Performance & revenue
MPI
Also written: market penetration index
What MPI means
Market Penetration Index measures a hotel's occupancy performance relative to a defined competitive set. An MPI of 100 indicates the hotel is capturing its fair share of market demand, while scores above or below 100 represent over-performance or under-performance, respectively.
Formula
MPI = (Hotel Occupancy % / Competitive Set Occupancy %) × 100
How it is used
Revenue managers track MPI to evaluate commercial strategy independently of pricing. A low MPI with a high Average Rate Index (ARI) suggests an aggressive rate strategy that sacrifices volume, whereas a high MPI with low ARI indicates rate discounting to fill rooms. Operations teams use sudden drops in MPI to identify service failures or deteriorating channel distribution. Investors and asset managers analyze historical MPI trends during acquisitions to assess whether a property is maximizing its physical capacity compared to market peers.
Worked example
A 200-room hotel achieves an 80% occupancy rate during October. Its five-property competitive set averages 72% occupancy over the same period. The hotel's MPI is calculated as (80 / 72) × 100 = 111.1. This demonstrates the property captured 11.1% more than its fair share of market demand.
Common mistake
Relying on MPI without cross-referencing ARI and RGI can lead managers to misinterpret high room volume as total commercial success while severely undercutting profitability.