This document provides definitions for many common revenue management terms used in the hotel industry. It defines terms related to rates like average daily rate (ADR), occupancy, and revenue per available room (RevPAR). It also defines terms used in forecasting demand and optimizing pricing like booking curve, pace, and displacement analysis. Additionally, it covers distribution channel terms like online travel agencies (OTAs), central reservation systems (CRS), and global distribution systems (GDS). Finally, it touches on performance metrics like average rate index (ARI), market penetration index (MPI), and total revenue per available room (TrevPAR).

1. Revenue Management Glossary: From ADR to yield, and everything in between
Glossary of Terms
Availability forecast: Estimate of the number of rooms that remain to be sold.
Average daily rate (ADR): Average selling price of all guest rooms for a given
time period. The formula for ADR is as follows: Total room revenue / Total
number of rooms sold. In statistics, it is called the ‘mean’ rate.
Artificial Intelligence: The ability of the computer systems to perform tasks
that normally require human intelligence, such as collecting and analyzing
data, and serving results and information, across systems, in real time.
Average Length of Stay (ALOS): The total room nights booked or sold in a
hotel, or segment; divided by the total number of reservations in the hotel, or
segment. It tells us if our guests are long staying types or the short ones.
Formula: Total occupied room nights, divided by Total bookings.
Average Rate Index (ARI): A metric used to determine whether the property is
achieving its fair share of ADR compared to a specific group of hotels (i.e. a
competitive set). It is calculated by taking the ADR of the property and dividing
it by the ADR of the competitive set (competitive set data collected through a
third-party provider such as STR). An ADR of above 1.00 indicates that the
property is achieving more than its fair share, while below 1.00 suggests that
the hotels in the competitive set are 'eating' into the properties' fair market
share 'pie'. Note: Traditionally, hotel revenue managers prefer to multiply the
number by 100 (or convert into a percentage).
Block (blocked room): a room that is being held for a certain guest on a certain
date
Booked to capacity: refers to a situation when the hotel has accepted the
maximum number of reservation and is unable to take any more without being
placed in a overbooked situation.

2. Best Available Rate (BAR): A commonly used base rate, visible to public, upon
which all other priced segments are based. This is the lowest rate for that date.
Also the common rate used for comparison between hotels.
Block code: A code attached only to group rooms that are a part of a block
(booking).
Block pricing: A non-yieldable rate, that is given to a set number (or block) of
rooms held for a particular group. Non- yieldable means the rates cannot be
increased.
Booking curve: It is a graphical representation of the number of bookings per
day, this year and last year, in linear form. The two lines are compared to see
two things. One, are the bookings more this year or less. Second, it also shows
the difference in the rate of the bookings, whether faster this year, or slower.
Booking engine: It is the technology that allows reservations to be made on
any website, and makes it convenient for the user.
Booking window: Also called as booking horizon, it gives a timeframe in which
hotel reservations come into hotels for a particular stay date. Some bookings
can come 6 months in advance, and some can be made before 15 days.
Brand loyalty: Interest of guest or potential guest to revisit and recommend
the hotel.
Budget: Refers to the annual financial plan, prepared for the property for the
next calendar or fiscal year. It includes a daily average occupancy, average
room rate (ARR) and RevPAR. The plan is divided into major market segments
and feeds into the overall financial budget for the property. A budget is a guide
for all departments and employees, in terms of income, cost and profit targets.
Capacity: The total number of rooms in a hotel, that can be sold to produce
income for the hotel.
Central Reservation System (CRS): A distribution system or a call centre office,
which is used by hotels in one chain or an organization, or created by a third-
party vendor, used to maintain hotel information, room inventories and rates
so as to manage the reservation process. They are of affiliate and non-affiliate
types.

3. Channel management: The technology and systems, used by hotels to update
hotel information, room inventory and rates, in each of the distribution
channels being used by the hotel.
Channels: Different methods by which a customer reserves a hotel room.
Airlines, cabs and cruise liners also use most of these channels.
Closed to arrival (CTA): An inventory control mechanism, used by revenue
managers, not to allow new reservations for guests, arriving on this date. Hotel
may be close to being fully booked.
Commission: Money sent to bona-fide travel agents as payment for sending
guests to a hotel paying full rate. The normal percentage is 10% of the room
rate, excluding service charge and prevailing government taxes.
Complimentary rooms: rooms given free for business promotion purpose;
rooms accorded to hotel’s employees for leisure in accordance with corporate
office policy guidelines. These free of charge rooms must be approved as per
delegation of authority.
Competitive set: Consists of a group of hotels by which a property can
compare itself, in terms of financial success, to the group’s aggregate
performance.
Conversion: The decision by a customer from shopping or gathering
information on a booking platform, to taking an action, such as actual
purchasing, or at least, making an inquiry.
Cost Per Occupied Room (CPOR): Calculated by adding up all of the expenses
associated with a room booking, including staff cost, commission, marketing,
utilities (amenities, energy etc), and cleaning the room for the next guest. It
allows the hoteliers to determine the minimum rate which would make the
booking profitable.
Cost of Acquisition: The fees and commissions, associated with a booking,
across all channels, including voice (call centre), brand.com and OTA.
Day(s) Before Arrival (DBA): The number of days before the guest stay date.

4. Demand: The amount of interest in a product. Found by the activities like
search on a website.
Denial: A notification that the hotel has been shopped on the hotel's direct
booking engine, and a rate was not given, because the hotel was sold out, or a
restriction was placed on the shopped date. Indicates high demand for the
product.
Displacement Analysis: calculating whether it’s beneficial to block rooms out
of inventory that could be requested later, at a higher rate (usually in a group
situation). To analyze, multiply the number of guestrooms that will be denied,
times the average rate for that segment of business. If that is higher than the
group revenue, then the group should be turned away.
Dynamic Pricing: It is the process of actively applying revenue management
principles, by selling the same products (room, date) at different prices to
different customers. All guests are not equal and some guests are needier than
others.
Extended forecast: Occupancy forecast that projects room demands more
than 30 days into the future.
Fenced rate: A lower rate on a hotels website compared to other channels,
but that involves certain pre- conditions in order to make the reservation, such
as non-refundable and non-cancellable reservations, or advanced purchase
reservations. Fenced rates are more easily segmented.
Forecast: Expected revenue results based on analysis (occupancy and average
rate included).Forecasts also typically refer to predicted demand.
Franchise Fees: Annual fees collected by hotel brands from hotel owners, for
the use of their name and services, including sales, marketing and technology.
Free sale: a term used when rooms are available for sale
Full house: a situation of 100% room occupancy in the hotel
F I T: Free Independent Traveller. Now, it is often termed as transients.

5. Global Distribution Systems (GDS): Four large reservation systems , namely
Amadeus, Galileo, Sabre, Worldspan, that were originally designed for airlines,
and now widely used by travel agents, only to book all forms of travel. GDS
systems generally use older technology, and are not connected through the
Internet.
Gross Operating Profit Per Available Room (GOPPAR): A key performance
metric that measures total revenue minus operational and marketing expenses
per room. It gives a more clear idea of the actual revenue coming in to hotel
accounts.
Group Displacement: When a hotel accepts a group reservation, it could mean
that some other transient guests will not be able to book a room on those
dates. This is displacement of one source of revenue for some other. A hotel
must estimate which source is more profitable before accepting the group
reservation.
Leisure traveller: A non-business traveller, who is travelling for personal
reasons, and not work. It could include a traveller on vacation or a holiday.
Length of stay: The number of nights a guest has booked at the hotel.
Look-to-book ratio: Used in the travel industry to show the percentage of
website visitors (lookers) as compared to the number of people who book on
the website (bookers). Also, it is comparable to conversion rate described
earlier.
Lose-it Rate: A rate where the hotel would be better off leaving the room
unsold than sell at this rate.
Market Share: The percentage of business that your hotel is receiving, as
compared to other hotels of your competitive set.
Market Penetration Index (MPI): A metric that is used to determine whether
the property is achieving its fair share of occupancy compared to a specific
group of hotels (i.e. a competitive set). It is calculated by taking the occupancy
percentage of the property and dividing it by the occupancy percentage of the
competitive set (competitive set data collected through a third-party provider
such as STR). An MPI of above 1.00 indicates that the property is achieving
more than its fair share, while below 1.00 suggests that the hotels in the
competitive set are 'eating' into the properties' 'pie'.

6. Note: Traditionally, revenue managers prefer to multiply the number by 100
(so as to convert into a percentage).
Metasearch: A type of search engine that aggregates inventory from several
sources and presents it in a single space. E.g. Kayak.com
Minimum Length of Stay (MinLOS): An inventory control mechanism, like
“closed –to- arrival” that is used to optimize stay patterns, primarily to ensure
that a peak demand night (world cup final) does not get filled with one-night
stays.
Mission statement: more focussed picture of what the hospitality operation
want to do and how it will do.
Net rate: The sell rate with commission already taken out which is sometimes
required for OTAs.
Net Revenue per Available Room (Net RevPAR): It is calculated by multiplying
occupancy % with ADR, and then the related overhead costs are subtracted.
This metric is a more reliable indicator of the financial health of the hotel.
Occupancy: The percentage of available rooms that were sold during a
specified period of time. Occupancy is calculated by dividing the number of
rooms sold by rooms available. Occupancy = Rooms Sold / Rooms Available.
Occupancy Index: The measure of your property occupancy percentage,
compared to the occupancy percentage of your competitive set. Formula:
Hotel OCC/ competitive set OCC * 100.
Online Travel Agency (OTA): An Internet-based hotel and travel reservations
system. Hotels typically provide room inventory to OTAs, which sell them in
exchange for a commission.
Opaque: Describes a booking channel where the supplier (hotel) remains
hidden until after the purchase is complete. This channel is for the most price
sensitive customers, who do not care for the brand loyalty. The site like
Hotwire is an example.
Open Pricing: The ability and strategy to price all room types, market
segments, channels and reservation dates independently of each other, to

7. maximize revenue, without having to close any channel off. No one is refused,
but discounts are increased very close to zero %.
Overbooking: It is the practice of confirming reservations beyond hotel room
capacity, either in expectation of cancellations or no-shows, or in error.
Pace: Also called pickup, pace is the rate at which reservations are being made
for a particular date. It is an indication of the demand for a product. An
increase in pace is a signal to raise prices.
Pay Per Click (PPC): A marketing technique employed when a marketer
establishes links, or advertising copy on a web page, and agrees to pay a fee,
each time a web user clicks on those links.
Predictive Analytics: Extracting information from data and using it to predict
trends and behaviour patterns of buyers.
Price Elasticity: An economic measure that shows the responsiveness or
“elasticity” of the demand, for a product, based on a change in its price. Highly
elastic buying behaviour means a little change in price results in great change
in demand. Both up or down.
ProPAR: Profits per available room, an emerging metric that calculates not just
revenue, but net revenue. This subtracts customer acquisition costs and other
expenses. Net RevPAR is another term for this.
Property Management System (PMS): Computer hardware with a suite of
software, interfaced with other stand –alone systems, like telephone, energy,
key, payment processing. Used onsite in an individual hotel to allow for guest
check-in and check-out, it is a useful source of transaction data and in- built
personalized reports.
Pledge relocates: rooms for guests housed at another hotel, but paid for by
the hotels as a result of the hotel not being able to honour a guaranteed
reservation
Room position: status of no. of room available
Room count: the no of rooms occupied at a particular night
Rate spread: the difference between the potential average single rate and the
potential average double occupancy rates

8. Rate parity: The strategy to maintain equality of rates among all sales
channels, usually enforced through contractual agreements between hotel
companies and third-party vendors, like OTA & GDS. However, in Europe this
view is being resisted and hotels can quote a lower rate on their own website,
with some pre- conditions.
Regret: A notification that the hotel has been shopped on its direct booking
engine (web site), and a rate was offered, but the guest chooses not to accept
the reservation.
Revenue per available room (RevPAR): A metric used to assess how
successfully a hotel has managed their room inventory and rates, to optimize
room revenue. Calculated by multiplying ‘occupancy %’ by ‘ADR’, it is a popular
metric that makes it easy to compare the performance of two hotels of
unequal size.
Revenue Generating Index (RGI) or RevPAR Index (RPI): A metric used to
check whether a property is achieving its fair share of revenue compared to a
specific group of hotels (i.e. a competitive set). It is calculated by taking the
RevPAR of the property and dividing it by the RevPAR of the competitive set
(competitive set data collected through a third-party provider, such as STR). An
RGI of above 1 indicates the property is achieving more than its fair share,
while below 1 suggests that the hotels in the competitive set are eating into
the properties’ pie. Traditionally, operators prefer to multiply the number by
100 (or convert into a percentage).
Revenue Management: The art and science of predicting real-time customer
demand, with the motive of optimizing the price and availability of products, to
match that demand. The guest with the greatest purchasing power is preferred
by hotels.
Revenue per Square foot of function space (REVPAS): A measure of how
effectively hotels (especially group and convention hotels) are at renting their
function space, and earning optimum revenue from its sale.
Formula: Total Function Room revenue/ Total square footage of
function room space.

9. Revenue Strategy: A holistic approach to profitability that enables
collaboration and innovation across all departments of the hotel or casino
enterprise. By unifying teams around a common source of dynamic data and a
company-wide mission focused on all round profitability, an organization can
become more efficient, drive more direct engagement with customers and
capture more revenue.
S T R:
A private company that provides a clearing house (like a main bank in a city, or
Reserve Bank of India, the Central bank) where hotels can enter their own
operating data (ADR, Occupancy and total rooms) and STR then aggregates this
information with data from other hotels in the same market, and allows
participating hotels to compare their KPIs. Give your own data to get
information about your competitors.
Shoulder Date: Nights that is next to full or very compressed dates. If a Friday
and Saturday are forecasted to be sold out, and Sunday is not, it would be
considered a shoulder date in that example. Compression is equal to very high
demand for rooms.
Stay Pattern Management: A revenue management process that seeks to
make optimum use of hotel capacity, by ensuring the stay patterns on the
books do not result in un-sellable stay patterns, remaining to be booked. It
involves the peak or sold out days, and the shoulder period.
Sell position: Specific placement order of hotel’s information on an internet
booking site. Hotels, whose listing is higher on a site, are said to have a higher
sell position. Somewhat similar to the ranking of a Google search results.
Sell out: Night on which a hotel expects to achieve 100% occupancy.
Sell-Through: The strategy in revenue management
Transient: The Non-group business which is also known as F I T, domestic and
international.
Total Revenue Management: The idea of forecasting and dynamically pricing
various components of a guest's on-property stay outside of just rooms, and

10. then capturing total spend data. Apart from room, spending on food &
beverage, entertainment, spa etc are also included in the calculations.
Total Revenue per Available Room (TrevPAR): Using a more complete look at
the revenue streams brought in by guests beyond just room rate, including
things like food and beverage, spa, parking, etc., to determine the hotel's
success rate per room.
Turn away: to refuse accommodation to walk in guest because the rooms are
not available. It is also called displacement
Unconstrained Demand: The forecast of how many rooms you could sell, if
you had an unlimited number of rooms. Unconstrained demand is the cause of
compression in room demand.
Web Shopping Regrets and Denials: When a hotel has been shopped online
and a rate was given but the guest did not book a reservation (regret), or a rate
was not given at all due to a restriction or sell out (denial).
Yield: The dynamic process of accurately pricing a product or service, by
making careful use of overbooking, discount allocation, and imposing stay
restrictions on guests, of perishable room inventory, so as to maximize
revenue. Yield% is also a key performance indicator.
Yield Management: Sometimes synonymous with Revenue Management,
Yield Management is the process of understanding, anticipating and reacting
to customer needs and behaviour with the intent of maximizing revenue
through price manipulation.