Standardization of distribution metrics
 
Standardization of distribution metrics
19 FEBRUARY 2016 7:26 AM

A key objective of the USALI is to provide hotel operators with standard methods for reporting results, which enables benchmarking.

Consistent application and standardization of financial practices facilitates industry benchmarking and the ability to manage portfolio operations. 

 
“What gets measured gets done” is a famous quote attributed to Peter Drucker, Tom Peters, Edwards Deming, Lord Kelvin and others. This was apparent when industry professionals expressed a need to include more detail and definitions on the components of rooms revenue to better align with industry practices and evolving trends. 
 
Those clarifications were included in the latest edition of the USALI, and we believe the changes have prompted more consistency in the application of the USALI and related operating ratios. This required working closely with revenue-management experts from various lodging companies and their owners. A consequence of those conversations was also a strong desire, prompted in part by rising channel costs, to analyze rooms revenue by channel, as well as related costs by channel.
 
Benchmarking often can start by looking outside one’s own industry. Shafiq Khan, SVP of channel strategy and distribution at Marriott International, came to the company from US Airways, where he pioneered a series of groundbreaking initiatives that fundamentally restructured airline distribution. 
 
Khan is quite passionate when asked about distribution costs: “Many years ago, when U.S. airlines found their distribution costs out of control, among the first things they did was to standardize the measurement of distribution costs within the industry so that apples-to-apples comparisons could be made. This allowed each airline to see how well it was doing versus the industry average, category leaders and laggards, and establish goals and benchmarks for itself. Those that did well shared their success with Wall Street. Over time, this focus on comparative cost metrics enabled the entire U.S. airline industry to significantly improve their cost situation.”
 
A key objective of the USALI is to provide hotel operators with standard methods for reporting results, which enables benchmarking. In addition to guidance around financial statements, USALI also provides guidance around financial ratios and operating metrics. 
 
One example is revenue per available room, which is arguably one of the most common ratios used in the industry and defined in USALI. Benchmarking RevPAR has become standard practice. Standardizing the components of RevPAR is critical to ensuring meaningful comparisons. Following this logic, it seems appropriate to focus efforts on this emerging area of channel metrics. 
 
Craig Mason, SVP of asset management for Host Hotels & Resorts, confirmed the need for this focus: “With the heightened attention on rapidly growing customer acquisition and retention costs, there is an urgent need to create standards to evaluate these costs in order to make informed decisions on sales-and-marketing strategies.”
 
Cindy Braak is a Senior Vice President and Finance Business Partner at Marriott International, supporting all of Marriott’s revenue generating platforms/programs. She is currently co-chair of AH&LA’s Financial Management Committee (FMC). Kapila Anand is the segment leader for Travel, Leisure and Hospitality at the accounting, tax and advisory firm, KPMG and is a co-chair of the FMC. KPMG provides Audit, Tax, Advisory services and industry insights.
 
This article represents the views of the authors only, and does not necessarily represent the views or professional advice of KPMG LLP or Marriott International.
 
The Financial Management Committee of the American Hotel & Lodging Association was established to provide superior financial management expertise on issues of common interest to owners and operators of hotels and motels.
 
The FMC is also responsible for the production of the Uniform System of Accounts for the Lodging Industry (USALI). A full version of this article was published in November 2015 by the American Hotel & Lodging Educational Institute (AHLEI). For information, visit www.ahlei.org.
 
The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.
 

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