Average Daily Rate (ADR) is an important hotel measure that helps managers compare their prices across time and booking channels.
Revenue Per Available Room (RevPAR) is one of the most common yet essential metrics used to quantify performance in the hospitality industry. An increase in RevPAR means that the Average Room Rate is increasing or the Occupancy Rate is increasing. This is very helpful for managers to understand key performance.
For example, if a hotel has 200 rooms available, the average occupancy is 75% and the ADR is $100, the RevPAR would be:
($100 per night x 75% occupancy = $75.00 or ((75% of 200) x $100 per night) / 200 rooms available = $75.00 RevPAR
RevPAR is use all over the hospitality industry to assess property performance. However, RevPAR does fail to consider the size of the hotel or the different types of rooms available at the property. A hotel with many luxury rooms would have a different RevPAR than a smaller hotel with only economy rooms. RevPAR also does not inform profitability. The occupancy and average daily rate can both increase while the overall profit decreases if the hotel has an increase in input costs.
The limitations of RevPAR does not mean that it is not important for hotel managers. However, they may want to consider a few other metrics to be able to assess success and profitability more clearly. These include: TrevPAR and ARPAR, and GOPPAR.
TrevPAR stands for total revenue per available room. This accounts for all the revenue generated by the hotel including add on amenities such as spa treatments or a hotel restaurant. TrevPAR is more important for hotels that offer many of these types of services because it allows them to see the full scope of guest profitability. Comparing TrevPAR and RevPAR over time can help hotels understand how their revenue is being generated and how consumer behavior is changing. This helps to inform investment decisions and training protocols.
ARPAR stand for adjusted revenue per available room. ARPAR helps hoteliers to factor in costs associated per available room. With rooms that carry higher costs of maintenance and service, you would expect a lower ARPAR. By comparing ARPAR to RevPAR, managers can understand how cost of business is affecting their bottom line.
GOPPAR means gross operating profit per available room. GOPPAR is a strong indicator of performance as it accounts for success across all revenue streams, including variables such as internet bills, room service, and spa treatments. Understanding GOPPAR helps managers to allocate budget across the hotel departments that are contributing the most overall value.
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