Looking Beyond RevPAR

Abstract

A study of 396 North American properties operated by two hotel companies indicates that decisions about a hotel's size, its service orientation, its strategic orientation, its ownership arrangement, and its management arrangement significantly affect a number of labor-and capital-productivity measures. Capital productivity is defined as total sales, gross operating profits, and income before fixed charges per available room; labor productivity is defined as those same measures per full-time equivalent employee, for a total of six productivity measures in all. The hotel's size, its service orientation, its ownership arrangement, and its management arrangement affect productivity. Large hotels, it seems, use their labor more productively, and generate the most income from their capital investments. Upscale hotels are inclined to be more productive overall than mid-market hotels, while hotels operated by branded management companies use their capital and labor resources more efficiently than do hotels operated independently or by independent management companies. Finally, company-owned properties tend to employ their labor more productively than do franchised hotels.