Revenue Per Available Room RevPAR Definition and Example

What is Revenue Per Available Room (RevPAR)?

Revenue Per Available Room (RevPAR) is a key performance indicator used in the hospitality industry to measure the financial performance of a hotel or lodging property. It is calculated by dividing the total revenue generated by the number of available rooms during a specific period of time.

RevPAR is an important metric for hotel owners and operators as it provides insights into the hotel’s ability to maximize revenue from its available inventory of rooms. By analyzing RevPAR, hoteliers can evaluate the effectiveness of their pricing strategies, occupancy rates, and overall revenue management.

To calculate RevPAR, you need to know the total revenue generated by the hotel and the number of available rooms. The formula for RevPAR is:

RevPAR = Total Revenue / Number of Available Rooms

For example, if a hotel generates $100,000 in total revenue and has 100 available rooms, the RevPAR would be $1,000 ($100,000 / 100).

RevPAR is a widely used metric in the hotel industry because it takes into account both occupancy rates and average daily rates. It provides a more comprehensive view of a hotel’s financial performance compared to other metrics like average daily rate (ADR) or occupancy rate alone.

By monitoring RevPAR, hoteliers can identify trends, make informed decisions, and implement strategies to optimize their revenue and profitability. It allows them to benchmark their performance against competitors and industry standards, ultimately driving the success of their business.

Definition of RevPAR

RevPAR, or Revenue Per Available Room, is a key performance indicator used in the hospitality industry to measure the financial performance of a hotel or lodging property. It is calculated by dividing the total revenue generated by the available rooms during a specific period.

This metric is widely used by hotel owners, operators, and investors to assess the effectiveness of their pricing strategies and overall revenue management. RevPAR provides valuable insights into a hotel’s ability to maximize revenue from its available inventory of rooms.

How is RevPAR Calculated?

To calculate RevPAR, you need to divide the total revenue generated by the available rooms. The formula is as follows:

RevPAR = Total Room Revenue / Number of Available Rooms

The total room revenue includes revenue from room bookings, additional services, and amenities provided to guests. The number of available rooms refers to the total number of rooms that are available for sale during a specific period, excluding any out-of-order or unavailable rooms.

RevPAR is typically calculated on a daily, weekly, monthly, or yearly basis, depending on the reporting needs of the hotel. It provides a standardized metric that allows for easy comparison of performance across different time periods and properties.

RevPAR is a valuable tool for hotel managers to evaluate their pricing strategies, identify revenue opportunities, and make data-driven decisions to optimize their financial performance. By analyzing RevPAR trends, hotels can adjust their pricing, marketing, and operational strategies to maximize revenue and profitability.

Example of RevPAR Calculation

Let’s consider a hypothetical hotel with 100 rooms. To calculate the Revenue Per Available Room (RevPAR), we need to know the average daily rate (ADR) and the occupancy rate.

Step 1: Calculate the Total Room Revenue

Assume the ADR for the hotel is $150. To calculate the total room revenue, we multiply the ADR by the number of available rooms and the number of days in the period we are analyzing.

Total Room Revenue = ADR * Number of Available Rooms * Number of Days

Total Room Revenue = $150 * 100 rooms * 30 days = $450,000

Step 2: Calculate the Total Available Rooms

Step 3: Calculate the Occupancy Rate

Assume the hotel had an average occupancy rate of 80% during the 30-day period. To calculate the occupancy rate, we divide the total number of occupied rooms by the total number of available rooms and multiply by 100.

Occupancy Rate = (Number of Occupied Rooms / Number of Available Rooms) * 100

Occupancy Rate = (80 rooms / 100 rooms) * 100 = 80%

Step 4: Calculate the RevPAR

RevPAR is calculated by dividing the total room revenue by the total number of available rooms.

RevPAR = Total Room Revenue / Number of Available Rooms

RevPAR = $450,000 / 100 rooms = $4,500

Therefore, the Revenue Per Available Room (RevPAR) for this hypothetical hotel during the 30-day period is $4,500.