If you are joining us now, please read these articles before continuing to gain a better understanding of Benchmarking.

WHAT IS BENCHMARKING  Read More

HOTEL BENCHMARKING IN PRACTICE  Read More

After discussing the importance of Benchmarking and how to interpret the reports, it is vital to look at what is Natural RGI and how to calculate your hotel’s.

An experience revenue manager uses the STAR reports to look for trends and identify opportunities.

The assumption is that achieving 100 or more on the RGI index shows the hotel achieved great results and outperformed the comp set. Unfortunately, this is not always the case. It is near impossible to have 5-6 true competitors who provide the same level of service, have the same number of bedrooms, start rating, and building conditions. If most of the comp set has 5* hotels and your hotel is 3* the natural RGI will be sitting below 100. If your hotel has 200 bedrooms and the comp set average is 70 rooms, your MPI index will sit below 100 combined with the same ARI index will lead to lower RGI. On the other hand, if your hotel is similar size and star rating as the comp set but has been recently refurbished the natural RGI will sit above 100. Natural RGI is where the hotel should sit in comparison to your competitors based on Product / Rooms / Food & Beverage / Conference & Events / Facilities / Location / Service / Trip Advisor Performance. Just because 100 is fair market share does not necessarily mean that is where your hotel should sit.

To calculate your Natural RGI, you need to rate the hotel and the individual competitors on Product / Rooms / Food & Beverage / Conference & Events / Facilities / Location / Service / Trip Advisor Performance.

Download our Natural RGI Calculator here

The rating scale is 5 excellent, 4 good, 3 average, 2 below average, 1 is poor, and 0 if service not present.

Enter each rating in the relevant grey field on the Assessment Sheet against the criteria for Product, Rooms, Food & Beverage, Conference & Events, Facilities, Location, Service, and Trip Advisor performance. If a hotel does not have a facility, then leave cell blank.

Go to the Natural RG Sheet and add your hotel’s actual RGI YTD, and (the Previous year’s RGI YTD, if known) in the grey cells.

The sheet will calculate your hotel’s natural RGI. This will allow a fair comparison to the comp set. If your natural RGI is 85 and your actual RGI score is 86, the hotel get’s more than its market share. On the other hand, if the Natural RGI is 120 and the actual RGI is 119, the hotel is leaving revenue on the table.

• Sometimes occupancy is sacrificed for higher rate or vice versa. It is important to find the balance as sacrificing too much on one and not gaining enough on the other can lead to decrease in RevPAR and profitability
• Costs also must be taken into account as £100 RevPAR achieved with 80% occupancy and £125 ADR will be significantly less profitable than achieving the same with 73% occupancy and £137 ADR. This is due to the cost of servicing 7% more rooms to achieve the same revenue.
• The exception to the above is when there are incremental sales. For a hotel where the average incremental sale is £50, it worth to sacrifice rate for occupancy, but B&Bs or low in-house spend hotels, pursuing ADR over occupancy will yield higher profitability
• Calculate your hotel’s natural RGI, so you have a fair comparison to comp set. A hotel which consistently achieves RGI in the 90s outperforms the comp set, if its natural RGI is 85. Also, having consistent RGI in the 110s is not good news, if the natural RGI of the hotel is 125.

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