Key performance indicators in the hotel industry

Abstract

Purpose: The aim of this study is to understand the role of financial and nonfinancial KPIs in the hotel industry, as well as to assess the reporting structure and approach for these KPIs. It also explores the importance of performance measurement and of performance measurement frameworks within which such KPIs are integrated. Lastly, it investigates the role of the accountant and financial controller in devising and measuring such KPIs. Design: This study adopted a qualitative research approach, where fourteen semi-structured interviews were held with representatives from fourteen Maltese hotels. Findings: All interviewees emphasised the equally vital role of both financial and non-financial KPIs. The most important financial KPI was that of occupancy rate. In addition, ARR, food and beverage cost percentage, GOP and turnover were also frequently mentioned. When it comes to non-financial KPIs, all interviewees stressed the importance of customer satisfaction. Interestingly, only a small number of hotels indicated that they utilise performance measurement frameworks. Lastly, the majority of hoteliers indicated that accountants and financial controllers aid management in devising and measuring KPIs. Conclusions: This study highlighted the importance of performance measurement and the role of KPIs within Maltese hotels. This research heavily emphasised that these tools aid in measuring performance levels, improve communication, influence monthly decision-making, and help hotels gain a competitive advantage. This study also highlighted the fact that accountants and financial controllers have a significant role in devising and measuring such KPIs, indicating that their role is much more important than what is commonly believed. Value: Hotels are a vital part of the Maltese hospitality and tourism sector. This study sheds light on the importance of performance measurement and KPIs in the daily operations of hotels, specifically because they are essential to their success. The proper use of such tools will improve both hotels and the Maltese economy.