how to improve revpar
increasing revpar means a hotel is earning more money for every room it has there are many ways hotel management can strive to make these improvements some hotels require a minimum stay should their rooms be booked by a third party i e expedia to compensate for the fees they ll need to pay the third party booking company the hotel can earn more money by requiring a longer stay alternatives to revparrevpar is a common metric useful in comparing figures across brands and locations however revpar does not use any profitability measures or information on profits focusing solely on revpar therefore can lead to declines in both revenue and profitability as it does not inform users of expenses many hotel managers prefer to use the average daily rate as a performance measure since it is among the main drivers of hotel occupancy therefore with accurately priced rooms the occupancy rate should increase and a property s revpar should also naturally increase properties may also opt for a similar but slightly different formula by only considering the occupied rooms and measuring revpor in addition there are several other per available room metrics used in the hotel industry total revenue per available room trevpar is similar to revpar however it also includes revenue earned by amenities such as spas pools entertainment areas and restaurants though trevpar faces the same downside as revpar by not considering expenses it also gives a greater holistic view about what revenue is earned for every available room calculation total revenue number of available rooms begin aligned textit calculation frac textit total revenue textit number of available rooms end aligned calculation number of available roomstotal revenue adjusted revenue per room factors in variable costs and variable revenue it manipulates average daily rate by subtracting the variable expenses such as the cleaning utility water internet tv and supplies expenses however arpar also factors in additional revenue such as room service that may otherwise be subtracted from revpar arpar starts to factor in expenses though it still omits many overhead costs needed to operate a hotel calculation adr vcpor arpor or where adr average daily rate vcpor variable cost per occupied room arpor additional revenue per occupied room or occupancy rate begin aligned textit calculation adr textit vcpor textit arpor times textit or textbf where text adr text average daily rate text vcpor text variable cost per occupied room text arpor text additional revenue per occupied room text or text occupancy rate end aligned calculation adr vcpor arpor orwhere adr average daily ratevcpor variable cost per occupied roomarpor additional revenue per occupied roomor occupancy rate gross operating profit per available room takes a larger view at an operating property by factoring in even more expenses especially those for rooms that are not occupied the downside to goppar is it may include expenses that are not controllable by hotel management calculation gross operating profit number of available rooms begin aligned textit calculation frac textit gross operating profit textit number of available rooms end aligned calculation number of available roomsgross operating profit revpar exampleimagine a hotel has a total of 150 rooms of which the average occupancy rate is 90 the average cost for a room is 100 a night a hotel wants to know its revpar so it can accurately assess its performance the hotel manager can calculate the revpar as follows 100 per night 90 occupancy rate 90 begin aligned 100 text per night times 90 text occupancy rate 90 end aligned 100 per night 90 occupancy rate 90 the hotel s revpar is therefore 90 00 per day to find the monthly or quarterly revpar multiply the daily revpar by the number of days in the desired period this calculation assumes all rooms are the same price the hotel manager can make key assessments and decisions regarding the hotel property based on the revpar the manager can see how well the hotel is filling its rooms and how wisely the average hotel room is priced with a 90 revpar but a 100 average room the hotel manager could reduce the average rate to 90 to help realize full capacity 