The hotel industry has spent decades building a sophisticated framework for revenue performance measurement. Short-term rental operators, by contrast, have largely relied on raw occupancy rates and revenue totals. This is a missed opportunity. One hotel metric in particular — the Market Penetration Index — translates directly to the STR context and provides insights that raw occupancy alone cannot.
Where the Market Penetration Index comes from
The Market Penetration Index, or MPI, originated in hotel revenue management as a way to measure how effectively a property is capturing its fair share of market demand. It is a relative measure — not how high your occupancy is in absolute terms, but how it compares to the market average.
An MPI of 100 means you are capturing exactly your fair share of market demand. Above 100 means you are outperforming. Below 100 means you are underperforming relative to what the market is producing.
How to calculate STR MPI
For example: if your property achieves 65% occupancy in a market where the average is 58%, your MPI is 112.1 — you are capturing 12% more than your fair share of demand.
Revenue Generation Index (RGI) for STR
The Revenue Generation Index extends the same logic to RevPAR:
The RGI is the most comprehensive single measure of competitive performance because it accounts for both pricing and demand capture simultaneously. An RGI above 100 confirms that you are generating more revenue per available night than the average competitor in your market.
How to use these indices in practice
Use MPI and RGI as diagnostic tools, not just performance scorecards. The combination of the two reveals specific strategic positions:
| MPI | RGI | What it means |
|---|---|---|
| High (>100) | High (>100) | Outperforming on both demand capture and revenue generation. Ideal position. |
| High (>100) | Low (<100) | Filling nights but at lower rates than market average. May be underpriced or attracting lower-value demand. |
| Low (<100) | High (>100) | Pricing above market average and accepting lower occupancy. Viable luxury positioning if RevPAR holds up. |
| Low (<100) | Low (<100) | Underperforming on both dimensions. Fundamental review of pricing, listing quality, and positioning warranted. |
Using these indices for owner reports
MPI and RGI are particularly effective in owner-facing reporting because they contextualise performance in a way that raw numbers cannot. Telling an owner that RevPAR was $95 last month is informative. Telling them that the property achieved an RGI of 108 against a market that averaged $88 RevPAR communicates genuine outperformance in language that is harder to dismiss.
Owners respond to relative performance more strongly than absolute numbers. An RGI of 112 in a tough market tells a more compelling story than a raw RevPAR figure without context.
MPI and RGI calculated automatically
BNBinsights tracks your market penetration and revenue generation indices against your comp set — the kind of analysis that used to require an analyst, now automatic.
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