What is RevPAR in Hotel ?
RevPAR is stand for Revenue per Available Room and it’s determined by dividing room revenue received for a specific day by the number of rooms available in the hotel for that day.
In hotel RevPAR is an important metric because it takes into account both the occupancy rate and the average room rate. A high RevPAR indicates that the hotel is effectively maximizing its revenue potential by either achieving high occupancy rates or charging higher room rates, or both.
By monitoring RevPAR, hotel managers can assess the effectiveness of their pricing strategy, marketing campaigns, and operational efficiency. It is also a useful metric for benchmarking the hotel’s performance against its competitors and for identifying opportunities for improvement in this field.
RevPAR Formula for calculating
Room revenue / Number of available rooms
Or
Hotel occupancy * Average daily rate
In this formula, “Total Room Revenue” refers to the total amount of revenue generated from the sale of hotel rooms, including room rates, fees, and taxes. And the “Total Number of Available Rooms” refers to the total number of rooms in the hotel that are available for sale.
RevPAR Example
I will tell you one simple example about the RevPAR if a hotel generated $100,000 in room revenue in a month, and had 500 available rooms during that same period, the RevPAR would be
RevPAR = $100,000 / 500 = $200
This means that the hotel generated an average of $200 per available room during that month. RevPAR is a useful metric for comparing the financial performance of different hotels or for tracking a hotel’s performance over time.
By another example of RevPAR formula is
For example, RevPAR for a hotel that has $10,000 in room revenue for the night of October 21 with 200 rooms available would equal $50 ($10,000 / 200 = $50).
This same hotel on November 21 with 200 rooms, room revenue of $10,000, 125 rooms sold, an average daily rate of $80 ($10,000 / 125 = $80), and hotel occupancy of 62.5 percent (125 rooms sold / 200 rooms available * 100 = 62.5 percent) would still produce the same RevPAR (.625 * $80 = $50).
RevPAR is used in hotels to determine the amount of dollars each hotel room produces for the overall financial success of the hotel.
What is the Good RevPAR in Hotel ?
The good RevPAR for a hotel depends on various factors, including location, brand, size, amenities, market demand, and seasonality. Generally, a higher RevPAR indicates that the hotel is generating more revenue from its available rooms.
As a benchmark, the average RevPAR in the hotel industry varies by location and market segment. According to data from Statista, in the United States, the average RevPAR for hotels in 2020 was $61.87. However, it’s important to note that RevPAR can vary significantly depending on the location and type of hotel.
Ultimately, a good RevPAR for a hotel is one that is higher than its competitors in the same market and one that allows the hotel to achieve its financial goals and objectives.