How to Calculate your Hotel Room Performance

In the competitive hospitality industry, success hinges on a deep understanding of your numbers. Key hotel metrics serve as crucial performance indicators, allowing you to benchmark against industry standards and fuel strategic growth. By diligently tracking and analyzing these metrics, you gain invaluable insights into your property's performance. This data-driven approach empowers you to refine revenue management strategies, optimize pricing, and ultimately, maximize profitability.

?Operating a successful hotel requires a data-driven approach. Key hotel metrics provide a powerful toolkit for measuring performance, identifying areas for improvement, and making informed business decisions. By tracking metrics like occupancy rates, average daily rate (ADR), and RevPAR, hoteliers can gain a competitive edge. These insights enable them to fine-tune pricing strategies, enhance guest experiences, and ultimately, drive sustainable revenue growth.

Numbers tell the story of a hotel's success. Key metrics, such as occupancy, ADR, and RevPAR, provide valuable insights into a property's performance. By tracking these metrics, hoteliers can benchmark against industry standards, optimize pricing, and make data-driven decisions to maximize revenue and profitability.

?Let us examine one of the key matrices with different approach

RevPAR (Revenue per Available Room)

Revenue per Available Room (RevPAR) is the revenue generated per available room, whether or not they are occupied. RevPAR helps hotels measure their revenue generating performance to accurately price rooms. Since it’s such a widely used metric, RevPAR can help hotels measure themselves against other properties or brands. RevPAR is used to assess a hotel’s ability to fill its available rooms at an average rate. If a property’s RevPAR increases, that means the average room rate or occupancy rate is increasing. It is a critical metric for hotels to plan for high and low seasons. It helps hotels measure the efficiency of their operations by tracking how well they’re filling available rooms at their Average Daily Rate (ADR). And since RevPAR measures revenue made during a certain period of time, it can be used to compare any given time period against previous periods, and measure the long-term performance of a property, however an increase in a property’s RevPAR means that its average room rate or its occupancy rate is improving. However, an increase in RevPAR does not necessarily mean better performance.

RevPAR allows revenue managers to compare revenue for a given period against previous periods. For example, it allows revenue comparisons for the current calendar year against the previous year’s numbers. This helps managers understand long-term performance and forecast future trends., but RevPAR alone is not a good measure of overall performance. A hotel may have a lower RevPAR but still have more rooms that earn higher revenues. In addition, certain larger rooms (i.e., penthouses) may overcompensate for lower quality rooms that are not being checked or are unavailable. Like other financial metrics, RevPAR is best suited as a comparison tool.

A hotel can compare its own RevPAR statistics over time to see whether the metric fluctuates with seasons or changes due to consumer preference. In addition, RevPAR can be used to compare against other hotels in the area to get a better sense of how one hotel may be performing compared to other. Keep in mind that this financial performance is limited to just revenue and does not consider expenses.

RevPAR (Revenue per Available Room) Calculation There are two ways to calculate RevPAR, either by dividing total room revenue by the total number of rooms available during the period in question or by multiplying the property’s average daily room rate (ADR) by the property’s occupancy rate, it can be calculated daily, weekly, and monthly and compare it vs comp set or previous period. First, hotel management can take the total amount of room rent revenue and divide it by the total rooms available to have been rented. Note that the total rooms available includes rooms that were available but were not occupied for this calculation.

Formula: RevPAR = Total Hotel Revenue ÷ Total Available Rooms

Example: Total Hotel Revenue = $100,000 and Total Available Rooms = 300, your Revenue per available Room would be $333.33 $100,000 (Total Hotel Revenue) ÷ 300 (Total Available Rooms = $333.33 Revenue per available Rooms Alternatively, hotel management can calculate RevPAR by taking the average daily rate of revenue and multiply it by the occupancy rate. This method is more appropriate and more accurate for fully-occupied hotels with limited rooms that are unavailable as it is based on total occupancy, not total availability.

Formula: RevPAR = Total Hotel ADR X Occupancy Rate

Example: Total Hotel ADR = $833.33 and Hotel Occupancy rate = 40 %, your Revenue per available Room would be $333.33 $833.33 (Total Hotel ADR) ÷ 300 (Total Hotel Occupancy rate = $0.40 Revenue per available Rooms Either formula returns a dollar amount that is theoretically lower than the actual daily rate (as a hotel can’t be or at least should not be occupied past 100%).

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