Hotel Terminology

Yield management is a dynamic pricing strategy the hospitality industry uses to maximize revenue. It’s a data-backed approach that’s all about selling the right room to the right guest at the right time (and for the right price!).

An Online Travel Agent (OTA) is a third-party platform that allows travelers to research, compare and book travel. This can include rental cars and airfare, but these platforms have grown to play a critical role in hotel distribution.

A Central Reservation Office (CRO) is a centralized system or department responsible for handling hotel bookings across multiple properties within a hotel group or brand. Rather than relying on individual hotels to manage their own reservations, a CRO streamlines the process by consolidating availability, rates and guest data into one location.

A Global Distribution System (GDS) is a powerful network that connects hotels, airlines, car rental companies and travel agencies on a single platform, making it easier to distribute and book travel services worldwide. For hotels, GDS platforms act as digital bridges, linking room inventory with travel agents and online booking platforms in real-time.

Dynamic pricing is a common strategy in the hospitality world. It’s a sure way to get more revenue for your rooms, adjusting prices in real time based on supply, demand and any relevant external factors (like seasonality or special events). While it’s a savvy way to generate more profitable bookings, there are situations where it may not be the best strategy. As a hotelier, you may want to enter into a rate agreement with certain groups or travel agencies to guarantee they’re able to book even during the busiest of times. In hospitality, that’s called last room availability.

Distressed inventory is a term used in many industries, from airlines to hotels to grocery stores. It refers to any product that remains unsold past or close to its sell-by date. It can apply to any product nearing the end of its shelf life, such as perishable food approaching its expiration date. In the hospitality industry, distressed inventory also applies to unused hotel rooms that remain unbooked on a particular day.

A hotel franchise contract outlines the fees, brand standards and operational support a franchisee can expect. If you’re considering franchising a hotel, here’s what to know.

Unconstrained demand is a powerful metric. It helps you understand your true market potential and make smarter business decisions, too. Learn more about its impact and how you can optimize for it below.

Remote revenue managers use cloud-based technology to access real-time data, competitor pricing and market trends from any location to make strategic pricing decisions.

Constrained demand occurs when a hotel is unable to fulfill booking requests. This may be due to internal limitations, like when rooms simply aren’t available, or because of external factors like peak seasons or popular events attracting a surge in visitors.

A length of stay discount, also known as tiered pricing, is a strategy that incentivizes guests to book at your hotel for longer periods of time. Guests will get a reduced nightly rate for staying beyond a predetermined number of nights — typically starting at three or more.

The period leading up to a guest's arrival, often referred to as "days before arrival" (DBA), is a critical window for hotels. This timeframe presents a valuable opportunity to connect with guests, enhance their pre-arrival experience, and set the stage for a positive stay.

Beyond simply looking at revenue, AGOP also takes into account the operating expenses specific to running a hotel — an incredibly important consideration as the rates of inflation, goods and services continue to rise.

A lead time restriction refers to the minimum number of days a guest is required to book their hotel reservation in advance. It’s often applied to specific room types, promotional rates or periods of high demand.

This is the percentage of your function space that is booked and utilized, which is vital to planning. Let’s start by understanding how to calculate function room occupancy and how it can help your hotel boost its earnings.

Managing your hotel’s room inventory is one of the most important parts of running a successful property. Every time a guest books a room, whether online, through an online travel agency (OTA) or over the phone, you need to keep your inventory updated to avoid overbooking and ensure a smooth experience.

This term refers to the amount of time it takes for a restaurant table to be ready for a new guest. The timer starts from the moment a party of diners sits and ends when the table is ready for the next group. Let’s take a look at the impact of this metric and how reducing it can boost a hotel’s earnings.

A compset is one of the many tools hoteliers use to stay competitive in the crowded marketplace. It’s made up of 5 to 10 hotels in your area that you’re in direct competition with. By analyzing both your hotel and your competitors, you can better strategize for how to market, operate and optimize your offerings to reach your target guests.

Average Bed Rate (ABR) is an important metric for hoteliers to understand. You’re likely familiar with Average Daily Rate (ADR), which focuses on room revenue, but for hotels with multiple room types, ABR can be an even more useful metric. By looking at the average revenue generated per bed occupied, as opposed to each room, you can get more specific about where your revenue is coming from and how you can market to attract the right kind of guests to maximize earnings.

ATR, defined as the average amount each guest spends on spa treatments during their stay, is a vital indicator of your spa's financial health and guest engagement. Let’s take a look at its impact and how you can work to increase it for your services.

Average Rate per Guest (ARG) is a metric that can help any hotel operator better understand their operations. ARG can come in handy when assessing your pricing strategy and overall revenue performance, and is an asset when predicting future earnings.

Best Available Rate, often shortened to BAR, refers to strategic pricing where you offer the lowest viable rate for a room. Typically, it will be a non-refundable rate that can’t be combined with other promotions, and is set based on market research and dynamic pricing.

There are star ratings, different property categories and various types of hotels, all of which attempt to give guests a framework of what to expect. The star rating system is likely the most familiar, but even that can be ripe with confusion, as star scales can vary widely.

Administration costs encompass a wide range of expenses associated with the general operation of a hotel.

Hotel folios, sometimes called a guest bill, guest folio, or invoice, recaps every charge throughout a guest’s stay, from room charges to last-minute spa treatments. Not only does it provide an end-of-stay summary, but it also ensures accurate billing — and thus happier guests.

Aparthotels serve as a cross between a traditional hotel room and an apartment. They feature many of the well-known comforts of home, such as kitchens, laundry facilities and dedicated living space, but also retain select perks of a hotel such as housekeeping and on-site amenities.

Hotel revenue management is the strategic process of setting room rates, controlling inventory and maximizing profit across all available channels. This can be achieved through a variety of strategies designed to optimize revenue and profitability for hotels, including dynamic upsells, demand-based pricing, intelligent forecasting and more.

Booking pace, also referred to as reservation velocity, is a key metric to understand as part of your overall hotel revenue management strategy. Understanding how quickly individuals are booking rooms for specific dates can help hoteliers make adjustments to pricing in real-time, ensuring they get the most revenue possible for each reservation.

A flagship hotel is a hotel chain's most prestigious property. It often serves as a benchmark for the brand, showcasing the highest standards of luxury, service and amenities.While hotels in a chain offer travelers a familiar and standardized experience across various locations, flagship properties are a cut above the rest.

A chain hotel is a group of hotels operating under the same brand that follows a standardized business model. This can encompass hotel chains (owned and operated by the same company), franchise hotels (independently owned but licensed to operate under the chain's brand) and branded hotels (managed by a third-party company under the chain's brand).

Over 80% of hoteliers say technology, like a central reservation system (CRS), makes them more efficient, and for good reason. A CRS is a software solution that acts as a central hub for all your hotel's reservation needs. It streamlines the booking process by centralizing data and automating tasks, ultimately increasing revenue and guest satisfaction.

Independent hotels are privately owned and operated, offering guests a distinct experience that reflects the individuality and character of the establishment. They’re free from the standardized branding and operational processes of hotel chains.

Experiential travel, also known as immersive travel, goes beyond sightseeing and traditional tourist attractions. It's about immersive experiences that allow guests to truly connect with a place.

Hotel capacity, also referred to as guest capacity, is the maximum number of rooms your hotel can accommodate at any given time. Here’s how to calculate various data points and ways you can leverage these metrics to boost revenue.

In the competitive world of hospitality, attracting guests and maximizing revenue are top priorities for hotels. A key strategy to achieve this is by offering a best rate guarantee (BRG). Also sometimes referred to as a low rate guarantee or price match, a BRG is a promise made by a hotel to guests that they will receive the lowest available rate for their stay. This can be a powerful tool for hotels to build trust with potential guests and encourage direct bookings.

Limited service hotels, sometimes referred to as select service hotels, are budget-friendly accommodations that prioritize comfortable essentials over extensive amenities.

Zero-based budgeting (ZBB) is a budgeting method where all expenses must be justified and recreated from scratch for each new budgeting period. Essentially, you start from a “zero base” each time.

Full-service hotels cater to a specific type of traveler—those seeking a luxurious and convenient experience. These hotels offer a wide range of amenities and services to meet the needs and preferences of their guests. Below, we’ll explore what makes a full-service hotel different from other types of accommodations, including amenities, hotel tiers and the differences between full-service hotels and limited-service hotels.

Hospitality management involves overseeing all aspects of running a successful hotel, resort or other lodging establishment. This includes everything from sales and guest services to room operations and human resources.

Green hotels, also known as eco-hotels or environmentally friendly hotels, are those committed to minimizing their environmental impact. This includes conserving resources, reducing waste and lessening your hotel's carbon footprint.

A property management system (PMS), also known as a hotel PMS or hospitality property management system, is a software solution designed to streamline and centralize critical operations within a hotel. This may include everything from reservations and housekeeping to reporting and the guest experience. Implementing a property management system for hotels can keep operations running smoothly by automating tasks and improving efficiency.

Imagine having a crystal ball that reveals guest preferences, competitor strategies and upcoming market shifts. In hospitality, that crystal ball is called hotel market intelligence. It's the art and science of gathering, analyzing and interpreting market data to gain a comprehensive understanding of your competitive landscape, guest behavior and the broader market trends. The ultimate goal? To give you a competitive edge. Armed with this knowledge, hotels can make informed decisions that drive occupancy, boost revenue, improve hotel performance and leave the competition in the dust.

In the highly competitive industry of hospitality, hotel groups are always looking to improve their operational performance. That’s where hotel asset management comes in. Also known as hospitality asset management, it is the strategic oversight of hotel operations to achieve an owner's investment goals. It encompasses a wide range of activities, all focused on driving profitability and increasing the long-term value of a hotel property.

NPS, or Net Promoter Score, is a metric used by the hotel industry to measure customer loyalty and satisfaction. It is calculated by asking customers to rate their level of satisfaction with their experience and then subtracting the percentage of customers who responded with a negative review from the percentage of customers who responded with a positive review. The result is the Net Promoter Score, a number between -100 and +100 that tells hoteliers how likely their customers are to recommend their hotel to others.

CSAT in the hotel industry stands for Customer Satisfaction. This is a measure of how satisfied a customer is with the products and services they receive from the hotel. It typically includes surveys, online ratings, and analysis of customer feedback.

RGI stands for Revenue Generating Index (an alternative definition for RGI in hotels is “RevPar Index”) and is used to measure the financial performance of a hotel. It is calculated by dividing a property’s RevPAR by the aggregate RevPar of other comparable hotels in the local market. The higher the RGI, the more profitable a hotel is.

Average Rate Index (ARI) is a measure of the average rate charged by a hotel in a particular market compared to other hotels in the same market. It is typically calculated on a monthly basis.

MPI (Market Penetration Index) is a financial metric used in the hotel industry to measure the level of market penetration a hotel has achieved in a certain market. It is a useful measure for understanding how well a hotel is doing relative to its competitors in a given market.

NOI stands for Net Operating Income, which is a measure of a hotel's performance and profitability. Net Operating Income can vary widely from market to market and should be judged against other comparable properties in a hotel’s compset.

ARPAR (Adjusted Revenue per Available Room) is a metric used in the hotel industry that takes a variety of factors into account that influence hotel revenue. ARPAR can provide hoteliers with a more accurate view of profitability than RevPAR (Revenue per Available Room)

GOPPAR (Gross Operating Profit per Available Room) is a hotel industry metric that measures a hotel's overall financial performance. It is calculated by dividing the total gross operating profit by the total number of available rooms in the hotel. GOPPAR is used to evaluate the revenue-generating potential of a hotel and is an important indicator of a hotel's financial health.

RevPAC (Revenue per Available Customer) is a metric that hotel owners and operators use to measure the average amount of revenue generated from each customer per night.

While RevPAR and TRevPAR do have some things in common, there are some differences.

TRevPAR stands for Total Revenue per Available Room, and it is a key performance metric used in the hotel industry. It measures the total revenue generated by a hotel per available room, taking into account rooms sold, average daily rate, and other services provided by the hotel (such as food and beverage sales). TRevPAR is calculated by dividing total revenue by the total number of available rooms in the hotel.

RevPAR (Revenue per Available Room) is a metric used in the hotel industry to measure the total revenue generated from a room in any given period of time. It is calculated by dividing the total revenue from hotel rooms by the number of available rooms in a given period of time. RevPAR is used to analyze a hotel’s performance and compare it against competitors in the same market.

Hotel occupancy rate is a measure of the percentage of available guest rooms that are occupied at a hotel at any given time. It is typically expressed as a percentage, and is calculated by dividing the number of rooms occupied by the total number of rooms available.

CPOR stands for Cost per Occupied Room and is one of the most important metrics in the hotel industry. It is a measure of the total cost of operating a hotel divided by the number of occupied rooms for a given time period. CPOR is used to track the efficiency of hotel operations and compare performance against competitors.

ALOS stands for Average Length of Stay, and it is a measure used in the hotel industry to assess the average number of nights that a guest stays in a particular hotel. This metric helps to inform hotel managers and owners of the average revenue generated per guest.

A hotel's ADR (Average Daily Rate) is a measure used to calculate the average rate paid for a hotel room over a given period of time. It is calculated by dividing the total revenue from room sales by the total number of rooms sold. ADR is used to help analyze the performance of a hotel and can be used to compare hotels in the same market.