Hotel Revenue Management glossary
The adoption of technology in the hospitality industry remains very low, largely due to the sector's fragmentation and the resulting chaos in the market. We believe that educating stakeholders is key to overcoming these challenges, which is why we created this glossary to support the understanding of modern technologies and revenue management concepts.
Whether you're a beginner exploring occupancy metrics and pricing strategies or an experienced professional looking to refresh your knowledge, you’ll find all the essential terms here.
A – B
ADR (Average Daily Rate)
The average daily room revenue: Shows the average revenue per occupied room.
Formula: ADR = Room Revenue / Number of Rooms Sold.
ALOS (Average Length of Stay)
The average number of nights a guest stays.
Formula: ALOS = Number of Guest Nights / Number of Bookings.
Ancillary Revenue
Revenue generated from non-room sources (e.g., dining, parking, spa services).
Automation
The use of technology to perform tasks or processes with minimal human intervention.
Available Rooms
The total number of rooms available during a given period.
Average Rate Index (ARI)
Compares ADR performance to competitors.
Formula: ARI = ADR (own) / ADR (competitors).
Best Available Rate (BAR)
The most favorable publicly available room rate defined by the hotel.
C – D
Cancellation Rate
The proportion of bookings that were canceled by guests.
Formula: (Number of Canceled Bookings / Total Bookings) × 100.
Central Reservation System (CRS)
A system that enables hotels to manage and distribute their room inventory across various sales channels.
Channel Management
The effective management of sales channels (e.g., OTAs, direct bookings).
Channel Manager
Software that synchronizes room inventory and prices across different sales channels, such as OTAs and hotel websites.
Competitive Set (Comp Set)
A group of hotels considered direct competitors.
Cost Per Acquisition (CPA)
The average cost of acquiring a booking (e.g., marketing expenses).
Formula: CPA = Total Cost / Number of Bookings.
Data analysis
The process of analyzing large data sets to uncover patterns and relationships.
Data synchronization
Ensures data consistency and updates across different systems or platforms.
Demand Forecast
Predicting future demand for hotel rooms based on historical data, market trends, and other factors.
Dynamic Pricing
Real-time price adjustments based on demand and supply.
E – F
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
A measure of profitability before deducting interest, taxes, depreciation, and amortization.
Forecasting
Predicting future demand and revenue using historical data.
Fenced Rates
Pricing strategies tied to specific conditions (e.g., advance booking discounts).
G – H
GOP (Gross Operating Profit)
Revenue after operating expenses are deducted.
GOPPAR (Gross Operating Profit Per Available Room)
A measure of profitability per available room.
Formula: GOPPAR = Gross Operating Profit / Available Rooms.
Group Booking
A booking that includes multiple rooms, often at discounted rates.
Hurdle Rate
The minimum price the hotel is willing to accept during a specific period.
I – J
Integration
The process of connecting various systems, software, or components to work seamlessly together.
Inventory Management
Managing available rooms and prices to maximize revenue.
Incremental Revenue
Additional revenue generated beyond core operations (e.g., premium services).
K – L
Key Performance Indicators (KPIs)
Metrics used to measure business performance (e.g., RevPAR, ADR, Occupancy).
Length of Stay (LOS)
The number of nights guests stay.
M – N
Market Segmentation
Categorizing guest groups based on their needs and behavior.
No-Show
A booking where the guest does not arrive.
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O – P
Occupancy Rate
The percentage of available rooms that are occupied.
Formula: (Number of Rooms Sold / Number of Available Rooms) × 100.
Overbooking
Selling more rooms than are physically available, anticipating cancellations or no-shows.
Predictive Modelling
Using statistical techniques to predict future outcomes based on historical data and trends.
Property Management System (PMS)
The central software used by hotels to manage reservations, check-ins, check-outs, and other front-office operations.
Q – R
Qualified Rates
Rates designed for specific groups (e.g., corporate partners, loyal customers).
Rate Parity
Consistency in pricing across sales channels.
Revenue Management
The strategic process of pricing and inventory optimization to maximize revenue and profit.
Revenue Management System (RMS)
Technology that automates and enhances revenue management processes, including pricing optimization and demand forecasting.
RevPAR (Revenue Per Available Room)
A key performance metric in the hotel industry that divides total room revenue by the number of available rooms.
Formula: RevPAR = ADR × Occupancy.
Return on Investment
Measures the profitability or value of an investment relative to its cost.
RoomRaiser RMS
RoomRaiser is a revenue management solution developed for accommodation providers, offering automated, data-driven dynamic pricing. Its goal is to increase revenues for properties while reducing the manual effort associated with pricing tasks. The system determines prices based on real-time market data, considering competitors' pricing, occupancy rates, and other relevant factors. RoomRaiser is on of the first revenue management systems of the CEE region that enables fully automated price updates through integrations, ensuring room rates are updated across various sales channels without user intervention. The solution is compatible with hotel PMS or Channel Manager systems, ensuring smooth and efficient operations.
S – T
Sell-Through Rate
The percentage of total capacity sold for a given period.
Shoulder Period
The period before or after the peak season.
TRevPAR (Total Revenue Per Available Room)
Total revenue generated per available room.
Formula: TRevPAR = Total Revenue / Available Rooms.
Turnaway
Potential guests who could not be accommodated.
U – Z
Upselling
Recommending higher-category rooms or services to guests.
Wash Factor
The percentage of expected cancellations in group bookings.
Yield Management
A concept related to revenue management, focusing on maximizing revenue from perishable or time-sensitive products.
