When you’re just getting started in the hotel industry, the jargon you come across can be confusing. There are more than enough three-letter combos, too many of them ending with “S.” Use this guide to learn the difference between a PMS and RMS, important metrics to look out for, and software terms that could otherwise trip you up.
Various core hotel systems are used to organize and streamline operations at your property. Nowadays, they’re usually in the cloud, and most of them do, or should, connect to one another.
CRM (Customer Relationship Management) – A customer relationship management system helps you manage guest data to build loyalty. It’s a powerful marketing tool that segments guests based on rich profiles and behavioral data to personalize services, offers, and communications.
Integration – A software integration enables the automated exchange of data between systems, saving time and improving data accuracy. You can enter data in one system, and the other system receives it automatically.
OBE (Online Booking Engine) – This is the application on your website that enables you to accept direct bookings online. It should integrate with your property management system to offer real-time availability and prevent double bookings and other errors. It should not take commission.
Payment Gateway – Connecting payment processors and merchant account providers, a payment gateway enables you to securely accept card payments at your hotel, whether they occur in person or online.
PMS (Property Management System) – Your PMS is the command center of your property. It handles room inventory, reservations, housekeeping, billing, reporting, and more. It connects with many other systems at your property.
POS (Point of Sale) – A POS system allows you to process charges for purchases made on your property, e.g., restaurant or spa bills. It should be integrated with your PMS so that you can automatically post these charges to guests’ reservations.
RMS (Revenue Management System) – An automated revenue management system recommends your best pricing based on season, availability, competitor information, and more. Using sophisticated algorithms to analyze real-time and historic data 24/7, RMS optimize room pricing to improve occupancy and revenue.
There’s no shortage of metrics and abbreviations related to how much money you bring in! No one metric gives you the full revenue picture for your property, so they should always be studied in relation to one another. Here are some of the most important ones.
ADR (Average Daily Rate) – This is the average amount of money you bring in per each sold room at your property. It does not include empty rooms.
ALOS (Average Length of Stay) – ALOS is the average number of nights guests stay during a specified time period. The higher your ALOS, the lower your room turnover costs.
Booking Pace – Booking pace is the rate at which reservations are made for a specific date. For instance, are two reservations coming in per day for May 31st or only one per day?
Booking Pickup – This is the number of room nights booked for a specific date(s) starting on another specific date. For instance, you could look at all the reservations for May 31st that were booked in the past month. Both booking pace and pickup help determine your occupancy, pricing, and staff levels.
Comp Set (Competitor Set) – Your comp set is made up of competing properties you compare yourself to so that you can find out your MPI (see below). Include properties located in your area and/or offering an equivalent level of service and amenities. A roadside motel and a five-star resort are not in the same comp set.
GOP (Gross Operating Profit) – This is how much your property makes minus expenses and including ancillary revenue. However, costs that don’t go directly to supporting your property (e.g., taxes) are not part of the calculation.
MPI (Market Penetration Index) – This metric enables you to gauge how well you’re doing compared to your competitors. To find it, divide your own occupancy rate by your competitors’ average occupancy rate (data services can tell you this), then multiply by 100. A final result below 100 means you’re underperforming.
Occupancy Rate – Occupancy rate is the percentage of your rooms that are full on any given night or time period.
RevPAR (Revenue Per Available Room) – RevPAR is the average amount of money you bring in per each available room in your property. Unlike ADR, rooms that are available but empty (and therefore generate no revenue) are included in this metric.
Room Nights – Room nights are the number of nights that a room at your property is booked or available to be booked. A guest booking a room for a two night stay would generate two room nights’ worth of revenue.
TRevPAR (Total Revenue Per Available Room) – TrevPAR is your hotel’s total revenue, including ancillary charges like meals or spa services, divided by the number of available rooms. This metric provides a broader perspective on hotel performance compared to RevPAR.
The following terms describe different pricing strategies you can use to boost occupancy and revenue.
Allocation – An allocation is a room or rate that is set aside for a specific group. Room allocations are also called room blocks.
BAR/BFR (Best Available Rate/Best Flexible Rate) – BAR is the cheapest/best price you offer to the general public. It can change depending on the day of the week or season, for example. If a rate is only available to loyalty program members, it is not your BAR.
Booking Window – The booking window (AKA lead time) is the amount of time between when a guest makes a booking and their actual arrival date at the property. You can use booking windows to create restricted rates for last-minute bookings or early-bird rates.
BRG (Best Rate Guarantee) – This is a guarantee that your best available rate (BAR) is on your website. It keeps third-party booking channels from undercutting you.
CTA/CTD (Closed-to-arrival/departure) – CTA and CTD restrictions are applied to rates to prevent guests from checking in or checking out on certain days of the week.
Dynamic Pricing – Pricing that changes based on market factors and demand. You don’t set and forget. (Using an RMS helps with this!)
LOS (Length of Stay) – Applying minimum LOS restrictions to rates is used to encourage longer stays and increase the value of bookings.
NRB (Negotiated Rate Business) – This refers to clients (usually corporate clients) that your property offers special rates to. For example, if a company has their retreat with you every year, you may choose to give them a discount. Negotiated rates are beneficial for both the hotel and the client; the client gets a reduced rate, and the hotel gets more repeat bookings.
Rack Rate – This is your base rate with no discounts, additions, ifs, ands, or buts.
Distribution refers to the various channels through which you sell rooms at your property. While direct bookings are your most profitable, third-party channels may have a wider audience, which makes it worthwhile to include them as part of your distribution strategy.
Channel Manager – A channel manager acts as a single point through which to manage your inventory across multiple channels. (In other words, a middleman between you and the other middlemen.)
Direct Booking – A direct booking is a booking that comes directly to you, for instance, through your own website or over the phone. Third-party channels are not involved.
GDS (Global Distribution System) – Unlike OTAs (online travel agencies), the GDS actually involves travel agents. You use a global distribution system to send inventory to both traditional travel agents and to OTAs, who then sell it to their customers.
Metasearch Channels – Think Google, TripAdvisor, or Kayak where you can display the link to your website and booking engine. Metasearch sites typically charge your business via a cost-per-click or cost-per-booking model.
OTA (Online Travel Agency) – Third-party online channels like Expedia or Booking.com that sell your rooms to their customers for a commission fee. You’re essentially paying them for their reach.
Parity – Rate parity means keeping your room rates the same wherever those rooms are offered. Many OTAs have parity agreements in place to ensure that you cannot sell your rooms cheaper than they do.
Your distribution channels should integrate with your PMS to ensure your rates and availability are automatically accurate everywhere—saving a lot of administration time and avoiding overbookings and other errors.
A nice property needs a nice website. Here are basic web design terms you should know.
ALT Tag (ALT Text) – A text alternative for images that is displayed if the image cannot be loaded. Screen-readers also use it, and it is important for website accessibility. It impacts your SEO as well, so make sure that it’s relevant and helpful.
CTA (Call-to-action) – Tell your guest/potential guest/website visitor what to do next! Keep it simple. A CTA is usually written as a command or prompt, e.g., “book now” or “view rooms,” in the form of a button or link.
CMS (Content Management System) – A content management system is a system like WordPress that allows users with no knowledge of coding to easily update and manage their website.
Google Analytics – This platform tracks visitors and their behavior on your website, including the number of people visiting, most popular pages, conversions, and more.
SEO (Search Engine Optimization) – The very important process of maintaining and improving your ranking on search engines such as Google. There are various SEO strategies, including choosing the right keywords and using them naturally in your content. However, your site’s functionality and UX (see below) impacts your SEO as well. Slow load times are penalized!
UX (User Experience) – This is the usability design of your website and includes intuitive navigation, fast load times, mobile friendliness, trust signals, quality graphics and copy, and more.
Here are some miscellaneous terms that will also come in useful.
Extended Stay – Put a kitchenette in these rooms; the guests are here awhile.
Night Audit – This is when you sit down at the end of the day and figure out if the last 24 hours’ transactions add up the way they should.
No-show – Used to describe a guest with a reservation who does not arrive or cancel that reservation. You most likely want to charge a fee for this.
OOO (Out of Order) – Use this term when your elevator doesn’t work, the toilet flushes backward, or room 13 opens a portal to the netherworld.
Self check-in – Facilitated via an app or online registration through your PMS, self check-in allows guests to check into your property without any in-person contact with the front desk. They pay, complete guest registration, and receive their keys digitally. It both saves time and prevents germs from spreading.
Walk-in – A walk-in guest is a guest who has not made a reservation prior to arrival. Think about summer roadtrippers pulling off the highway with sleepy, sticky, and/or hungry kids in the backseat.
This list of key hotel terminology will help you get to know the industry better and prepare your new venture for success (or at least help you make conversation at that conference you’re eyeing). Don’t worry if you can’t remember them all. The more you use them, the better they’ll stick!
