Analysis of Key Performance Indicators in the Hotel Industry Report

This report provides an analysis of key performance indicators (KPIs) relevant to the hotel industry. It identifies essential KPIs across various perspectives, including financial performance (total revenue), customer satisfaction (customer satisfaction index), marketing and sales (website conversion rate), operational efficiency (average occupancy rate), employee engagement (employee engagement level), and corporate social responsibility (energy consumption). The report references relevant literature to support the selection and importance of each KPI, offering a framework for hotel managers to measure and improve their performance in a competitive and evolving market. The paper highlights how these KPIs can help hotels respond effectively to challenges such as intense competition, budget constraints, and cost pressures. The report uses a structured approach, categorizing KPIs based on different business angles, to provide a comprehensive overview of hotel performance metrics.

Accounting Financial Analysis Report

Table of Contents
Identification of KPIs for Hotel Industry...................................................................................3
References..................................................................................................................................5

Identification of KPIs for Hotel Industry
The paper sets out to identify the key performance indicators (KPIs) for hospitality industry
that can be used by managers to measure the performance level of a hotel. Hotel industry is
undistinguishably associated with the tourism industry. With the advancements of technology
and globalization in recent years, hotels must operate in a constantly changing atmosphere of
intense competition, decreasing limits of budgets, and fierce pressures of costs (Odoom,
2012). Consequently, KPIs in different areas of hotel management helps to increase its ability
to adequately respond to these challenges.
Marr (2012) explained the most important 75 KPIs which can be used to measure and
interpret the business aspects of any industry; those were categorised into six groups
following different business angles. In this paper, the same framework has been used to
identify one of the most important KPI under each group and presented in following table.
KPI group according to 75 KPIs list Selected KPI for hotel industry
Financial perspective Total Revenue
Customer perspective Customer Satisfaction Index
Marketing and sales perspective Website Conversion Rate
Operational perspective Average Occupancy Rate
Employee perspective Employee Engagement Level
CSR perspective Energy Consumption
Table 1: Selected List of KPIs for Hotel Industry
The first group discusses about financial perspective. Wadongo et al. (2010) identifies total
revenue as the most important financial KPI for hotel industry which is also a key indicator
and termed as revenue growth rate to measure financial performance in the 75 KPIs list.
Revenue growth represents the success of a hotel in increasing business performance. The
second group gives importance to understanding customers and satisfaction index can be
selected as the most important KPI for hotel industry. The customer satisfaction index reflects
the acceptance of hotel services, or any issues, complaints etc, in case of deficiencies
(Pingitore, Seldin & Walker, 2010). It allows hotel managers to timely respond to customer
issues effectively.

The third most important KPI for hotel industry should be website conversion rate which
calculates the visitors’ number that convert into reservations. The conversion rate is an
important indicator to measure the success of marketing campaign and it also evaluates the
interaction experience of visitors with the website (Murphy, Chen & Shapiro, 2017). Under
the operational performance category, capacity utilization rate is one of the most important
measure. In case of hotel industry, it can be modified as average occupancy rate by
calculating a percentage of rooms occupied against total available room during certain
timeframe (Luo & Lam, 2017). Higher occupancy is beneficial for a hotel which reflects
optimum utilization of the available business capacity.
Employee engagement level can be viewed as a multi-dimensional KPI and an important
factor to determine the role of employee satisfaction in business performance improvement.
A highly engaged employee is likely to put more efforts towards the wider aspect of
organization rather than working only for salary (Dewantara, Haerani, & Hamid, 2019). For
hotel industry, the engagement level can be measure by collecting opinions using employee
engagement survey. The sixth KPI is related to environment and social sustainability
performance and energy consumption can be selected for hotel industry. Electricity is one of
the highest utility expense in the costing of hotel operations so energy consumption KPI also
contribute to financial performance improvements (Peng Xu, Chan & Qian, 2012).

References
Dewantara, I. W. G. S., Haerani, S., & Hamid, N. (2019). HRM Practices in Hotel Industry.
In 3rd International Conference on Accounting, Management and Economics 2018 (ICAME
2018). Atlantis Press.
Luo, J. M., & Lam, C. F. (2017). Urbanization effects on hotel performance: A case study in
China. Cogent Business & Management, 4(1), 1412873.
Marr, B. (2012). Key Performance Indicators (KPI): The 75 measures every manager needs
to know. Pearson UK.
Murphy, H. C., Chen, M. M., & Shapiro, T. (2017). Digital marketing performance: How
effective are the tactics and metrics used by hotels?. CAUTHE 2017: Time For Big Ideas?
Re-thinking The Field For Tomorrow, 255.
Odoom, C. K. (2012). Logistics and supply chain management in the hotel industry: Impact
on hotel performance in service delivery.
Peng Xu, P., Chan, E. H., & Qian, Q. K. (2012). Key performance indicators (KPI) for the
sustainability of building energy efficiency retrofit (BEER) in hotel buildings in
China. Facilities, 30(9/10), 432-448.
Pingitore, R., Seldin, D., & Walker, A. (2010). Making customer satisfaction pay:
Connecting survey data to financial outcomes in the hotel industry.
Wadongo, B., Odhuno, E., Kambona, O., & Othuon, L. (2010). Key performance indicators
in the Kenyan hospitality industry: a managerial perspective. Benchmarking: An
international journal, 17(6), 858-875.