What is RevPAR? Understanding Hotel Performance
If you’re new to the hotel industry or simply researching ways to improve your hotel’s occupancy, you’ve probably begun to see the term “RevPAR.” In this post, we will share how RevPAR is calculated and how Travel Media Group solutions allow you to use this information to fill empty rooms and increase revenue.
What is RevPAR?
RevPAR simply means Revenue Per Available Room. RevPAR is used to assess daily performance based on how many rooms are usually filled and how much the average daily room rate is. RevPAR does not take into account specific room types and rates and actual occupancy.
RevPAR is calculated by multiplying the Hotel ADR times the occupancy rate. If a hotel charges, on average, $80 per night and usually fills 45 of their 50 rooms (or, 85% occupancy), their RevPAR would be calculated:
Hotel A: $80 per night x .85 = $68 revenue per available room.
Comparing Hotels by RevPAR
The key to using RevPAR as a metric is to understand it as a shorthand for your property and realize that it doesn’t provide all the necessary information to compare one property to another.
For instance, the hotel in the example above has $68 RevPAR. Depending on occupancy, $68 RevPAR can mean very different things. Consider these other hotels with the same RevPAR:
Hotel B: $72 per night x .94 = $68 RevPAR
Hotel C: $113 per night x .60 = $68 RevPAR
You can see that all three hotels have the same RevPAR but are performing wildly differently. In addition, the actual number of available rooms has a huge impact on what these numbers mean.
Hotel A: $68 RevPAR x 75 rooms = $5800
Hotel B: $68 RevPAR x 30 rooms = $2,040
Hotel C: $68 RevPAR x 125 rooms = $8,500
Individually, these hotels could look at their RevPAR and make decisions about their daily rates. However, if you owned two hotels you wouldn’t compare one to the other using RevPAR. There are too many other factors that vary, such as a number of rooms and operating costs, for this to be an accurate way to compare businesses.
Why Use RevPAR?
If the results vary so much, why use RevPAR? It’s helpful for making quick decisions and understanding how your property is doing at a glance. If your RevPAR is $70 and you have 100 rooms, you can use $7,000 as a benchmark of what you expect to bring in on a given night. Monitoring RevPAR helps you to accurately price rooms, improving your occupancy, which in turn can increase your RevPAR.
Get More Out of Your RevPAR Calculation
RevPAR helps hoteliers assess daily hotel performance. Learn how to calculate your RevPAR and use this information to vacant rooms and increase revenue. Another consideration when calculating RevPAR is knowing how much you have to pay in OTA commissions for bookings. With direct bookings on your website, you get to keep the revenue earned. If you lean on OTAs to fill your rooms, you then have to pay for your hotel room revenue. Travel Media Group hospitality media specialists utilize a proprietary revenue calculator to find out exactly how much OTA fees are cutting into your bottom line revenue. They can show how reducing dependence on OTAs impacts hotel revenue.
In addition, hotels that list their property on HotelCoupons.com can use SMS texting to update their rate daily. If it seems like a low occupancy day, with just one text they can drop their rate to encourage same-day travelers to fill empty rooms.
Finally, studies have shown that improving online review scores can allow you to raise the daily rates of your hotel without hurting the occupancy rate. The Travel Media Group revenue calculator allows us to show you the potential change in RevPAR when online reputation is improved.
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