Hotel RGI: What It Is and How To Calculate It

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In the hospitality industry, Revenue Generating Index (RGI) is a key metric that hoteliers use to measure the performance of their property in relation to their competitors. It provides valuable insights into a hotel’s market share and revenue potential. In this article, we will explore what RGI is and how to calculate it.

What is RGI?

RGI is a metric that compares a hotel’s revenue performance to that of its competitive set. It helps hoteliers understand how well their property is performing in the market and whether it is capturing its fair share of the available revenue.

RGI is calculated by dividing a hotel’s revenue by the average revenue of its competitive set, and then multiplying it by 100. The formula for calculating RGI is as follows:

RGI = (Hotel Revenue / Competitive Set Average Revenue) * 100

Why is RGI important?

RGI is an important metric because it allows hoteliers to benchmark their property’s performance against their competitors. It helps them identify areas where they may be underperforming and take corrective actions to improve their revenue generation.

By tracking RGI over time, hoteliers can monitor the effectiveness of their revenue management strategies and make informed decisions to optimize their pricing, distribution channels, and marketing efforts.

How to calculate RGI?

To calculate RGI, you need to gather data on your hotel’s revenue and the average revenue of your competitive set. Here’s a step-by-step guide:

  1. Identify your competitive set: Your competitive set consists of hotels that are similar to yours in terms of location, size, amenities, and target market. These are the hotels that you directly compete with for business.
  2. Collect revenue data: Gather data on your hotel’s total revenue for a specific period, such as a month or a year. This includes revenue from room bookings, food and beverage sales, and other sources.
  3. Collect competitive set data: Obtain the total revenue data for each hotel in your competitive set for the same period.
  4. Calculate the average revenue of your competitive set: Add up the total revenue of all the hotels in your competitive set and divide it by the number of hotels.
  5. Calculate your RGI: Divide your hotel’s total revenue by the average revenue of your competitive set, and then multiply it by 100.

For example, if your hotel’s revenue is $100,000 and the average revenue of your competitive set is $80,000, your RGI would be:

RGI = ($100,000 / $80,000) * 100 = 125%

Interpreting RGI

An RGI of 100% indicates that your hotel is capturing its fair share of the market revenue. A value above 100% suggests that your hotel is outperforming its competitors, while a value below 100% indicates that your hotel is underperforming.

It’s important to note that RGI should be interpreted in conjunction with other performance metrics, such as occupancy rate, average daily rate (ADR), and revenue per available room (RevPAR), to get a comprehensive understanding of your hotel’s performance.

Conclusion

RGI is a valuable metric that helps hoteliers assess their property’s revenue performance relative to their competitors. By calculating and tracking RGI over time, hoteliers can make data-driven decisions to improve their market share and revenue generation. Remember to consider RGI in conjunction with other performance metrics to get a holistic view of your hotel’s performance.