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10 Hospitality Industry Terms

I have never been in the hospitality industry. Not until I’ve joined Sabre Hospitality Solution, provider of digital marketing solutions, central reservation systems and global distribution systems for the hospitality industry, just two weeks ago. Here are a list of terms that I have came across often in the industry.

1. Visit to Look and Look to Book ratio
This ratios are to measure the effectiveness of a hotel’s website and online booking engine. What it wanted to measure is the number of visitors who lands on the hotel’s website and eventually look into the room rates, thus the Visit to Look ratio. Look to Book ratio measures the number of visitors looking at the room rates and how many visitors actually make a booking.The higher the ratio means that the website and booking engine has a good conversion rate.

2. Online Travel Agency (OTA)
Agoda, and Expedia are some of the examples of online travel agency. These websites, or the companies operating it, typical have obtained some form of deals, directly or indirectly, with the hotels. The deal would typically allow the OTAs to list hotel room on their website available for visitors to book. Whenever there is a booking, the OTA’s would get a commission from the hotel.

3. Hotel Meta-Search Engine
Basically meta search engine would aggregate all websites to display the best rates available for a particular hotel room. Some example include TripAdvisor, Kayak and Trivago.These websites are getting popular for hotel booking since it would display the different rates of various sources for comparison.

4. Price Disparity
Price disparity means that a specific room in a specific date is showing a different rates on the hotel website and various OTAs. This usually happens when OTAs cut the price of the room to ramp up sales (as they only earn commission from the hotel only when there is a booking).

5. Average Daily Rate (ADR)
From time to time, a hotel would change the price of the room booking for various reasons. But in order not to deviate too much from their typical room rates, they would keep track of their average daily room rate. Even though room booking rates changes over time, it would be fine as long as their average daily room rate remains constant. Due to strategic reason, a hotel might want to slowly increase or decrease their average daily rate.

6. Average Occupancy Rate (AOR)
Similar to average daily rate, average occupancy rate tracks the percentage of room booked at any specific period. Hotels would strive a higher occupancy rate.

7. Global Distribution System (GDS)
Chances when you visit a travel agency, and you see the staff checking rates on the computer, they are using a Global Distribution System. It is a system created by a company to enable bookings or transactions between third parties and travel agents to offer travel-related services to the end consumers.

8. Booking Lead Time
When hoteliers plan their marketing campaign, they might want to know what is the average lead time for their guest to make a booking at their hotels. For example, if they know the average time for guests to make a booking before the stay is about 3 months. If they want to push for Valentine’s day promotion, they should start it 3 months before.

9. Derived Rate
Have you ever wonder how hotels set their price for their rooms over different period? They started off by setting a based rate. Based on the hotel’s occupancy history, occasions and some other factors, decides the room rates by indicating what we call the derived rate. Meaning to say, they might decide that this period would add another 5% or -3% to the room price.

10. Competitive Set
As the hospitality industry is a very competitive industry, very often the hoteliers would like to know how are they performing comparing with their competitors. Of course they can’t compare with any hotels as all has different target audience and unique factors. As such, they would need to craft a competitive set, meaning to define a specific group of competitors to compare.

There are much more to learn in this industry. Do you have anything you would like to add-on or something you would like to correct me?

Published by

Johnny Koh

A project manager and a brand strategist, I have over six years of experience in advising businesses of various industries as well as the public sector in their branding and communications need.