Glossary

Using specific terms and abbreviations is common in all markets and industries, and knowing them is a must for every business owner. However, the different range of phrases makes it difficult to remember all the meanings thoroughly. Therefore, we put together a clear, concise, and growing glossary that contains the most used keywords in the field of hospitality and vacation rentals.

ADR

What Does ADR Mean?

“Available Daily Rate” is a key performance indicator (KPI) widely used in the hospitality industry. ADR measures the average revenue made per an occupied room on a day. It is also a good metric to look for market trends, such as comparing the current ADR with its ADR history in each season or different cities.

Different elements adjust ADR; thus, it shows the overall financial performance of a company.

ADR=Total Revenue Earned by Occupied Units/Total Number of Occupied Units

The revenue earned by each room is modified based on the type of room or the service provided; thus, the amount of ADR is affected by different factors. Like other metrics, ADR has some limitations, and getting a high ADR doesn’t always mean a good efficiency. Therefore, this Rate will be meaningful when it is put together with other indicators.
CRM

What Does CRM Stand For?

“Customer Relationship Management” is a process of managing the interactions with all customers, including previous, current, and potential customers, and also staying connected to them. 

Some CRM tools have been provided that gather information across all channels. A CRM tool performs as storage of customers’ comparative data, such as their contact information, customers history with the company, their orders’ status, and service issues. Therefore, it provides a better understanding of the relationship with customers over time. It also makes a hub through which all company employees can access the data about customer interaction records if needed.

CRM systems are initially used as sales, marketing, and customer service tools. However, they also help in managing relationships between colleagues, sellers, and partners. They help to picture a better real-time view of the company’s current situation and opportunities and give more accurate forecasting.
KPI

What Does KPI Mean?

“Key Performance Indicator” is a measurable value that evaluates a business’ effectiveness and progress over time. There are different ranges of KPIs defined as two levels, naming high-level and low-level KPIs. High-level KPIs estimate the whole organisation’s overall function while low-level KPIs evaluate more focused areas of a business, such as sales, marketing, human resources, etc.

To define KPIs for a specific business, the team should understand its basics as well as its objectives. Also, there should be a clear plan to achieve the desired outcomes and a proper analysis based on managers’ and department heads’ feedback. With regards to these factors, it would be easier to find which steps of the process need a KPI measurement. 

KPI is not about numbers only; it should cover all the company’s strategies. Thus, the KPIs of a company must indicate its business model clearly.
Occupancy Rate

What is Occupancy Rate?

In the hospitality industry, occupancy rate indicates the number of rental units occupied over time compared to the total number of units available at the given time. The occupancy rate is one of the most critical KPIs in the vacation rental industry used to carry out a revenue management strategy. It is usually defined as a percentage and has a simple formula:

Occupancy Rate=Total Number of Occupied Units/Total Number of Available Units

The average annual occupancy rate is calculated based on monthly occupancy rates and is useful in presenting the market demand. With this indicator, companies can simply compare their performance with their competitors, and also it determines how new changes in marketing strategies affect their businesses. However, occupancy rate should be used alongside with other KPIs, such as RevPAR and ADR. Because the main goal is to increase the revenue, not only the occupancy rate, and to focus on one KPI doesn’t make an accurate evaluation.
OTA

What is an OTA?

OTA stands for “Online Travel Agency”. They are web-based marketplaces that showcase various travel services and allow customers to book them online. These platforms work as intermediaries that sell or rent other companies’ products, including vacation rental units, flights, tours, cars, etc.

Online agencies provide free tools for the secure booking process, communicate with renters, manage guests’ reviews, and access real-time market data. Hoteliers and property providers usually list their rentals on different channels to gain higher exposure and attract potential guests. However, these agencies don’t allow property companies to access to their guests’ contact information.

Listing on OTAs is usually free, but they charge property owners based on a defined amount of commission fee (ranging from 3% to 25%) per booking. There are many known OTAs for advertising properties, such as Booking.com, Airbnb, Expedia, agoda.com, and others.
RevPAR

What Does RevPAR Mean?

“Revenue Per Available Room” is a KPI used in the vacation rental industry to measure units’ operating performance. For calculating this metric, the total revenue earned from rented rooms is divided by the number of available rooms in the given period of time. RevPAR can also be measured through multiplying average daily room rate (ADR) by the occupancy rate. 

RevPAR=ADR×Occupancy Rate=Average  Revenue Earned by Occupied Units/Total Number of Available Units

The RevPAR given results are more meaningful than ADR and occupancy rate. However, a high RevPAR doesn’t always mean a more significant profit since RevPAR doesn’t consider profitability measures. 

Here is an example that shows how to interpret the related data. For instance, when the occupancy rate is below 100%, and the RevPAR is lower than ADR, a property manager may reduce the average room price, leading to increasing occupancy.
ROI

What Does ROI Mean?

“Return on Investment” is a versatile, quick, and straightforward measure used to assess investment efficiency. ROI measures the amount of return related to the cost of investment. 

For calculating ROI, the return or benefit of the investment is divided by the investment’s cost. Therefore, the outcome is a ratio or a percentage, in which the more positive it is, the better it is.

ROI=(Current Value of Investment – Cost of Investment)/Cost of Investment

Since calculating ROI is not complicated, its interpretation is straightforward and can be applied for various businesses and in different markets. 

ROI has a limitation and cannot give meaningful results often. Time value (of money) is an essential factor that has not been considered in ROI calculation. For example, a 25% amount of ROI may be viewed as a wow for a short-term evaluation of an investment, but it is not a massive profit for a more extended period.
SEO

What Does SEO Stand For?

“Search Engine Optimisation” is a process that has a positive influence on a website’s unpaid traffic by getting better search engine results, that may lead to making more money. In other words, when a searcher is looking for a specific keyword into the search box of a search engine, SEO increases the chance of exposure of online content by coming up as the top result. 

SEO is an appropriate marketing approach. Choosing the correct keyword or a “search term” is essential. Because a small change in the keyword can alternate the results and show a different set of websites;  however, SEO is not only about using the right keywords but also leading searchers to the right places by preparing optimised and qualified contents. Knowing how to manage SEO will represent the content properly, target the right audience, and convert a visitor to a customer.