RevPAR Calculator – Revenue Per Available Room

RevPAR (Revenue Per Available Room)

RevPAR is a vital metric if you want to track some KPIs (key performance indicators) to understand whether you’re operating efficiently. So, this is one metric that tracks how efficiently your hotel is generating income from its existing room inventory.

Hence, what you factor into the equation is how many rooms you’re selling and also how much revenue they’re earning in turn. As a result, you can easily evaluate the combined effect of occupancy and pricing strategies, which makes the RevPAR a valuable metric for your budgeting, forecasting, and even performance benchmarking requirements.

How You Can Calculate RevPAR

You can choose from two ways to calculate the RevPAR.

Method 1-

Total Room Revenue / Available Rooms

So, for example, if your total room revenue is $20,000 and you have 100 available rooms, then your RevPAR will be approximately $200.

Method 2-

ADR x Occupancy Rate

So, if your ADR or average daily rate is $100 for rooms and your occupancy rate is 50 rooms then your RevPAR will be $5,000.

*Remember that your total room revenue includes income from all the sold rooms without any extra services or taxes

*The available rooms include sellable inventory for any period.

*The ADR is the average daily rate in this case

*The occupancy rate is the percentage of rooms that are sold vs those that are available

Why You Should Use RevPAR

Here are some reasons why you should use RevPAR as a KPI for your hotel.

• RevPAR combines both the room occupancy and the pricing power into one figure.
• ADR only tells you how much you charge for each sold room, while occupancy tells you how full your hotel actually is. RevPAR, on the other hand, tells you how your inventory is revenue efficient. Hence, it takes both underperforming and unsold rooms into account.
• You can use RevPAR to identify both the low and high performing dates and compare multiple segments or departments. You can also use it to assess whether your present rate strategy is in sync with overall market demand.
• You can thus make better decisions regarding adjustments in rates, managing demand, and also policies regarding discounts.

How is ADR Different from RevPAR?

You should understand the fundamental differences between ADR and RevPAR for maximum benefits.

• RevPAR includes all your unsold rooms in the calculation. This offers a more extensive view of how the inventory is performing.
• On the other hand, ADR tracks how much you are earning for the rooms that are sold, but it does not cover empty rooms.

As a result, you’ll find RevPAR a vital metric while evaluating how efficient your rate strategy actually is, combined with the actual booking performance. To give you an example, a hotel with a higher ADR and lower RevPAR may indicate overpricing and losing out on occupancy. At the same time, a hotel with a stronger RevPAR and moderate ADR may be balancing between demand and rates properly.

How You Can Increase Hotel RevPAR

Here are some ways in which you can increase the RevPAR for your hotel:

• Apply revenue management tactics- You have to analyze guest data and identify booking trends to manage the hotel revenue and attract more customers. Dynamic pricing tools will help you track overall hotel performance vis-à-vis competitors on a real-time basis. You can thus keep adjusting room rates to stay more competitive and maximize your revenues.
• Scale direct bookings- You can focus more on direct bookings and attract customers with discount codes. This will help you convert more guests with dynamic booking engines. Give exclusive offers for direct bookings along with loyalty rewards to enhance reservations and website traffic alike. It also helps you lower distribution costs considerably.
• Rate restrictions for securing bookings- Come up with rate restrictions and be more flexible with minimum stay requirements and non-refundable rates. This will help you lower cancellations. Make sure prepayments are enabled for enabling predictable revenues and booking security.
• Manage your channels wisely- Increasing RevPAR is possible if you use the right hotel channel manager. You can enhance your visibility and reach a bigger range of customers. It may help you scale up room bookings, while giving you access to several booking channels in turn.