Insights / Reference
Hospitality KPI glossary
Defined as operators use them, with the calculation and the trap that most often makes each one wrong.
Restaurant
Food, beverage and labour
| Term | Calculation | What it tells you, and where it goes wrong |
|---|---|---|
| Prime cost | (Cost of sales + total labour) ÷ net sales | The single most useful restaurant number, because it covers the two costs that move weekly. Goes wrong when payroll taxes and benefits are excluded from labour — that understates it by two to four points. |
| Theoretical food cost | Recipe cost × items sold | What food cost should have been. The gap against actual is waste, theft, over-portioning or mispricing. Useless unless recipes are current — a costing from eighteen months ago measures nothing. |
| Average check | Net sales ÷ covers | Separates traffic growth from price growth. Goes wrong when covers are counted as tickets — a two-top and a party of eight are not the same cover count. |
| Sales per labour hour | Net sales ÷ hours worked | Productivity independent of wage rate, which makes it comparable across units in different wage markets. |
| Comp, void and discount rate | Comps + voids + discounts ÷ gross sales | Where restaurant losses hide. Worth watching by server and by daypart, not as a single blended figure. |
| Four-wall contribution | Unit revenue − all unit-level costs, before group overhead | The honest measure of whether a location earns its place. Goes wrong when group overhead is allocated in — that measures the allocation method, not the restaurant. |
Lodging
Rooms, profit and conversion
| Term | Calculation | What it tells you, and where it goes wrong |
|---|---|---|
| ADR | Rooms revenue ÷ rooms sold | Rate achievement. Goes wrong when complimentary and house-use rooms are left in the denominator, which drags the rate down artificially. |
| RevPAR | Rooms revenue ÷ rooms available | Combines rate and occupancy into one figure, which is why it is the standard comparison. It says nothing about profit — RevPAR can rise while GOP falls. |
| TRevPAR | Total revenue ÷ rooms available | Captures food, beverage and other departments. The better measure for full-service and resort properties where rooms are under half of revenue. |
| GOP | Total revenue − departmental and undistributed expenses | Profit before fixed charges and ownership costs. The number a management company is generally measured on. |
| Flow-through | Change in GOP ÷ change in total revenue | How much of each incremental revenue dollar reached profit. The most diagnostic lodging metric and the least used. Below roughly 40% on a revenue gain means cost grew with volume in a way it should not have. |
| CPOR | Rooms department expense ÷ rooms sold | Cost per occupied room. Rising CPOR alongside rising occupancy usually points at labour scheduling rather than at demand. |
| USALI | — | The Uniform System of Accounts for the Lodging Industry: the standard presentation brands, lenders and asset managers expect. Reporting outside it triggers rework at every review. |
Payroll, tax and calendar
Terms that cause the most trouble
| Term | What it means and why it matters |
|---|---|
| Tip credit | The amount of an employee's tips an employer may count toward the minimum wage obligation. Rules vary by state and several states allow none at all. Applied incorrectly across a multi-state group it becomes a wage claim. |
| FICA tip credit | A federal income tax credit for the employer share of Social Security and Medicare paid on reported tips above the minimum wage threshold. Frequently unclaimed — it is real money left on the table every year. |
| Form 8027 | The annual return for large food and beverage establishments reporting tip income and gross receipts. Triggered by employee count and tipping customarily occurring; missing it invites examination. |
| Service charge vs gratuity | A mandatory service charge is wages, not a tip — it is subject to payroll tax and generally cannot be counted toward tip credit. Getting this backwards is one of the most common and most expensive hospitality payroll errors. |
| 4-4-5 calendar | A fiscal structure of 4, 4 and 5-week periods per quarter, so each quarter contains thirteen weeks and comparisons hold. Requires a stated period calendar or reporting becomes ambiguous. |
| Deferred revenue | Cash collected before the service is delivered — event deposits above all. It is a liability until the event occurs. Recognising it on receipt overstates profit now and creates a hole later. |
| Percentage rent | Additional rent owed once sales exceed a stated breakpoint. Belongs in occupancy, accrues as sales are earned, and should never be left to a year-end true-up. |