Hotel Benchmarking Reports: The Value of Monthly Data
By David Eisen, Director of Hotel Intelligence and Customer Solutions for HotStats
Sometimes, the best way to begin a blog is by borrowing a quote. It's admittedly a conceit that helps contextualize your subsequent thoughts—an artistic device, like a voiceover in a movie.
In this instance, I turn to W. Edwards Deming, whose Wikipedia page explains that he was an American engineer, statistician, professor, author, lecturer, and management consultant. In perfect symmetry, he passed away in 1993 at age 93, and over the course of his nine-plus decades became regarded as having had more impact on Japanese manufacturing and business than any other individual not of Japanese heritage.
He is an ideal muse for this blog about data, which is why I looked to him to give me a boost.
With that in mind, I give you the quote attributed to Deming: "In God we trust, all others must bring data."
It's the perfect quote, unless you are an atheist, and its implication is clear: Without data—without hard numbers, you won't be able to make educated decisions about your business. Because having a leg up on your competition will allow you to step up your bottom line.
Now, not all data is created equal, and having a trusted source is only part of it. Data is only as good as it is timely. For means of demonstrating this point, consider cryptanalysis, or codebreaking. During World War II, the Allied forces used cryptanalysis to decode radio communications that had been enciphered by the Axis powers. Intercepting and decrypting these communications was fundamental to the Allied victory.
Imagine, however, that this data was collected, but, rather than made actionable in real time, was only shared and consulted once a year. The arc of history could have bent in a different direction.
Data only works when it is used.
Now, since this is a blog about the hotel industry, let's take it there. In the hospitality industry, data is the strongest currency because hunches don't cut it. The more data you have, the better positioned your hotel will be for success. This is especially true as the industry continues to face myriad challenges—both micro and macro—from political impacts and social upheaval, to travel intermediaries and the rising cost of labor.
Like any business, a hotel's success or failure is measured by profit and loss: the ability to maximize revenues while simultaneously containing costs. In order to achieve that balance, hotel owners, operators and asset managers need detailed, robust and actionable data that they can then use to deliver operational efficiency across the board, across all departments.
Hotels normally close their books at the end of each month. Why wouldn't they want to consult data on a monthly basis, too?
In the profit-and-loss data benchmarking game, it is not enough to see annual results. Only by examining monthly numbers can hoteliers make decisions that will impact their bottom lines in a timely and meaningful way. By the time you look at yearly data, it's too late.
Consider profit per room, or GOPPAR. GOPPAR is an optimal KPI because it measures how much money a hotel is actually earning. Now, take hotels in London, for example. For each of the first three months of 2018, GOPPAR in London was negative, year-over-year. But over the course of the entire year, GOPPAR was positive YOY, growing 4.1 percent. That's welcome news, but had hoteliers known Q1 was such a drag, they might have been in a better position to understand why, and made decisions that could have resulted in even higher annual GOPPAR gains.
There are hundreds of KPIs beyond GOPPAR that hoteliers can leverage. Think about the possibilities of knowing your food cost of sales on a monthly basis and how that can impact your purchasing habits. Or the ebb and flow of payroll and how seasonality affects it.
The applications are numerous.
More than a century ago, oil became the hottest commodity to sweep the globe. It powered much of everyday life and continues to help drive modern society. Like the oil boom, a new digital era birthed today's most transformative and valuable resource: data. It powers our decisions, helping to remove guesswork from the equation. Data is the new oil. But you have to tap the well more than once a year to extract its true value.
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