There are many hotel industry metrics that owners and operators need to keep a close eye on. Many of them dictate what is happening with the hotel, such as whether it’s profitable or whether some areas need improvement. CPOR is one of these metrics.
In this article, we will discuss CPOR. We’ll explain what it is and how you can calculate it. We will also address a few of the most commonly asked questions about it.
CPOR is shorthand for Cost per Occupied Room. This hotel industry metric measures the cost of running a hotel, offering valuable insights into a hotel’s operational efficiency and financial health.
It would be accurate to say that CPOR is one of the more vital metrics in the hotel industry. You can use it to track the efficiency of your hotel’s operations. However, you can also use it as a method of comparing your hotel’s performance against that of your closest competitors.
Now, let’s look at how you calculate CPOR.
The way you get the Cost per Occupied Room is by dividing your total operating expenses by the number of occupied rooms in the hotel. It looks like this:
Let’s say that a hotel has total operating expenses of $200,000. It has 1,000 occupied rooms. The CPOR for that hotel would be $200, since $200,000 divided by 1,000 equals 200.
A CPOR should be a reflection of the cost of running a hotel. If you have low revenue but high costs, then that likely means your CPOR is too high. In such an instance, to stay solvent, you will probably need to think about either lowering costs, raising rates, or both.
A hotel’s owners will want to make sure that their hotel’s occupancy rate (the percentage of available rooms that are being used), is high enough to justify their expenses. A hotel owner can also seek to increase their average daily rate, sometimes written as ADR. This is what a guest pays for each night in a hotel room.
Now, let’s talk about some ways a hotel owner or operator might improve their CPOR metric if they don’t like the way the numbers are looking when they calculate them.
The short answer to how hotel owners usually improve their CPOR is by improving their efficiency and reducing their operating expenses. How each hotel does that might look a little different. However, those are the generally recognized methods in this industry that should get your CPOR looking better if you’re noticing a high cost of doing business but a lower revenue stream than you would like.
Renegotiating vendor contracts is a method of potentially reducing operating expenses that your hotel might try. If you have a vendor contract and the cost is too onerous, you’ll need to talk to that vendor.
If you can get them to give you the same products you need at a slightly reduced rate, you might do so. If they refuse to budge in this area, you can let them know that you will be looking at some other providers of the goods they are supplying to the hotel.
The good news in this regard is that there are almost always alternate vendors you can use for linens, silverware for your dining area, toiletries, food supplies for your onsite restaurant, or just anything else a hotel needs. If a vendor sees that you are serious about making a switch, that might convince them to work with you to get their prices down a bit.
There are also ways that a hotel might become more energy-efficient that can potentially reduce its operating costs. For instance, a hotel owner might choose to install smart thermostats. They can use LED lighting. They can install some water-saving fixtures as well.
They might install occupancy sensors in each room. These can turn off the lights any time a guest leaves the room and has left some of them on.
Green programs are another option for hotel owners who are not happy with their CPOR numbers. Green programs are usually based on the concept of fewer room cleanings.
Many guests will feel that it is not necessary to have their room cleaned every day. If they are going to be staying at the hotel for multiple days, ownership can ask them if they want to opt out of daily room cleanings and go to an every other day system.
This can reduce the need for so many room cleaners and cleaning supplies. If you have a guest staying at your hotel for a week, and you only clean their room 2-3 times during their stay, you can easily imagine how much that will save you on toiletries, the cost of the cleaning crew, etc.
You might have a situation sometimes where a hotel will have ongoing issues with the HVAC system. That could stem from not having it cleaned or serviced enough. This often happens with older buildings or an HVAC system that has not been updated for many years.
As a hotel owner, you might set up a maintenance schedule where a commercial HVAC company comes and looks at the system during times of the year when you’re using it the most. You can have the HVAC company look at the AC section of the system before the height of summer when it sees the most use. They can look at your furnace before winter sets in.
This will often save you from having to deal with HVAC problems as they occur. Regular scheduled maintenance will cost you money upfront, but it makes urgent problems that require costly fixes less likely later.
In some cases, you might be managing your perishable inventory inefficiently. This could adversely affect your CPOR. If you keep a closer eye on perishables, you can use them before you have to throw them away.
For instance, this might be an option if you are offering a continental breakfast. By making sure you get perishable food items out to guests before they go bad in your pantry, you will not create as much food waste.
You might feel that you can reduce the number of staff members you have onsite some of the time. That can positively impact your CPOR.
You can look at what times of the day you have the most guest activity, as well as the least. If you know that there are slower times when you don’t need as many individuals at the front desk or working as bellhops, you can cut back on some worker hours. This should reduce your operating costs and improve your CPOR.
If you have a bar in the hotel, and you see that there are times of the day when it’s not usually very crowded, you might go from having two bartenders to just one. If you have periods where there aren’t as many individuals eating in your onsite restaurant, you can cut back on the staff you have there as well.
In this same area, you can further reduce the need for as many staff members in the hotel by using technology the best way possible. A contactless check-in process is something that many hotels are going to these days. It is an easy way for you to have less staff on the payroll.
You can set up kiosks that guests can use to quickly check in without having to interact with anyone. Some guests might prefer it that way.
You can also automate your guest messaging. If you have something you need to tell your guests when they check in, you can do so via text messages or email. You can allow them to interact with these emails or messages if they want to let you know about a particular service they need.
You can also set up a chatbot on your website and encourage guests to interact with it. You can still employ a skeleton crew of human workers who can answer guest queries if necessary, since some guests might occasionally have a question that the bot can’t answer.
Using automated booking systems also reduces human error and cuts back on the time your workers would need to engage in administrative tasks. You can create a bespoke platform where guests can book with you, or else you can rent software that does it for you using a software-as-a-service model.
We’ve touched on this a little already, but we should briefly discuss the factors that are likely to have a negative impact on your CPOR. Even as you are taking the time to actively attempt to improve your numbers in this metric, you should know about the situations that can potentially make the situation worse.
High utility costs are usually at the top of this list. If your hotel has uncontrolled energy consumption, that can quickly impact your CPOR in a negative way. As we mentioned, installing a smart system that turns the lights off when a guest leaves them on or that automatically modifies the temperature on each floor should be beneficial for you.
Poor maintenance is something else that many hotel owners point to if you ask them about what negatively impacts their CPOR. If you keep up with regular repairs and maintenance of the vital systems that your hotel needs, that makes emergency repairs less likely. Such repairs can wreck your budget and lead to an unsatisfactory CPOR.
Poor revenue management is also something that a hotel owner might bring up if they say they’re not happy with their CPOR. You might have set up dynamic marketing or other pricing strategies. Such techniques can work, but they’re not guaranteed to by any means.
If you’re trying dynamic marketing or a new pricing strategy, and you see that it’s resulting in lower average daily rates or decreased occupancy, you could see a higher CPOR. If that’s happening, you need to talk to your marketing team.
If what you’re doing isn’t working, then you’ll need to look at the data you’ve gathered. It should provide clues as to what you can do to change your marketing techniques to hopefully get you to a better place with your CPOR. If your marketing team is not able to provide you with some new ideas, then you may need to replace them with someone who has an established track record of turning struggling hotels around.
CPOR is one of those metrics that can reveal a lot about what is happening with a hotel. If you calculate it and it’s not where you’d like it to be, consider implementing some of the strategies that we’ve mentioned.
Remember that CPOR, like so many of the other essential hotel metrics, is going to fluctuate as time passes. If you continue to see numbers you don’t like when you calculate this metric, though, it might be necessary to do a top-down reimagining of how you’re running your hotel.
Consistently unsatisfactory CPOR means you need to take action to run your hotel more efficiently, or going out of business is not out of the question.
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