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Multiplier effect

The impact that multiple night stays and ancilary revenues have on magnifying Revenue Management decisions.

Minimum length of stay

Imposes a strict limit on the minimum number of nights in order for a potential reservation to be accepted for a given arrival date.

Maximum length of stay

Imposes a strict limit on the maximum number of nights in order for a potential reservation to be accepted for a given arrival date.

Market Segmentation

Market segmentation is firstly the acknowledgement that not all customers are the same and, secondly, the separation of existing (or potential) clients into sub sections or segments. Whether it be divided by age, occupation, hobbies or location, segmenting your customer basis allows you to better address the needs of a broad spectrum of clientele.  Once […]

Market Penetration Index (MPI, OCC Index)

Your Market Penetration Index (MPI) is a unit of measurement used to show the how your hotel’s occupancy compare to a preselected set of competitors. This is particularly helpful in showing how your business is doing in relation to your competition and the market in general.  MPI = Your occupancy rate ÷ your comp set’s […]

Mean Absolute Percentage Error (MAPE)

The Mean Absolute Percentage Error of your hotel is a way of measuring the accuracy of your forecast. Whilst the Mean Absolute Deviation (MAD) allows you to calculate the disparity between your predictions and the reality of bookings, your MAPE allows you to put a percentage value to that calculation.  This allows for better comparison […]

Mean Absolute Deviation (MAD)

Your Mean Absolute Deviation (MAD) is used as a measurement of accuracy for your forecasted data. MAD plays an important role in understanding how accurate and reliable your forecasts are. By seeing how successful or unsuccessful your most recent forecast was, you are able to minimise forecasting error and create a more reliable and accurate […]

Lost business

The business that considered the subject hotel, but in the end decided to purchase from another organization.

Linear programming

A method to achieve the single, best outcome (such as maximum profit or lowest cost) in a mathematical model whose requirements are represented by linear relationships.

Inelastic demand

Exists for a specific product is when changing the price does not significantly change in how much consumers purchase.

Group wash

The difference between the CONTRACTED and BLOCKED rooms for a group, it represents the number of rooms that the hotel DOES NOT believe the client will use.

Group Displacement Model

An opportunity costs analysis, measuring profitability with and without a proposed group, that can also be used to calculate the minimum acceptable rate (lose, walk away).

Government – Group Sub-segment

A negotiated rate for a block of rooms associated with qualifying government agencies including military, national security, health and human services, and defense at a national and local jurisdiction level.

GOPPAR

A metric indicating the profit yield of a hotel for a given period. Calculation: (total revenue minus total management controllable expenses) divided by available rooms.

Forecast

A calculation or estimate of future events, especially coming weather or a financial trend.

Elastic demand

Exists for a product when changing the price has a significant impact on consumer purchases.

Discount – Transient Sub-segment

A rate open to the general public (non-qualified) where the guest pays a discount off of the retail rate. Examples include Advance Purchase, Loyalty redemptions or offers, Packages, Promotions, OTA Opaque.

Denials

Potential reservations that the hotel is not able to accommodate due to unavailability of product or service at that price.

Demand unconstraining

The process of using direct observation and statistical techniques to accurately determine total unconstrained demand.

Demand Control Chart

Utilizes a forecasted occupancy and strategy threshold rules to determine Revenue Management tactical controls.

Cut-Off Date

The contracted date that any unsold rooms in the block will be released back into the hotel’s general inventory.

Cost-Based Pricing

A pricing philosophy where the rate is determined based on the cost to deliver the product plus an agreed-upon margin.

Corporate – Group Sub-segment

A negotiated rate for a block of rooms associated with a company related to industries such as but not limited to Manufacturing, Retail, Healthcare, Insurance, Financial, Law firms, Professional Sports Organization, Entertainment Companies and Transportation Corporations.

Competition-Based Pricing

A pricing philosophy where the rate is determined using competitors’ rates as the primary benchmark, or by “mimicing” the competitors’ pricing.

Closed to arrivals

Imposes a strict block on all potential reservations for arrival on a given arrival date, allowing on stay throughs from prior arrival dates.

Capacity controls

A set of criteria utilized to filter potential bookings in order to maximize profitability when demand exceeds supply. They include MS#, MX#, CTA, and BTC. Also known as stay controls.

Booking Curves

A graphical representation of the cumulative bookings for a target arrival date(s), arranged in the order of days before arrival (DBA).

Booking Curve Forecast

A “glance” forecast based on comparing the current pick-up to a relevant booking curve.

Booked to capacity

The most severe stay restriction, it blocks all potential reservations from arrival AND stay through on a given arrival date.

Bid price

A simple method (via linear programming) for determining which rate class / length of stay combinations are open. The bid price for any arrival date and length of stay is determined by taking an average of the shadow prices for all of the dates of the stay. An incoming request should be accepted, if and […]

Barrier to entry

The existence of high startup costs or other obstacles that prevent new competitors from easily entering an industry or area of business.

Average Rate Index (ARI, ADR Index)

Average Rate Index is a measure of how your hotel’s average rate compares to that of your competitors. The comparison works against a designated set of competitors (comp set), selected based on their likeness to your own business. I.e hotels with a similar brand, target audience and size. By choosing competitors that have a similar […]

Average Daily Rate (ADR)

Average Daily Rate (ADR) is a common metric used to measure the performance of a hotel. It is the calculation of the average price or rate of a hotel room charged for a given period.  ADR = Revenue ÷ sold rooms For example, if  your revenue was $100,000 and you sold 500 rooms, your ADR […]

Attrition

Attrition is the clause in a contract that requires a group booking to commit to a certain number of rooms. It states that the guest is to pay for that specific room-block and should their numbers decrease there will often be a penalty charge to make up for the rooms no longer rented.   Attrition is […]

Association/Convention – Group Sub-segment

A set, pre-negotiated rate for a block of rooms to be occupied by individuals associated with a trade, progressional, or philanthropic association.  Such bookings are beneficial to both parties as the customers can ensure the group are located all in one place and can reap the benefits of all the hotel has to offer, whilst […]