Revenue Per Available Room
RevPAR is used to assess a hotel’s ability to fill its available rooms at an average rate. If a property’s RevPAR increase, that means the average room rate or occupancy rate is increasing. It is one of the key metrics used in the hospitality industry to measure hotel performance. RevPAR should not be the only metric you rely upon, as it doesn’t take into account other revenue generators at your hotel such as food and beverage, spas, gyms, or other amenities; or retail sales. RevPAR can also differ widely by market, segment, and timing. It is a representation of the success your hotel is having at filling and/or maximising the value of your rooms.
Moreover, increase in RevPar is not resulting in higher hotel profits, due to the fact that Revpar is not using profitability measures or information profits. If a business focuses only on RevPar, it can result to revenue decline. The average daily rate is usually preferred by hoteliers as a performance metric, since it is a clearer indicator of hotel occupancy.
How do you calculate RevPar?
There are two formulas you can use to calculate RevPAR:
- Rooms Revenue / Rooms Available
- Average Daily Rate x Occupancy Rate