How RGI is killing your business

Let me paint you a picture.

You're sitting in a revenue meeting. The GM is nervous. The owner is on the call. Someone pulls up the comp set report and there it is - RGI below 100.

And then it begins.

"Well, our comp set includes a hotel next to a mall.""That property has villas - completely different product.""They have large apartments, it's not a fair comparison.""That hotel reports ADR inclusive of F&B packages."

That last one. Let's just sit with that for a second. A hotel. Reporting ADR. Inclusive of food and beverage packages.

And we're using this number to benchmark performance.

What is RGI and why do we worship it?

RGI compares your RevPAR to the average RevPAR of your competitive set. Above 100 means you're outperforming your comp set. Below 100 means you're losing to them.

Simple in theory. Deeply flawed in practice.

Because it assumes your comp set is actually comparable.

And in most cases - it isn't. Not even close.

Here's how a comp set typically gets built. Someone (a GM, a revenue manager, an owner with opinions) picks 4 or 5 hotels that feel roughly similar. Same stars, same area, roughly similar rates, different chains.

Except that comp set might include a property with 40% suites versus your 10%. A hotel attached to a convention center with guaranteed group business. A resort with all-inclusive packages baked into their rate. A boutique property with 60 rooms versus your 400.

You are now measuring yourself against all of these. Every single month. And when your RGI dips, you spend an hour in a meeting explaining why the comparison isn't fair.

Which everyone in the room already knows.

But nobody says it out loud.

And here's where it gets truly uncomfortable. STR built an entire industry around comp set data. Revenue management systems like IDeaS and Duetto - billion dollar businesses - are largely built around optimising against that same comp set. If the comp set is fundamentally flawed, what exactly is the whole machine optimising against? It's a question the industry doesn't particularly want to answer.

So what actually matters?

Here's the question nobody asks enough: what are we actually trying to measure?

If the answer is "are we making money and growing" - RGI tells you almost nothing useful on its own.

Here's what tells you more:

TRevPAR — Total Revenue Per Available Room. Not just rooms. Everything. F&B, spa, parking, ancillary spend. A guest who spends $200 on a room and $150 in your restaurant is worth far more than a guest who books a $220 rate and never leaves their floor. RGI doesn't see that. TRevPAR does.

GOP PAR — Gross Operating Profit Per Available Room. Revenue is vanity. Profit is sanity. A hotel running high occupancy at discounted rates with bloated payroll might have great RGI and terrible GOP. Which number actually pays the bills?

Direct Booking Ratio. What percentage of revenue comes direct versus through OTAs? This tells you about brand strength, loyalty program health, and long term margin sustainability. A hotel with 80% OTA dependency and great RGI is a fragile business dressed up in a good-looking report.

Guest Retention Rate. How many guests come back? This is the most underused metric in hospitality and arguably the most honest one. You can game almost every other number. Retention is harder to manipulate - though it's worth acknowledging that loyalty points and status matching can artificially inflate return rates without genuine satisfaction driving them. Strip those out and look at what's left. That number tells you the truth.

Now here's an idea the industry isn't talking about yet.

What if instead of comparing RevPAR - revenue per available room - hotels started comparing revenue per square meter of accommodation space?

A 25 square meter standard room generating $150 a night is performing very differently from a 90 square meter suite generating $300 a night. The suite looks impressive in a RevPAR report. But per square meter? It's actually underperforming the standard room significantly.

Now apply that logic to your entire comp set.

That hotel with villas? Suddenly the comparison gets very honest very fast. Those large apartments your GM keeps mentioning as an excuse? Let's see how they perform per square meter. The all-suite property that always beats you on ADR? Run the numbers.

Revenue per square meter strips away the excuses. It normalises for the one thing that actually defines your physical product - space. It doesn't care how many rooms you have, what category they are, or how creatively someone packages their F&B into their rate.

It just asks one simple question: how hard is every square meter of your hotel working for you?

Is this metric widely used today? No. Should it be? Absolutely. And I'd argue it's only a matter of time before someone builds the benchmarking tool to prove it.

So what's the best benchmarking solution?

Here's my honest answer: there isn't one single metric. There never will be.

The moment you pick one number to judge performance, smart people find ways to make that number look good while the actual business quietly suffers.

The best benchmarking is a dashboard of metrics that together tell the whole truth:

Revenue per square meter - normalises for your physical product.

GOP PAR - because revenue without profitability is just an expensive ego trip.

TRevPAR - captures the full guest spend, not just the room.

Direct booking ratio - measures brand strength and long term margin health.

Guest retention rate - the most honest verdict on whether your hotel is actually good.

And here's the order that matters: benchmark against your own last year first. Your budget second. Your comp set third.

Your biggest competitor isn't the hotel down the street. It's your own potential.

So why hasn't the industry moved on?

Because RGI is simple. It's one number. It fits in a PowerPoint slide. It's easy to present to an owner who doesn't want a dashboard - they want a verdict.

The hospitality industry has a chronic allergy to complexity in reporting. Which is ironic given how complex the actual business is.

The real solution isn't just better metrics. It's better financial literacy at ownership and board level. Until owners start asking better questions, operators will keep giving them the easy answer.

And everyone will keep sitting in that Monday morning meeting.

Explaining why the RGI isn't their fault.

Stop explaining your RGI. Start explaining your business. And maybe (just maybe) start measuring it better.

For a real world example of how commercial strategy plays out on the ground - and what happens when hotels get the environment completely wrong - read Three Resorts. One Beach. One Winner.

xoxo, Bored Hotelier 😉