If you’re managing or learning to manage a hotel, you’ve likely heard of REVPAR, but how well do you understand it? For those new to hospitality, it’s a key metric that stands for “Revenue Per Available Room.” It’s crucial because it provides a snapshot of how well a property is performing, combining both occupancy and average daily rate (ADR) into one simple figure. To calculate REVPAR, multiply your ADR by the occupancy rate (Hotel Tech Report). For example, if your hotel charges an average of $100 per night and has a 75% occupancy rate, your REVPAR would be $75.
Many accounting systems within the hospitality industry automatically calculate REVPAR, but do they go beyond that? Let’s deep dive into why REVPAR is important and look at some other useful metrics that you might want to consider.
Why REVPAR Matters
REVPAR is vital because it gives a clearer picture of hotel performance than simply looking at occupancy or ADR alone. A hotel could have high occupancy but charge very low rates, which may not be sustainable. Conversely, a hotel with a high ADR might struggle with low occupancy. REVPAR balances these two to help you gauge overall revenue efficiency (Amadeus Hospitality). It is also a benchmark widely used in the industry to measure success against competitors.
However, REVPAR has limitations. It doesn’t account for other revenue streams like food and beverage sales, spa services, or event bookings. That’s where alternative metrics come into play.
Alternative Metrics to Consider
While REVPAR is a great starting point, understanding the full picture of your hotel’s financial health requires additional metrics. Here are three other important KPIs (Key Performance Indicators):
1. TrevPAR (Total Revenue Per Available Room):
TrevPAR expands on REVPAR by incorporating total hotel revenue, not just room sales. This metric includes money spent on amenities like restaurants, bars, spas, or other services. For full-service hotels, where additional revenue streams are critical, TrevPAR is a more comprehensive measure of financial performance (Cloudbeds).
2. ARPAR (Adjusted Revenue Per Available Room):
ARPAR goes one step further by subtracting variable costs (like cleaning, guest supplies, and marketing) from total revenue (Wikipedia). The result is a clearer picture of how much profit each available room generates. This metric is particularly helpful for understanding how well your hotel is managing expenses in relation to revenue.
3. GOPPAR (Gross Operating Profit Per Available Room):
GOPPAR takes profitability into account by focusing on operational efficiency. It measures the hotel’s gross operating profit divided by the number of available rooms. Unlike REVPAR, GOPPAR gives you insight into your hotel’s profitability after operating costs. This can be a more telling figure, especially for properties with high operational expenses.
Do You Have the Right Tools?
The hospitality industry is increasingly relying on advanced software solutions that track multiple metrics, not just REVPAR. While many accounting systems can handle REVPAR, they may not calculate more nuanced metrics like TrevPAR, ARPAR, or GOPPAR. As you evaluate your accounting software, check whether it offers customizable reports and data analysis that include these alternative metrics. A system that provides comprehensive reporting will give you deeper insight into your hotel’s overall performance.
Conclusion
REVPAR is an essential metric for understanding how well your property is performing in terms of room sales, but it’s only one piece of the puzzle and the entry point to most financial metrics. To fully grasp your hotel’s financial health, especially if you’re managing a property with multiple revenue streams, it’s important to incorporate other metrics like TrevPAR, ARPAR, and GOPPAR. By using accounting software that tracks these metrics, you’ll have a more holistic view of your property’s profitability and operational efficiency. If your accounting software doesn’t have these metrics, you may be wasting time and money.
