Master RevPAR to improve your hotel's performance!

Do you manage a hotel establishment and have heard of RevPAR?

When it comes to developing your hotel's profitability, there are a number of measurement tools that can give you valuable pointers on what's working and what's not, enabling you to define or reinforce your strategy.

RevPAR is one of the most widely used indicators by hoteliers. By calculating revenue per available room, it helps you assess your hotel's performance and guide your strategic decision-making .

Learn how to calculate and analyze it now, and discover tips on how to boost your hotel's revenues at the end of this article!

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Hotel RevPAR: definition

What does RevPAR mean?

The acronym RevPAR stands for "Revenue Per Available Room".

ℹ️ ️One clarification here: we mean here that a room is available for guests to rent, not that it's vacant over the period in question.

RevPAR is a key performance indicator (KPI) in the hotel sector, as it provides visibility on the commercial and financial performance of an establishment. It indicates the number of rooms sold and the sales they generated.

💡 Interpreting it correctly supports your strategy, by understanding how to improve room occupancy and maximize the revenue they generate.

Difference with ADR and occupancy rate

RevPAR is derived from other data such as the average daily rate per room and the occupancy rate. It's important to know how to distinguish between them:

• Average daily rate (or ADR): this is the average rate for your rooms, i.e. the average revenue you generate per room sold. It is calculated by dividing the amount collected for all your rooms rented for one night by the number of rooms sold;

▶ ︎ E xample: if 50 rooms sold for one night bring in €5,500, then your ADR is €110.

• Occupancy rate: this is the percentage of rooms rented per night. It is calculated by dividing the number of rooms occupied for the night by the total number of rooms.

▶ ︎ E xample: if your hotel has 100 rooms and you have 50 rented, then your occupancy rate is 50%.

💡 You can also calculate the average occupancy rate over different durations (week, month, etc.), which will vary this figure depending on the period considered. We explain how to calculate it below.

Why monitor this indicator?

RevPAR has many advantages:

• it's very simple to calculate and monitor;
• it indicates the income you can expect for each available room;
• it gives a precise idea of your hotel's performance over the period studied;
• it allows you to validate or revise your strategy by adjusting the rates you charge for your services.

All in all, its proper use contributes to effective revenue management.

How do you calculate a hotel's RevPAR?

Calculation method no. 1

To calculate RevPAR, first multiply the average daily rate by the occupancy rate.

Formula RevPAR 1:

▶︎ Example:

Let's take the previous example:

• ADR = €110
• occupancy rate = 50%.
• RevPAR = €55.

Calculation method no. 2

The other calculation method consists of dividing the total sales from rooms rented for one night by the number of rooms available in your hotel.

RevPAR 2 formula:

▶︎ Example:

Let's take the previous example:

• total revenue generated for one night = 50 x 110 = €5,500
• total number of rooms available in your hotel = 100
• RevPAR = €55.

Calculating RevPAR for the year

RevPAR is most often calculated for one year. The time period to be studied is important to give the indicator its full relevance.

If you choose to track RevPAR by the year, you need to take into account :

• the average selling price of a room over the year and the average occupancy rate over one year,
• or the total sales generated by rooms over one year, and the total number of rooms available over one year.

▶ ︎ Let's take our example of a hotel with 100 rooms.

1. Calculate the number of rooms available over a year: 365 x 100 = 36,500 rooms available.
   
   
2. Then estimate the average occupancy rate by dividing the number of rooms rented in a year (let's imagine 25,000) by the total number of rooms available in a year (36,500). This gives an average occupancy rate of 25,000/36,500 = 0.68 (equivalent to 68%).
   
   
3. Finally, determine the revenue per available room: multiply the average occupancy rate we've just calculated by your annual ADR (let's say it's €105), which represents an annual RevPAR of 0.68 x 105 = €71.4.

How to analyze RevPAR?

To better understand and interpret RevPAR, it is commonly used to measure the health of :

• an establishment,
• a group of hotels
• a market,
• a geographical area, etc.

What information can be gleaned from it? To put it to good use, you can :

• track the performance of a hotel or chain over time;
• evaluate any difference between your actual and potential revenues;
• compare your data with those of establishments in the same market segment.

When performing your analysis, here are a few best practices:

• don't use the RevPAR indicator to assess your hotel's profitability, but rather to gauge its business performance;
  
  
• understand the figures in context: for example, if RevPAR is naturally high for the luxury hotel industry, this does not necessarily mean that these establishments are better revenue generators than hotels in lower segments with a lower indicator;
  
  
• make sure you also consider your other sources of revenue (such as spas, breakfasts, room rentals, etc.) and complete your analysis using other indicators such as :
  • ARPAR: refines the RevPAR calculation by introducing average cost and average additional revenue per occupied room;
  • TrevPAR: total revenue (all sources of revenue combined) per available room;
  • average length of stay, etc.

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4 tips to improve your RevPAR

N° 1: survey market trends

Analyze supply and demand in the hotel market in detail, so you can set your prices wisely.

Keep in mind, for example, that demand is on the rise:

• at certain popular times of year (school vacations, summer season, etc.),
• or around popular events close to your hotel (festivals, national holidays, etc.).

This adjustment will have a positive impact on your RevPAR.

No. 2: take care of your marketing strategy

The promotion of your hotel is an aspect not to be neglected. A well thought-out marketing strategy will help you generate traffic and online bookings on your site.

Here are some examples of actions you can take:

• develop a content strategy to be distributed via various channels (blog, newsletter, social networks), in order to raise your profile;
  
  
• define a policy for managing online reviews, to monitor and respond to comments made by Internet users, and thus nurture your e-reputation;
  
  
• set up monitoring tools and marketing KPIs to assess your impact and adjust your marketing efforts accordingly.

No. 3: diversify your offers

Playing with different holiday offers gives you greater control over the average length of stay.

For example, in high season, you can test special offers with a minimum length of stay, and thus only accept stays of a certain duration.

Conversely, a maximum length of stay would help you promote advantageous prices for a smaller number of nights.

It's up to you to find out how to adjust the slider to increase your occupancy rates.

No. 4: Vary your distribution channels

While using channels such as OTAs (Online Travel Agencies, like Booking.com or Expedia) can quickly boost your occupancy rate, it's not always the best way to increase your RevPAR.

In fact, despite their attractive role with travelers due to the tempting offers they provide, relying solely on OTAs runs the risk of lowering your revenues, even if your rooms are rented.

It's on the perceived value of your rooms that you'll benefit from working, by communicating, for example, on all the complementary services you offer. And why not promote them on your website?

A hotel management tool can help you optimize the marketing and distribution of your rooms. For example, the Asterio :

• integrates a channel manager to control all your distribution channels;
• enables you to develop direct bookings on your website;
• improves your RevPAR thanks to optimized reservations management.

Now you know the essentials about RevPAR, how to read and use this indicator to better manage your business.

Do you use RevPAR to analyze your performance? What other indicators do you use to better define your strategy?