How to Start & Run a B&B BandBED2eBook-1 | Page 21

So it is no good focusing on any one success factor – occupancy, for example – at the
expense of all others, because you can have 100% occupancy and fail financially if your
achieved room rates are much too low, and your marketing costs and overheads are
much too high.
The message is: always look at a balanced set of measurements of your success. In the
business world, these are called “KPIs” (Key Performance Indicators), but than is
simply a jargon label.
Fred has never heard of KPIs, but he knows that his whelk-stall will be successful if his
gross profit percentage (GP%) is 60%+ , and if his unit sales are at least 480 tubs per
week. He always knows on a daily basis what he is buying and selling his whelks for,
and how many tubs sell each day, so he has an immediate and accurate grasp of his two
“KPIs” that the Finance Director of a FTSE100 plc company, fighting his way through
oceans of data compiled by others, would kill for.
You would not always know it from business textbooks or seminars, but business is not
about the jargon, its about the fundamentals. Fred is in a better position to manage his
business than the plc Finance Director, because he both grasps the fundamentals and is
closer to them and manages them directly every day. So can you with your B&B.
In our case, the “KPIs” we should focus on include:
• Occupancy rate (average % of rooms filled), and
• Average achieved price per room sold (“ARR” or Average Room Rate”)
Which are the two key measurements in the hotel sector. Other commonly-used
measurements effectively combine the two, eg:
• “RevPAR”: (average) Revenue Per Available Room, or
• Total sales per week or month
RevPAR
This is much discussed in the hotels industry – the report below, for example, appeared
on e-TID (the electronic Travel Industry Digest) on 5 August 2010:
Coalition cuts could check recovery
London hotels are in a ‘league of their own’ as their recovery outpaces the regions, according to
PricewaterhouseCoopers. But the business consultancy warns that the Government’s austerity
plans and public sector cuts will dampen the revival in the capital and regions.
An update to the PwC LLP Hotel Forecast shows - despite the ash cloud, strikes and bad
weather - the average London RevPAR (revenue per available room) climbed from £87 in H1
2009 to £95 a year later.
In the first six months of 2010, London hotels’ occupancy levels broke records for Q1 and Q2 in
previous years. As a result of higher occupancy, these hotels have reduced discounting and
seeing more profitability at last, said PwC.
Hotels in the provinces, which are more dependent on domestic business travel, saw H1 RevPAR
rise 1.2% to almost £39, while London hotels witnessed an increase of 9.2%.