Hotel & business glossary

The key terms of hotel management and business, each with a formula, a worked example and a link to try it in a free hotel tycoon game.

• ADR · Average daily rate

  The average price paid per room actually sold.

• Break-even point

  The level of sales where revenue exactly covers all costs.

• Contribution margin

  Price minus variable cost: what each sale contributes to fixed costs and profit.

• Fixed costs

  Costs that stay the same whatever you sell: wages, upkeep, insurance, property tax.

• GOPPAR · Gross operating profit per available room

  Operating profit divided by available rooms — RevPAR after costs.

• Margin of safety

  How far sales can fall before a business reaches break-even.

• Market share

  Your share of all customers or sales in a market.

• Occupancy rate

  The share of available rooms that are sold.

• Operating leverage

  How much profit swings when sales change, because of fixed costs.

• Price elasticity of demand

  How strongly demand reacts to a change in price.

• Revenue management

  Selling the right room to the right guest at the right price and time.

• RevPAR · Revenue per available room

  Room revenue divided by all rooms available — the most used measure of hotel performance.

• TRevPAR · Total revenue per available room

  All hotel revenue — rooms, food, drinks, spa — divided by available rooms.

• Variable costs

  Costs that rise and fall with sales, like ingredients or laundry.