RevPAR stands for Revenue Per Available Room. It means that a room is available to customers over the period studied (most often the year) and not that it is vacant at a given time. This is a metric used in the hospitality industry to assess a property’s ability to fill its available rooms at an average rate.
Despite certain limitations, RevPAR is generally considered to be the “king of performance indicator” of the hotel business and its commercial performance. In an environment where prices are more and more variable and dynamic, it is rightly considered to be a more efficient and meaningful indicator than the occupancy rate.
The RevPar is most often calculated for a year or any other period by the formula:
RevPAR = total room revenue / total rooms available
RevPar = average daily rate X occupancy rate
What is RevPar for?
It allows you to easily visualize the revenues generated by market segments specific to your establishment. This measure therefore provides an overview of the number of rooms that are sold and the revenue generated by these reservations. It allows you to assess one of the components of your overall revenue management strategy.
Calculating your Revenue Per Available Room allows you to understand the best way to maximize the revenue generated from your rooms. If you see that your property’s RevPAR is increasing, it most likely means that your average room price has increased or it is your occupancy rate. Or both! In any case, the RevPAR is a good indicator of the performance of your establishment.
RevPAR increased, what does it mean?
An increase in a property’s RevPAR means that its average room rate or its occupancy rate is improving. Since it tells you the revenue per available room, whether it’s occupied or not, it can aid hoteliers in accurately pricing their rooms. Additionally, Revenue Per Available Room can form the basis for measuring properties against each other.
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Questions and answers about RevPAR
1. A 45-room hotel generated accommodation revenue for year Y of € 1,314,000 excluding VAT. What is their revenue per available room?
The Revenue Per Available Room for year Y is € 1,314,000 / 16,425 = € 80 excl VAT.
2. A hotel with 45 rooms with an Occupancy Rate of 80% and an average income of 100 € excluding VAT for year Y. What is their revenue per available room?
The hotel will have a Revenue Per Available Room of: 80% x € 100 = € 80.
3. or example, a hotel has 150 rooms in total, with an average occupancy rate of 90%. The average cost for a room is € 80 per night. A hotel wants to know its RevPAR in order to accurately assess its performance.
The hotel manager can calculate the RevPAR as follows:
(€ 80 per night x 90% occupancy rate) = € 72.00
The hotel’s Revenue Per Available Room is therefore € 72.00 per day.
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Sources: PinterPandai, Site Minder, Investopedia, Amadeus Hospitality