WEEK 5 STUDENT NOTES: STR & HOTEL REVENUE MANAGEMENT

1. What is STR?

STR stands for Smith Travel Research. It helps hotels compare their performance with similar competing hotels (called the competitive set or comp set). A hotel may look successful on its own, but STR helps show whether it is doing better or worse than the market. The comp set should include hotels with similar location, class, facilities, prices and target guests.

2. Three important hotel measures

Measure	What it tells me	Formula
Occupancy %	How many available rooms were sold.	Rooms sold ÷ rooms available × 100
ADR	Average price earned for each room sold.	Room revenue ÷ rooms sold
RevPAR	Room revenue earned per available room; combines rate and occupancy.	Room revenue ÷ rooms available OR ADR × occupancy rate

3. STR performance indexes: remember the Rule of 100

MPI (Market Penetration Index) compares occupancy: Hotel occupancy ÷ comp-set occupancy × 100.
ARI (Average Rate Index) compares room rate (ADR): Hotel ADR ÷ comp-set ADR × 100.
RGI (Revenue Generation Index) compares RevPAR: Hotel RevPAR ÷ comp-set RevPAR × 100.
For all three indexes: above 100 = outperforming the comp set; 100 = performing equally; below 100 = underperforming.

4. Supply, demand and guest segments

Supply means the rooms available for sale; demand means the rooms guests book and occupy. If demand rises while supply stays stable, a hotel may be able to raise rates. If supply rises faster than demand, competition may increase and occupancy or rates may weaken. STR reports may also show business segments: Transient (individual travellers), Group (such as conferences, weddings or sports teams), and Contract (rooms sold under negotiated agreements). Segment % = segment rooms sold ÷ total rooms sold × 100.

5. How managers use STR

Managers use STR results to set prices, control discounts, manage room inventory, target marketing and check whether campaigns are working. The indexes should be read together. For example, MPI above 100 but ARI below 100 may mean the hotel is filling rooms by charging less. A high ARI with a low MPI means the hotel charges more but may not attract enough guests. RGI shows the overall RevPAR position.

Quick example

If a hotel has 80% occupancy and an ADR of $200, its RevPAR is $200 × 0.80 = $160. If the comp set’s RevPAR is $150, RGI = $160 ÷ $150 × 100 = 106.7. This means the hotel’s RevPAR performance is about 6.7% stronger than its comp set.

My main takeaway: I should not judge a hotel by occupancy or price alone. I need to compare occupancy, ADR and RevPAR with competitors, then use the results to make decisions that improve revenue without unnecessary discounting.