RevPAR vs. TrevPAR: Which is the Better Metric for Measuring Hotel Performance?

Hoteliers constantly seek the best metrics to gauge their property's performance effectively. Two of the most discussed metrics in this regard are Revenue Per Available Room (RevPAR) and Total Revenue Per Available Room (TrevPAR). While both offer valuable insights, understanding their differences and applications can empower hotel owners and managers to make more informed decisions. This article delves into the nuances of RevPAR and TrevPAR, aiming to guide you on which metric might be better suited for assessing hotel performance based on your specific goals.

Understanding RevPAR

RevPAR is a widely used performance metric in the hotel industry that measures a hotel's revenue generated from its rooms. It is calculated by dividing the total room revenue by the number of available rooms or by multiplying the average daily rate (ADR) by the occupancy rate. The formula looks like this:

RevPAR provides a snapshot of a hotel's operational efficiency, specifically how well it is utilizing its room inventory to generate revenue. It's particularly useful for comparing performance across different hotels, regardless of their size or the number of rooms they have.

Exploring TrevPAR

TrevPAR, on the other hand, takes a more holistic approach by considering the total revenue generated by the hotel, not just from room sales but from all sources, including food and beverage, spa services, and other amenities. It is calculated by dividing the total revenue by the number of available rooms. The formula for TrevPAR is:

TrevPAR offers a broader view of a hotel's financial health, emphasizing the importance of all revenue streams, not just room sales. This metric is particularly relevant for hotels that offer a wide range of services and amenities beyond just accommodations.

RevPAR vs. TrevPAR: Which One to Use?

The Case for RevPAR: RevPAR is best suited for hotels that primarily focus on maximizing room revenue. It is an excellent metric for assessing how effectively a hotel is managing its room inventory and pricing strategy. RevPAR is also useful for making quick comparisons between different hotels or tracking performance over time. However, it doesn't account for revenue generated from other hotel services.

The Case for TrevPAR: TrevPAR is ideal for hotels that offer a variety of services and wish to understand their overall revenue performance. It encourages a more comprehensive view of hotel operations, highlighting the contribution of non-room revenue streams to the bottom line. This metric is especially valuable for full-service hotels, resorts, or boutique hotels with unique amenities that significantly contribute to total revenue.

Choosing between RevPAR and TrevPAR depends on your hotel's specific business model and strategic goals. If your focus is on optimizing room sales and you operate a property with limited ancillary services, RevPAR might be the more appropriate metric. Conversely, if your hotel offers extensive services and amenities and you aim to maximize overall revenue, TrevPAR could provide the insights you need.

Ultimately, the most effective approach may be to track both metrics. By doing so, you can gain a comprehensive understanding of your hotel's performance, leveraging room revenue insights from RevPAR and the broader revenue picture from TrevPAR. This dual approach enables hoteliers to identify opportunities for growth and make strategic decisions to enhance both room and ancillary service offerings, driving overall profitability and success in the competitive hospitality industry.