Measuring hotel performance is an extremely important part of the revenue management process. For years, one of the key hotel performance indicators has been RevPAR, or Revenue Per Available Room. But should you now be taking other KPIs into consideration?
RevPAR represents the revenue generated per available room, whether or not the rooms are occupied. RevPAR helps hotels measure their revenue-generating performance to accurately price rooms. Since it’s such a widely used metric, RevPAR can help hotels measure themselves against other properties or brands through benchmarking services.
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The Problem with RevPAR
- RevPAR does not measure the profitability of a hotel, only top-line performance. It does not consider costs per occupied room (CPOR) or operational and distribution costs.
- RevPAR also does not account for any ancillary revenue from other departments such as catering, parking, or the spa.
- Total Revenue per Available Room (TrevPAR) takes into account total revenue of the property across all outlets, including the spa, the pool, and restaurants – providing your PMS and RMS can share this data. However, like RevPAR, TrevPAR fails to account for cost factors and occupancy rate.
- Net Revenue per Available Room (NetRevPAR) refers to the room revenue generated, minus any costs associated with distributing the room. As a KPI, it provides a picture of how successful a hotel is at making money from each of its available rooms, including some cost factors. It requires a hotel to know its distribution costs across all channels.
- Adjusted Revenue per Available Room (ARPAR) is similar to RevPAR, except that ARPAR takes into account revenue and costs per occupied room. It’s a great metric to measure the performance of revenue management and the overall effectiveness of a hotel’s pricing policy.
- Gross Operating Profit per Available Room (GOPPAR) is a strong indicator of performance across all revenue streams, it includes room variables like internet bills and hotel furniture costs that hotel managers have little control over. It looks at all rooms regardless of whether they are occupied or not.
The main issue with GOPPAR is that what is and isn’t included in the calculation of Gross Operating Profit is still fairly new.
Another issue with GOPPAR is comparing hotels with Food & Beverage to hotels without. Since the F&B profit percentage is different from that generated from guest rooms, the calculated percentages will likely differ between limited and full-service offerings. Therefore, it is important to compare similar hotel products when possible.
Whatever metrics you use, be sure to take a holistic view of your revenue management, work closely with other departments, and build a strategy based on driving total profitability based on total guest value.
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