RevPAR (revenue per available room)

It is useful to always state the revenue in net figures so that the comparative value is not falsified. If the hotel has increasing lodging turnover, this has a positive effect on sales. Because either the average room rate or occupancy increases. Through the analysis, you can understand how to maximize revenue in the hotel.

‍

‍

What exactly is RevPAR?

In the area of Revenue Management Is the RevPAR one of the most important business figures. In addition to occupancy, the daily rate (Average daily rate) and turnover. These parameters provide conclusions about the hotel's past and future developments. When looking at it, it should be noted that you can calculate this from a variety of time periods. This allows you to calculate the value for a day, a month, a quarter, or a year. Anyone who has not yet used the revenue in their hotel for performance analysis should definitely do so! Because it is also relevant for investors or for financing at banks. Depending on the market, target group and season, there can be strong upward or downward fluctuations. It should therefore always be used as a basis for analysis in hotels with other key metrics. Since the hotel market can be influenced by various influences, such as holidays, trade fairs or conferences, it is important to have control over your key performance indicators to ensure economic success.

‍

You can calculate the lodging revenue in two different ways:

RevPAR = lodging turnover / sum of available rooms

RevPAR = Current daily rate x utilization in %

‍

‍

RevPAR calculation

‍

‍

‍

In the following example, our hotel has 100 rooms of which 50 are occupied, with a daily rate of €70. This results in a turnover of €3,500 with a workload of 50%. The revenue per available room rate is calculated as follows:

• €3,500/100 = €35
• €70 x 0.5 = €35

The example hotel has a revenue of €35.

Problem

To compare prices, revenues and sales, the revenue per available room rate is one of the most suitable indicators. But he has a teacher — economic profit.

‍

An example should better illustrate this:

Hotel A and Hotel B both have 100 rooms. Both hotels always rent out their rooms on the same day:

• Hotel A rents 100 rooms for €50
• Hotel B rents out 50 rooms for €100

As a result, both hotels achieve a turnover of 5,000€ with a RevPAR of 50€. As a result, both hotels have the same value in comparison. However, the gross profit is completely different. Since Hotel A rents out 100 rooms and therefore 50 more rooms than Hotel B, this results in more variable costs. As already mentioned, the cost factor is one of the weak points of RevPAR analysis and the neglect of additional sales.

‍

RevPAR Index

RevPAR Index, is a key figure based on your hotel's RevPAR and that of your competitor. By calculating the RevPAR Index, the hotelier recognizes how good their sales and revenue management strategies are compared to their competition. The RevPAR index is calculated from the competitors' average RevPAR and your own RevPAR.

RevPAR Index = RevPAR/RevPAR Competitor x 100

example:

One hotel has a RevPAR of 100€, the average RevPAR offered by competitors is 90€

100€/90€ x 100= 111.11

If the RevPAR index is above 100, you have more market share compared to your competitors. If the RevPAR index is among them, you should think about investments or marketing activities so that you get more market share again.

‍

TrevPAR

In contrast to RevPAR, TrevPAR (Total Revenue per available room) includes all revenue that consists of lodging, catering and additional sales. As already mentioned, RevPAR is used much more often in the hotel industry than TrevPAR. The advantage, however, is that it not only focuses on accommodation but also includes other revenues. The TrevPAR thus provides a better overall overview, as catering, wellness, conference and banquet sales as well as application revenue are also considered. As a result, additional consumer sales such as cash are completely neglected at RevPAR. However, especially for full hotels and holiday hotels, these are revenues that are closely linked to hotel occupancy.

‍

TrevPAR calculation

‍

‍

‍

The TrevPAR is calculated as follows:

• TrevPAR = total revenue/sum of available rooms

In the following example, our hotel has 100 rooms of which 50 are occupied, with a daily rate of €70. On average, €10 in additional revenue from F&B and wellness areas is added per room. This means a total turnover of €4000. The TrevPAR is calculated as follows:

• €4000/100 = €40

The example hotel has a TrevPAR of €40.

‍

ARPAR

RevPAR and TrevPAR are good indicators for comparability with other hotels, but they don't say anything about profitability. Both neglect the costs incurred. The ARPAR (Adjusted Revenue per Available Room) is very suitable for this. So that the efficiency of hotel operations can be assessed, the ARPAR also includes the variable costs per room occupancy. This analysis is very useful because it can refute the assumption “main workload”.

‍

ARPAR calculation

‍

‍

The ARPAR is calculated as follows:

ARPAR = (ADR — cost per occupied room + additional revenue per occupied room) * occupancy

In the following example, Hotel A has 100 rooms of which 100 rooms are occupied for 50€ and Hotel B also has 100 rooms of which 50 rooms are rented out for 100€. Both hotels have variable costs per room occupancy of €20 and additional sales per room of €10.

• ARPAR Hotel A = (€50 — €20 +€10) *1
• ARPAR Hotel B = (€100 - €20 + €10) *0.5

Hotel has an ARPAR of €40 and Hotel B of €45. Hotel B is therefore more economical, although both hotels have the same RevPAR of €50.

‍

‍

conclusion

Room prices, rates and occupancy influence each other. RevPAR can be used to determine which price/workload ratio makes the most sense. As a result, it is arguably the most important indicator in the area of revenue management within the hotel industry and serves as a recognized benchmark and the price optimization. The value is therefore more suitable as a comparative value among hotels than the pure average daily rate. RevPAR offers great added value because you can compare hotels with high occupancy and low rates as well as hotels with low occupancy and high rates. The extension would be TrevPAR (Total Revenue par available Room), which includes not only lodging turnover but also additional sales, application revenue and F&B revenue in the calculation. The extension of this would be ARPAR (Adjusted Revenue per Available Room), which also includes costs and is therefore even more relevant from a business perspective, as it can be used to represent the profitability of a hotel. Every hotel should have its KPI, such as RevPAR, TrevPAR, and ARPAR budgeting so that they are subject to continuous performance monitoring. By mastering the key figures in revenue management, you can counteract the increasing complexity of the competition for the best room rate.

‍

‍