What is RevPAR?
The hotel industry features a lot of jargon, and if you’re not familiar with all of it, you can feel a little overwhelmed. But if you were to learn and understand just a few key terms or phrases, RevPAR should be right at the top of the list. Very simply, revenue per available room is the gold standard performance metric used by hotel industry stakeholders to measure the health of a property, set of hotels, market, state, country, world region, etc.
Why? RevPAR enables you to understand performance success across any given time period as well as the money being made in relation to potential.
Plus, calculating RevPAR is straightforward – using the percentage of available rooms sold (occupancy) and the rate charged for those rooms (average daily rate or ADR).
How RevPAR can benefit your business
Hotels have plenty of avenues for generating money from room service to guest experiences, but room sales are always going to provide the biggest revenue stream—and should always be the primary business focus. There’s two ways to increase revenue from room business: bring in more guests (and drive occupancy) or charge a higher room rate. RevPAR helps you achieve balance between these two options to achieve your optimal performance levels and keep growing.
The logical next step, once you understand your RevPAR, is to compare your performance with your market or competitor—this is known around the industry as benchmarking. Every day, our hotel clients across the globe are comparing their KPIs against their market via our free hotel survey report or with a chosen set of their competitors via dSTAR.
In a nutshell, RevPAR puts performance into context. When hoteliers compare themselves to their competition, they are better placed sell the right rooms to the right people at the right time and price. And as a result, RevPAR is more likely to grow.
Taking immediate action with RevPAR insights
RevPAR is a comprehensive snapshot of how well you are attracting guests and the effectiveness of your pricing strategy—think of it as an instant “health check” on your room business. Analyzing over time guides your business’ short- and long-term decisions as well as growth of market share.
As with any measure of growth or decline, the most common approach is to track changes against the same period in the previous year(s). Imagine that your city hosts the same festival each summer, and last year your bookings were higher than anticipated. This year you decide to raise rates to capitalize on this opportunity. Well, analyzing RevPAR will indicate whether this approach was a success.
If RevPAR increased, you’ve learned that occupancy levels were comparable to last year and increasing room rates was a great idea. But if your occupancy decreased and the event attendance was similar, this indicates that your target guests found better deals at competing hotels. As you can see from this example, RevPAR is the clearest indicator of your hotel’s market share.
Of course, there are many other factors at work, and this is why benchmarking is vital. Just because your RevPAR fell by 2% doesn’t mean you’re in crisis. What if the competition experienced a 4% drop? In this instance, your strategy is limiting the impact of whichever external factors are affecting the rest of the market.
These are the kind of quick insights you can share with colleagues and team members to ensure everyone is informed and pulling in the right direction.
RevPAR’s ease of accessibility
RevPAR is particularly helpful to hoteliers as it is both simple and comprehensive, while being easy to access. STR requires only 3 pieces of information to report on hotel occupancy, ADR and RevPAR: number of available rooms, number of rooms sold in a given time period and the revenue those rooms generated. Submit data and receive reports on a monthly, weekly and even daily basis—it’s really as easy as that! Reliable and accurate data is then delivered to you in a timely manner.