Average rate index (ARI): your room rate against your competitors'

An index sets you against a group of hotels, with 100 as your fair share. HSMAI's glossary puts it this way: an index of 100 means the hotel is performing at the same level as its competitive set; above 100 it is capturing more than its fair share, and below 100 less.

• 100: your rooms sold, on average, at the same rate as your competitors' rooms.
• Above 100: your average rate was higher than theirs. 110 means a tenth higher.
• Below 100: your average rate was lower. 90 means a tenth lower.

A high ARI is not good on its own, and a low one is not bad. A hotel can sell at a higher rate than every hotel around it and still earn less, because it sold fewer rooms. That is why ARI is read with the market penetration index, MPI, which does the same for occupancy, and the revenue generation index, RGI, which does it for RevPAR.

1. 1Choose the period and the competitors, and keep both the same from one month to the next.
2. 2Work out your own average room rate: room revenue, without tax, divided by rooms sold.
3. 3Work out your competitors' average room rate as one group: all their room revenue added together, divided by all their rooms sold added together. Averaging their rates instead would let a small hotel count for as much as a large one.
4. 4Divide your rate by theirs and multiply by 100.

The calculator on this page opens on the same month. Put in your own average room rate and your competitors' to see yours.

An index is only as honest as the hotels you set yourself against. HSMAI's glossary describes a competitive set as hotels that compete for similar guests, sharing location, service level, facilities, price range and the guests they aim for, and warns that a poorly chosen set leads to wrong conclusions.

• Choose the hotels a guest choosing you would also look at: the ones beside you on Google Maps and in the booking sites' lists for your area, at a similar price.
• Match what guests get: similar rooms, a restaurant if you have one, a pool if you have one, the same kind of hotel.
• Match where guests want to be: near the same station, temple, fort, office district or beach.
• Don't choose hotels only because you beat them. A set picked to flatter you hides the nights you are losing guests.
• Don't choose only the grandest hotel in town because you would like to be it. Set yourself against the hotels guests really weigh you against.
• Keep the set steady, and change it when the market changes: a hotel opens or closes, or one is rebuilt and moves up. EHL Hospitality Business School advises reviewing it at least once a year.

Your own average room rate is in your accounts. Your competitors' is not public, so there are two honest ways to get near it.

• STR, now part of CoStar. A hotel that sends STR its own figures gets reports setting them against a group of competitors it chooses, with the index already worked out. EHL Hospitality Business School says hotels of all sizes can take part by sending their figures, and that the price is a quote from CoStar. In a town where few hotels send figures, there may not be enough for a fair set.
• Their prices on Google and the booking sites. You can read what each competitor charges for each coming night: the price a guest comparing you would see. It is the price on offer, not the rate the rooms actually sold at, so an index worked out from it shows how your prices sit against theirs, not how your sales did.

OneHorizyn reads each competitor's lowest price on Google for each of the next 90 nights, every week, sets it beside your own, and shows your price against theirs on each day of the week.

• ARI below 100 with an occupancy index above 100: you are filling rooms at a lower price than the hotels around you. EHL Hospitality Business School says this may mean filling rooms too cheaply. Try a higher price on the nights your town is busy.
• ARI above 100 with an occupancy index below 100: guests are choosing the hotels around you. EHL says your pricing may be outpacing demand. Check your photos, reviews and place in the booking sites' lists before you cut the price.
• Both above 100: you are taking more than your share of guests and of rate. Hold your prices on busy nights and try a little higher.
• Both below 100: something more than price is turning guests away. Look at your reviews, listings and photos first.
• Read it by day of the week and by season, not only by month. A weekend ARI above 100 can hide a weekday one well below it.

• Whether you earned more. A higher rate that sold fewer rooms can bring in less money: the revenue generation index says that.
• Why your rate differs. Bigger rooms, a pool or a view can earn a higher rate; a weaker review score can explain a lower one.
• What the booking sites took. Rates are usually counted before commission, so two hotels at the same rate can keep very different amounts.
• Anything at all if the set is wrong. An ARI against hotels guests don't compare you with tells you nothing.