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Revenue per available room (RevPAR) is a metric used in the hotel industry to determine the financial health of the business based on the average daily room rate (ADR) by the occupancy rate. It can also be determined by dividing the total room revenue by the total available rooms.
Why is ‘Revenue Per Available Room – RevPar’ Important?
RevPAR is a vital performance metric that is often used in the hotel industry as it incorporates both room rates and occupancy, which provides a convenient way to analyze how well a company is filling its rooms, as well as how much the business can charge for the rooms.
With RevPAR you can only evaluate your income as a percentage of room sales, not including any other factors that also take account into making profitability (like tour sales, room service, and spa bookings).
It should be noted that RevPAR, by definition, is calculated on a per-room basis. Therefore, one company can have a higher RevPAR than another, but still, have lower total revenues if the second firm manages more rooms.
How do you calculate RevPar?
RevPar is calculated by multiplying a hotel’s average daily room rate (ADR) by its occupancy rate. It may also be calculated by dividing a hotel’s total room revenue by the total number of available rooms in the period being measured.
Rev/Par = Average Daily Room Rate x Occupancy Rate
- RevPAR is rooms revenue per available room (Total rooms inventory),
- Rooms Revenue is the revenue generated by room sales
- Rooms Available as used in calculating
- Successful RevPAR numbers differ from market to market based on demand and other factors.
- Best compared across like time periods. For example, it is proper to compare RevPAR on a Friday only versus other Fridays.
- Best compared across similar seasonal time periods. For example, comparing results from the Christmas week with the same a year previous is more credible than with a non-holiday week.