New performance indicators for restaurant revenue management: ProPASH and ProPASM

Abstract

Measuring business performance is the first step of the improvement process but without knowledge there can be no purposeful action. Revenue per Available Seat Hour (RevPASH) is an effective and reliable indicator of a restaurant's performance, however, it may not provide the whole picture of a restaurant's business performance. In restaurants, the contribution margin of each menu item is different and it should be taken into consideration when evaluating restaurants’ performance, because the goal of restaurant revenue management is to maximize profit, not just revenue. Although several researchers have explored various issues regarding restaurants’ revenue management (RM) strategy, there has been little discussion on how to measure the performance of RM strategies as they apply to restaurants, except RevPASH. Therefore, this study proposes new metrics, ProPASH (Profit per Available Seat Hour) and ProPASM (Profit per Available Square Meter) and discusses how they can be applied to measure the effectiveness of restaurants’ RM strategies.