The hospitality market is competitive, so it pays off to understand how your business performs compared to your competitors. Key performance indicators (KPI) are statistics that can help you, and one of the most important is your revenue generation index (RGI).
If you’re unfamiliar with RGIs, we’ve put together all the information you need to know about what it is, including how to calculate, interpret, and improve it.
What Is RGI?
Your RGI allows you to determine if your hotel or property is gaining a fair revenue share compared to your direct competitors. The group of your direct competitors is called a competitive set (CompSet). By using an RGI to compare your performance, you can find ways to make your offers more competitive.
How to Calculate Your RGI
To calculate your RGI, you will need to calculate the revenue per available room (RevPar) of your hotel and the market. Once you know the RevPar of your business and the market, you can use the formula below to calculate RGI.
How to Calculate RevPar
First, decide on a period you will look at, which can be a week, month, or year. Then use one of the following formulas below to calculate RevPar:
- RevPar = rooms revenue / rooms available
- RevPar = average daily rate * occupancy percentage
To find the data needed to calculate the average market RevPar, you can use tools such as rate shoppers that monitor your competitor’s rates.
You want to make sure you calculate your RGI using a RevPar that represents your closest competitors. Consider factors such as the establishment size, geographic location, star rating, room amenities, and targeted market. This process will ensure you compare your hotel with a CompSet that is comparable and prevent unrealistic goals. For example, if you are the only 3-star hotel in a CompSet of 5-star hotels, it will be harder to have an RGI equal to or higher than the average RevPar of your CompSet.
How to Interprete Your RGI Results
The number you get from calculating your RGI will determine the revenue share you have compared to your CompSet. When your:
- RGI equals 1: Your RevPar is equal to the average RevPar of your CompSet
- RGI is less than 1: Your RevPar is less than the average RevPar of your CompSet
- RGI is greater than 1: Your RevPar is higher than the average RevPar of your CompSet
You can also multiply your results by 100 to get the percentage of shares your hotel is receiving.
How To Improve Your RGI
Now that we’ve answered your questions, such as what is RGI and how do I calculate it, it’s important to understand how you can use the results to improve your hotel’s competitiveness. If you find your hotel is receiving less than the market’s average revenue share, you will want to implement strategies to optimize your pricing and boost your occupancy.
To optimize pricing, you want to monitor your competitor’s prices. First, if you observe an upward trend in prices, you can optimize the situation and increase your prices. Secondly, if you see prices dropping among competitors, you may want to consider modifying your pricing policy.
When boosting occupancy, there are many factors you can consider. Are you a new hotel that needs an increase in exposure? Perhaps you aren’t leveraging the power of internet marketing. Easy to use websites, utilizing SEOs, partnering with online travel agencies (OTAs), or getting featured on blogs can all increase your online visibility.
You can also boost your occupancy by increasing your exposure to potential guests by becoming a Stasher host. Stasher allows you to help travelers store their bags and shows a level of customer service most people appreciate. These non-guests using the Stasher service, which have now interacted with your brand, are more likely to book with you for their future trips.
Staying ahead of the competition in the hospitality industry requires awareness of your KPIs, and calculating your revenue share is a great way to accomplish this. By knowing your RGI you can easily plan strategies to increase your competitiveness with tools designed to boost your occupancy, such as partnerships with Stasher. Stasher operates in multiple cities globally and is here to support your brand’s success.