for instance, sales volume (though not on the list), where exceeding a certain level can displace more valuable sources of business for the hotel. I think this approach will help hoteliers focus on a limited set of KPIs and not be distracted by those that don’t ultimately result in improvements in profit.
• Jehangir: It’s not about finding one replacement for RevPAR and RPI, but rather about using a suite of KPIs that together help us measure each department’s success while at the same time focus on the bottom line.
• Cariss: When making a decision on what KPIs are relevant to a hotel or group of hotels, the most important thing is to ensure alignment with commercial strategies and performance expectations. When these two are in alignment, you should be able to more easily identify and track the metrics that matter.
• Boerger: Define the property’s, asset’s, and/or company’s main objectives first, and then define which KPIs are most conducive to measure progress/success.