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Terms and definitions in the Hotel industry
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Revenue sources other than room and conference & banquet revenue. Examples include a minibar, parking, spa, golf, entertainment, restaurant, etc. Ancillary revenue streams can be configured for group and transient market segments.
Artificial intelligence (AI) is transforming the hospitality industry by streamlining operations, improving guest experiences, and enhancing revenue management. This page will discuss the meaning of artificial intelligence, its applications in hotel management, the benefits of using AI, and other relevant information to understand its impact on the hospitality sector.
Average Daily Rate (ADR)
Actual daily room revenue/total rooms sold.
Average Length of Stay (ALOS)
The average number of days that guests stay, calculated by dividing total occupied room nights by total bookings. It can be determined for a subset of rooms or the whole hotel.
Average Rate Index (ARI)
An index that measures a hotel’s rate against its market. Above 100 indicates a hotel's rates on average are higher than its competitors.
Best Available Rate (BAR)
The lowest non-restricted rate bookable by all guests. This rate can change several times a week and up to several times a day.
A combination of business and leisure travel, where a business traveler adds leisure activities to a business trip. These activities can include sightseeing, shopping, attending cultural events, or simply taking a day off to relax. It is becoming increasingly popular among business travelers as it allows them to combine work with leisure.
Visualization of the speed at which bookings materialize prior to the arrival date.
The system that allows reservations to be made on a website.
The speed at which bookings materialize over a period of time from the booking date to the arrival date. Booking pace is expressed as a fraction of bookings received on certain days in advance.
The time frame in which a reservation is made by the guests or a group and the actual arrival date.
The mix of different market segments that occupy a hotel, measured as a value or percent of occupancy.
Central Reservation System (CRS)
A reservation system used to maintain hotel information, rates, and inventory status. Processes and manages reservations for one or multiple hotels.
Software used to manage hotel rates across multiple distribution channels.
Closed to arrival (CTA)
An inventory control tool that prevents new reservations on certain dates.
Payments made to a travel agency or OTA for each reservation they facilitate.
Comparable hotels (does not have to be in the neighborhood) that compete for guests.
A combination of physical guest rooms that can be converted into various configurations to form larger and more tailored accommodations for guests.
The number of rooms that could be sold considering the hotel's capacity or restrictions on bookings.
A discounted rate offered to business travelers.
Cost of Walk (COW)
The cost of turning away a guest when the hotel is unable to provide the promised accommodation, which may include the cost of a hotel room, transportation, meal, and probably lost future business.
The practice of designing and delivering products, services, experiences, and processes around the needs and preferences of the customer. It requires a deep understanding of customer behavior and a commitment to continuously improve customer experiences. It is a way of thinking and working that puts customers at the center of a company’s operations, decisions, and strategies and will most probably be a new form of a market segment.
Customer Relationship Management (CRM)
A system used by companies for customer management and sales management to improve business relationships.
The contracted date when the hotel closes a group block and releases unsold rooms to inventory.
Practice of dividing the day into several parts, in which a different meeting or event can be accommodated in a function space (morning, lunch, afternoon, evening, etc.).
Days to Arrival
The number of days prior to arrival date. Used to measure information such as a booking pace, hotel performance, and forecast performance.
The practice of predicting customer demand for a product or service in the future.
Business anticipated for future days.
The practice of offering discounts in order to increase sales or revenue.
An analysis of business (primarily group) based on the total value of the business versus the value of the transient business that would be displaced if the business were accepted.
The practice of adjusting prices in real-time, based on market demand and other factors.
The buying and selling of goods and services online.
Fair Market Share
A metric measuring a hotel’s performance against its immediate competitors. Refers to the number of rooms a property would sell if the demand were distributed evenly across the hotel and its relevant competitive set. If one hotel’s performance increases, thereby increasing its share of the reference market, this leaves less market demand for the remaining hotels to capture.
Rates a hotel uses to provide a series of options to guests. The rate is determined by which fences a guest accepts, which might include non-refundable, non-cancelable reservations and advanced purchase reservations.
Short-term discounts offered to boost sales.
The statistical patterns used to predict demand, occupancy, and revenue.
Function-only business restrictions or event-only business restrictions are guidelines put in place at the hotel to ensure space is available for groups within their typical booking window.
Full Pattern Length of Stay (FPLOS)
A pattern indicating whether a rate is open (available) for the arrival date and length of stay.
Global Distribution System (GDS)
Travel shopping and reservation platforms travel agents use to book airline, car, hotel, and other travel arrangements for their customers (Amadeus, Galileo, Worldspan, Sabre).
Gross Operating Profit Per Available Room (GOPPAR)
A key metric measured by taking total revenues minus operating and marketing expenses, divided by the number of available rooms.
The group business expected for an occupancy date.
Group Pricing Evaluation
A system tool that allows users to enter details about a potential group booking, generate an analysis, and use the resulting data to select the best arrival date and rate that will provide the highest benefit to the hotel.
The difference between the final occupancy from a group and the maximum value of the block pace or the pickup pace.
The practice of managing the availability and levels of products or services in order to maximize revenue potential.
Key Performance Indicator (KPI)
A quantifiable measure used to evaluate success in meeting objectives. For example Average Daily Rate (ADR), Revenue per Available Room (RevPAR), Gross Operating Profit Per Available Room (GOPPAR), Occupancy rate, Profits per Available Space Time (ProPAST), Profits per Occupied Space Time (ProPOST), and Function Space Utilization Percentage.
Non-business traveler, or someone traveling for personal reasons and not work.
Length of Stay (LOS)
The number of nights a guest stays at a hotel. This value is also the difference between the departure date and the arrival date.
A subset of artificial intelligence that automates analytical model building. It is grounded in the idea that systems can learn from data, identify patterns and make decisions with minimal human intervention.
Information related to a company's market, including booking trends, competitor rates, and customer reviews.
Market Segment Group (MSG)
Market segments grouped together by pattern and rate.
Market Segment (MS)
A portion of the customers who possess a common set of motivations as well as a combination of unique purchasing (e.g., advance purchase vs. walk-in) and usage patterns (e.g., single night vs. weekly).
Maximum Length of Stay (Max LOS)
A room inventory control function that limits the number of nights a reservation can stay when arriving on a certain date.
A search tool that aggregates rates and inventory from other websites to produce its own results. Examples include Kayak and TripAdvisor.
Meetings, Incentives, Conference & Exhibitions. An acronym used in sales & catering and function space.
Minimum Acceptable Rate (MAR)
The lowest acceptable amount a group can be charged. Used to calculate the suggested group rate.
Minimum Length of Stay (Min LOS)
A room inventory control function that requires a reservation to meet or exceed a certain length of stay in order to complete the reservation.
The price of a room or space minus commission, transaction costs or before being marked up by a third party.
The case where some customers with a reservation do not show up to use the room(s) reserved for them, without explicit cancellation.
The constrained occupancy the hotel is expected to achieve for a specified period of time. This value may be expressed either as a specific number of rooms or as a percentage of available rooms.
The “fill” measure of a hotel. Occupancy = total number of rooms occupied/total number of rooms available x 100 (e.g, 75% occupancy).
Online Travel Agency (OTA)
Third-party internet sites consumers can use to book a hotel, air, car rental, or tour activities. This indirect channel charges a commission or marks up the rate to guests. Examples include Expedia, Booking.com, and Ctrip.
A booking channel where the property name remains hidden until after the purchase is complete.
A forecast based on the anticipated constrained occupancy for a hotel. Used to manage staffing and supplies.
The use of forecast, inventory, rate, configuration, and user interaction to calculate the best pricing and inventory control decisions that maximize quality revenues for a hotel. Optimal pricing, LRV, forecasts, and overbooking are the end result of the optimization process.
The practice of selling more products than physically present to account for cancellations and no-shows. The goal of overbooking is to maximize revenue by achieving as close to 100% occupancy as possible on any given day.
The use of advanced analytics to make predictions about unknown future events using historic and forward-looking data.
An economic measure that shows the responsiveness or “elasticity” of the demand for a product based on a change in its price.
Customer's willingness to pay. Historical pace data is used to estimate how much a change in pricing impacts demand. Demand is either elastic or inelastic.
The process of setting prices for a product or service based on market research and analysis.
Property Management System (PMS)
A system used on property to manage guests and site activities.
A rate the guest must qualify for. A corporate rate for the guest’s company, a rate available due to an affiliation, a promotional package rate with specific booking conditions, etc.
Rate Distribution System
A system used to distribute a hotel's rates and inventory to direct and indirect channels.
Rate Shopping System
An online service that supplies competitor rate data to hotels.
The system-calculated remaining unconstrained demand for an arrival date in the future, as of the processing date.
Reputation Management System
A system that manages guest reviews for a business.
Pricing science that integrates a hotel’s online reputation, guest reviews, and ratings into its revenue management strategy.
Revenue Generated Index (RGI)
An index that measures a hotel’s revenue share in its market. Above 100 indicates a hotel's RevPAR on average is higher than competitors. Used to determine if a hotel is capturing their fair share.
Revenue Management (RM)
The practice of optimizing and maximizing the revenue that a business earns through pricing, forecasting, and inventory control.
Revenue Management System (RMS)
The system businesses use to control the supply and price of their inventory in order to achieve maximum revenue or profit by managing availability, room types, stay patterns (future and historical), etc.
The practice of using data and analytics to optimize pricing and inventory control in order to maximize revenue.
Revenue Per Attendee
Revenue/total number of attendees. Helps venues understand utilization for their space.
Revenue per Avail able Room (RevPAR)
Daily room revenue/total rooms available.
Revenue per Available Room (RevPAR)
Daily room revenue/total rooms available.
Potential revenue from all inquiries/revenue booked.
Qualified rate plans, often wholesale or corporate negotiated rates, that due to contractual terms can only be closed out when the Best Available Rate is not available for the same combination of room type and length of stay. Also known as last room available accounts.
Days of less occupancy on either side of peak days.
A date or set of contiguous dates for which the hotel data cannot be forecasted in the normal fashion, or period(s) where the transient business pattern is different than normal.
A user-selected value that replaces the demand value calculated by the system.
Total Revenue Performance
The intelligent calibration of demand across all revenue streams to meet overall business objectives. It is the ability to instantly and systematically decide which business to accept across multiple revenue streams at all times based on greatest overall value to the asset.
Guests who book individually rather than with a group.
The anticipated volume of business from transient market segment groups.
Daily total revenue/total rooms available.
Refers to the number of rooms that could be sold if there were no constraints such as the hotel’s capacity or restrictions on bookings. Unconstrained demand provides a complete picture of all the possible demands, not just the limited demand you accept. Also known as 'true demand'.
Rates offered by the hotel to guests who do not have an agreed contract rate and that have no restrictions or booking conditions attached to them.
The practice of trying to sell more expensive or higher-end products to existing customers.
The difference between the group block and what the hotel expects it will actually pick up.
Set of strategies that help realize optimal revenues for capacity-constrained resources. A method of pricing and marketing inventory in order to maximize revenue from each available sale.