TITLE:
Stress Testing Key Performance Indicators: A Monte Carlo Approach to Hospitality Industry Resilience
AUTHORS:
Rohan Alibhai, Jameson Augustin
KEYWORDS:
Monte Carlo Simulation, Hospitality Finance, KPI Stress Testing, RevPAR, Occupancy Rate Volatility, Financial Modeling in Hospitality, Resilience Modeling, Risk Analysis, Stochastic Modeling in Tourism, Scenario Forecasting, Gross Operating Profit, Quantitative Hospitality Research
JOURNAL NAME:
Open Journal of Business and Management,
Vol.14 No.6,
November
13,
2026
ABSTRACT: In this study, we analyzed the response of two key performance metrics in the hospitality industry, i.e., Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR) to multiple adverse scenarios. Based on the Fairmont Southampton in Bermuda, which is owned by Gencom, the research uses the operational data from four years (from 2016 to 2019) to establish a Monte Carlo simulation model. The model develops scenarios representing both stable conditions (labeled “Business as Usual”) and high-volatility environments (“Turbulent Times”), in which external factors like global economic recessions or supply chain disruptions can sharply curtail demand. The study uses one thousand independent simulations per scenario to assess potential revenue declines both in likelihood and severity of potential revenue declines. While under most market conditions, ADR and RevPAR remain fairly stable, clustering around their historical means, extreme scenarios can generate considerable down-side risk with significant revenue shortfall potential, which is what the key findings reveal. VaR (Value at Risk) and ES (Expected Shortfall) metrics emphasise the probability of these losses as well as the subsequent damage after risk limits have been breached. It can be concluded that proactive strategies including dynamic pricing mechanism, diversifying income sources, and maintaining financial buffers are necessary for hotel resilience. These insights go beyond merely reinforcing the need for strong contingency planning, they also help guide Gencom and investors/partners on how we can develop strategies to withstand sudden market shocks.