Braidwood Hospitality Management helps small & medium sized hotels & resorts analyse why they are under-performing in any of these 4 key indicators. This is not always an easy task as many factors may be influencing the underlying cause i.e. rates, product, location, services, mix etc. We help determine these underlying causes, working with our clients to develop and implement an action plan to increase both fair market share and market penetration.
There are 4 key indicators of Market Penetration, these are Revenue; RevPar, Average Rate and Occupancy. 100% is equal to fair market share; anything less is not! Let’s assume that a hotel with 70 rooms operates with 4 hotels within its identified competitive set. Hotel (1) has 50 rooms, Hotel (2) has 100 rooms, hotel (3) has 80 rooms and hotel (4) has 150 rooms. This would mean that on any given night that there are a total of 450 rooms available in the market for sale.
Within this “market? in a 30-day month there would be 13,500 rooms available to sell. At month’s end, the hotels in our example market sold 8,100 rooms or an average market occupancy of 60 percent.
Using Occupancy as one example, our sample hotel only sold 945 rooms during the month achieving occupancy of 45 percent. Dividing the 945 rooms sold into the 8,100 rooms sold in the market shows that our sample hotel finished the month with an 11.6 percent market share vs. its Fare Share of 15.6 percent. Therefore its market penetration would be 74.4 percent or 25.6 percent below its fair market penetration assuming 100% is fair market share.
This is an indicator that our hotel is under-performing in the market and losing business to its competitors.