RevPAR Meaning Explained: Learn How To Improve It
RevPAR is a key metric in the hospitality industry that provides valuable insights into room performance. It takes into consideration how many rooms are booked and at what rates. This metric not only shows current performance but also guides strategic decisions to maximize revenue. Let’s find out what RevPAR is and how it can help your business.
What is RevPAR?
RevPAR is an acronym commonly used in the hospitality industry, it stands for revenue per available room. With RevPAR, you can measure how much revenue each available room will bring.
RevPAR helps property owners see how well they are booking rooms and at what prices, combining both room rates and occupancy into one number.
This simple metric can help you increase your revenue by giving you an estimate. It can be the key factor in seeing what you need to do to improve and maximize your revenues.
How to calculate RevPAR
If you want to see how well your property is performing in a matter of minutes RevPAR is the right metric for you. Here’s how RevPAR is calculated:
RevPAR= Total room revenue / Number of rooms available
For example, you are managing your property and want to calculate your RevPAR for a specific date. On that day, you have 100 available rooms out of a total of 120 rooms, and your total room revenue for the night is $18,000.
$18,000 / 100 = $180
How do you know your RevPAR is good?
There are 5 factors that can help you evaluate your RevPAR, they are:
- Historical performance
- Market and competitor comparison
- Budget and goals
- Industry benchmarks
- Occupancy and ADR balance
To make sure your property is doing well, check if your RevPAR meets or exceeds your budget goals and how it compares to other properties in the industry. Aim for a good balance between occupancy rate and how much guests pay on average to keep your RevPAR strong. This way you can ensure a revenue increase.
What are some RevPAR mistakes?
RevPAR offers a clear picture of a property’s financial performance. However, when hoteliers analyze this metric and attempt to implement new revenue-boosting strategies, they can sometimes inadvertently achieve the opposite effect. To ensure the best results, it’s crucial to recognize and avoid common mistakes. Here are some frequent mistakes to watch out for:
1. Ignoring seasonal variations:
A common mistake is ignoring seasonal variations in demand. Different times of the year bring changes in occupancy rates. Failing to adjust pricing and marketing strategies accordingly can lead to missed revenue opportunities.
2. Overemphasis on occupancy rates:
Focusing too much on occupancy rates can be misleading. High occupancy doesn’t always mean high revenue if the rooms are sold at low rates.
3. Neglecting rate parity:
Neglecting rate parity can lead to pricing inconsistencies across distribution channels. This not only confuses potential guests but also undermines trust in your brand.
4. Inadequate competitor analysis:
Not analyzing your competitors well can lead to missed opportunities and poor pricing. Knowing how your competitors price their rooms and adjusting your rates helps you stay competitive and maximize RevPAR.
How to improve hotel RevPAR?
To achieve optimal balance among occupancy, revenue, and room costs, enhancing your property’s RevPAR is important. This is done by adjusting prices in response to demand fluctuations and seasonal trends. Implementing effective revenue management strategies can further help these efforts.
You can also diversify your distribution channels to increase the occupancy rates. HotelRunner can help you with that. Using the HotelRunner channel manager you can save time by updating every single OTA from one platform while increasing your revenues. Also, you can make smarter business decisions and realize your property’s true potential with HotelRunner Insights while accessing your competitors’ real-time prices on different sales channels with Competition Analysis. You can contact our team to learn more about the easy and profitable world of HotelRunner.
