industry terms based on occupancy

2 Replies

Hi Everyone,

I'd like your feedback for applying new terms (or teaching me existing terms). So far, market reporting tools like Airdna use traditional industry terms, such as ADR (average daily rate) and RevPAR (revenue per available room night) which require knowledge of occupancy. I assume these terms were coined at a time when information was directly available for a specific property (eg. a hotel). With the coming of online vacation rental sites like Airbnb, true occupancy is not disclosed, and we're left to guess.

The result of guessing is some level of inaccuracy (mild to wild), which brings criticism to market pricing / availability tools. Without knowledge of the occupancy requirement, I think these terms are wrong to use because they're not as defined. I do agree there's comfort in traditional terms because they're widely used and well understood. This might be an overwhelming factor.

We have lots of meaning to extract from available data and we can describe meaning with terms we know, such as the following:

- Open Calendar Daily Rate: daily rate of open (available) calendar days.

- Closed Calendar Daily Rate: daily rate of closed (unavailable) calendar days.

- Changed Closed Calendar Daily Rate: daily rate of calendar days which have been observed to change from open to closed, over time.

Are there existing terms which already describe what I've mentioned? Any opposing thoughts to seeing these terms in a market pricing / availability tool vs. industry standard terms? Thanks in advance for feedback!

Hi @Alan Da Costa , I agree, I'm not a big fan of utilizing the existing hotel industry jargon for STRs, especially considering the fact that hotels are built on a model of rooms occupied by different guests for overlapping days. STRs are most often not used in that fashion.  

That being said, ADR * Occupancy Rate is the quickest way to get an estimated GOI (gross operating income) from which most of your other expected cash flow and accounting calculations are going to flow from.

I was going to tell you about a guy I read about that was creating an app for something similar to what you are talking about, only to find that was you.  :)

I think there is some value in what you are trying to establish however if I'm understanding it correctly, this sort of 'dynamic' variable that can be attached to occupancy stats to help close the gaps in inaccuracy.  Just not quite sure how it fits in the grand scheme of things yet.  Perhaps it will be a valuable variable involved in some kind of AML based predictive analytics toolset? 

Keep me posted! 

Similar to @Jon Crosby I think ADR's and hotel financial tracking and the like are over-rated.  As a multiple property owner/operator I'm not interested in what I like to call ANR, Average NET Rate.  Like the old adage "what we lose in profit, we'll make up in volume" makes no practical sense.  As a result, I do track ADR but only to use it to calculate ANR, which is my daily rate, less expenses (i.e.,  fees, cleaning, expendables, etc...).  It's not 100% precise as some of the smaller expenses vary, but it's pretty darn close.  These calc's provide me with some details as to how to price my rentals in following years, but other than that, they too are not of great value to me.  I think our industry needs a set of KPI's (Key Performance Indicators) of its own; asking ourselves "what are the most important items we need to track so we are as successful as we can be" and use these numbers as a benchmark for performance, comparing them with like minded owner/operators.   Food for thought.... and happy to discuss further.

Mike