Key Performance Metrics
What Is RevPAR? A Quick Guide For Hotel and Motel Managers
The accommodation industry is full of acronyms and abbreviations and it can be difficult to remember them all. When it comes to key performance metrics though, it’s worth making sure you’re familiar with a few of the more crucial terms. One of those measures is RevPAR. It’s one of the most useful indicators for hotel and motel managers so we’ll take a look at the RevPAR definition and formula, explain why it’s important and provide five actionable strategies to increase it.
What is RevPAR?
RevPAR meaning Revenue Per Available Room, is a vital metric in the hotel and motel industry. It is the total revenue generated, within a specific time frame, by each available room in your property and it is a measure of a property’s ability to fill its available rooms at an average rate. Simply put, RevPAR combines room occupancy and average room rate (ARR) to assess how well a hotel or motel is performing. It provides a snapshot of a property’s financial health and operational efficiency.
The RevPAR Formula
RevPAR can be calculated using two different methods:
- RevPAR = Total Room Revenue / Number of Available Rooms
- RevPAR = Average Daily Rate (ADR) x Occupancy Rate
Both formulas will yield the same result, giving you a clear picture of your property’s revenue-generating ability.
Example Calculation:
- If your hotel has 100 rooms, and during a specific period, 75 rooms are occupied (occupancy rate = 75%) at an average daily rate of $120, your RevPAR calculation would be:
- RevPAR = $120 x 0.75 = $90
Alternatively,
- 75 x $120 = $9000 in total room revenue
- $9000 / 100 rooms available = $90
Why is RevPAR Important?
RevPAR is crucial for a number of reasons. As a top line indicator of performance, it’s one of the easiest and most insightful metrics to track. But as it’s also an ‘industry standard’ measure, it can also be a great way to benchmark how you’re doing against your competitors and what the opportunities are for improving your RevPAR. The most obvious benefits of understanding your revenue per available room are:
- Performance Indicator: It provides a comprehensive measure of a hotel’s revenue performance, considering both occupancy and room rates.
- Benchmarking: Helps in comparing the performance of your property against competitors or industry standards.
- Revenue Management: Assists in making informed pricing and marketing decisions to optimise revenue.
- Identify Trends: It can be used to identify trends so that you can adjust your marketing or pricing strategy during certain periods.
- Operational Efficiency: Highlights the effectiveness of marketing and sales strategies, prompting necessary adjustments.
5 Ways to Increase Revenue Per Available Room
While it’s just one metric in a suite of KPIs that you will want to measure, understanding your RevPAR will help you to drive revenue, manage costs and ultimately build profitability. So once you understand what your current RevPAR performance is, you can then go about identifying how you could improve on this.
- Optimise Pricing Strategy: Implement dynamic pricing models that adjust room rates based on demand, seasonality, local events, and competitor pricing. Use data analytics to forecast demand and set optimal rates.
- Enhance Marketing Efforts: Invest in targeted marketing campaigns to attract diverse customer segments. Utilise social media, email marketing, and partnerships with travel agencies to reach a broader audience and increase bookings.
- Improve Guest Experience: Focus on delivering exceptional guest experiences to encourage repeat visits and positive reviews. Invest in staff training, upgrade amenities, and offer personalised services to enhance guest satisfaction.
- Implement Upselling and Cross-Selling: Train your staff to upsell premium rooms and amenities during the booking process. Additionally, promote ancillary services such as dining, spa treatments, and local tours to boost overall revenue.
- Invest in Technology: Utilise property management software (PMS) to streamline operations, track performance metrics, and manage bookings efficiently. Implement a user-friendly booking engine on your website to reduce dependency on third-party booking platforms and increase direct bookings.
Understanding and tracking RevPAR is essential for hotel and motel managers aiming to maximise revenue and ensure long-term success. By optimising pricing strategies, enhancing marketing efforts, improving guest experiences, implementing upselling techniques, and investing in technology, you can effectively increase your RevPAR and drive your property’s growth. Keep a close eye on this critical metric and continuously adapt your strategies to stay ahead in the competitive hospitality market.
How Can GuestPoint Assist You?
Within the GuestPoint Property Management System (PMS) your RevPAR is calculated for you. This can be found in your dashboard or your reports. Saving you the time of having to calculate this, and also automatically updates for you if pricing changes. Our system has a variety of reports that provide in-depth insight into your property. Showing the importance of our comprehensive reporting system available in every GuestPoint PMS.
Simplify your operations, manage your revenue, and create great experiences with GuestPoint.
