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Revenue per Available Room (RevPAR) is a key figure in the hotel industry that is used to measure the performance of a hotel. The measurement is calculated by multiplying the average daily room rate (ADR) of a hotel by its occupancy rate. RevPAR is also calculated by dividing the total room revenue of a hotel by the total number of available rooms in the measured period.
An increase in the RevPAR of a hotel most likely indicates an improvement in the occupancy rate.
RevPAR is a hotel industry metric used to evaluate a property’s ability to fill its available rooms at an average rate. An increase in the RevPAR of a property means that either the average room rate or the occupancy rate has improved. However, an increase in RevPAR does not necessarily mean better performance.
RevPAR does not take into account the size of a hotel. Therefore, RevPAR alone is not a good measure of overall performance. A hotel can have a lower RevPAR but still have more rooms that generate higher revenue. In addition, certain larger rooms (e.g. penthouses) can compensate for lower-value rooms that are unoccupied or unavailable.
Like other financial ratios, RevPAR is best used as a comparative tool. A hotel can compare its own RevPAR statistics over time to see if the metric fluctuates with the seasons or changes based on consumer preferences. In addition, RevPAR can be used to compare yourself to other hotels in the area to get a better understanding of how one hotel compares to others. Please note that this financial benefit is limited to sales only and does not include expenses.
It can be difficult to compare RevPAR with other hotels as revenue and occupancy information may not be readily available. Management must therefore be prepared to set internal RevPAR targets.
There are two ways to calculate RevPAR. First, the hotel management can take the total amount of room rental revenue and divide it by the total number of available rooms that could be rented out. Note that the total number of available rooms includes rooms that were available but not occupied for this calculation.
Alternatively, hotel management can calculate RevPAR by taking the average daily sales price and multiplying it by the occupancy rate. This method is more accurate and better suited for fully occupied hotels with limited unavailable rooms, as it is based on total occupancy rather than total availability.
Each formula results in a dollar amount that is theoretically lower than the actual daily rate (since a hotel should not be occupied, or at least not over 100% occupied).
An increase in RevPAR means that a hotel earns more money for each available room. There are many ways in which hotel management can strive for these improvements:
Some hotels require a minimum stay if their rooms are booked by a third-party provider (e.g. Expedia). To compensate for the fees they have to pay to the third-party booking company, the hotel can earn more money by asking for a longer stay.
RevPAR is a common metric that is useful for comparing figures across brands and locations. However, RevPAR does not use profitability measures or information about profits. Focusing solely on RevPAR can therefore lead to declines in both sales and profitability, as it does not take expenses into account.
Many hotel managers prefer to use the average daily rate as a performance measure, as it is one of the main drivers of hotel occupancy. Therefore, if rooms are priced correctly, the occupancy rate should increase and the RevPAR of a property should also naturally rise. Properties can also choose a similar but slightly different formula by considering only the occupied rooms and measuring RevPOR.
In addition, there are several other “per available room” key figures in the hotel industry, such as TRevPAR (Total Revenue Per Available Room), ARPAR (Adjusted Revenue Per Available Room) and GOPPAR (Gross Operating Profit Per Available Room), which each take different aspects of hotel performance into account.
