The RevPAR Formula
The RevPAR formula in 4 easy steps
Here is a quick overview of the RevPAR formula and to calculate revenue earned per room. Below we give a couple of helpful examples as well in working out the revenue earned per room per day for a hotel.
Calculate revenue earned per room per day for a hotel
- Define a period of time
- Add up the total revenue earned from room sales or bookings (over period defined)
- Add up the total number of rooms that were available (over period defined)
- Divide the total
On a day in my hotel, I have 100 rooms available. I sold 70 rooms at an ADR or average room rate of $100.
Revenue on the day = 70 rooms multiplied by $100 = $7,000
RevPAR = $7,000 / 100 = $70
So I have defined my period as a day, identified how many rooms there were available and the revenue generated and divided revenue by rooms.
RevPAR quick knowledge test
I have two hotels Alpha and Beta. Which is performing better?
Alpha hotel has 50 rooms and had room revenue of $93,000 in the month of March, which has 31 days.
Beta hotel has 70 rooms and the average room rate in March was $80 and the occupancy was 80%. March has 31 days.
Let’s work out the RevPAR for each hotel
Alpha hotel Alpha hotel has 50 rooms and had room revenue of $93,000 in the month of March, which has 31 days. This means:
Room revenue for the month = $93,000
Total possible occupancy = 31 days multiplied by 50 rooms = 1,550
RevPAR = $93,000 divided by 1,550 = $60
Beta hotel has 70 rooms and the average room rate in March was $80 and the occupancy was 80%. March has 31 days. This means:
Room revenue for the month = $80 multiplied by 31 days multiplied by 80% multiplied by 70 rooms = $138,880
Total possible occupancy = 31 days multiplied by 70 rooms = 2,170 rooms
RevPAR = 138,880 divided by 2,170 = $64
We learn then that Beta Hotel has a better RevPAR or revenue per available room than Alpha Hotel.
We also can calculate the RevPAR on both hotels together in March.
Total room revenue = $93,000 + $138,880 = $231,880
Total available rooms = 2,170 + 1,550 = 3,720
Total RevPAR = 231,880 divided by 3,720 = $62.33
Looking for some advanced tips. Read about how to increase hotel revenue in our blog, revenue tips part 1 and part 2.
Revenue Management is for all hotels, whether you are running the rooms for a small hotel, a resort, or a group of hotels. If you are learning about revenue management, we hope this helped!
Message from the Outperform RMS team
Here at Outperform RMS we understand that some hotels have revenue managers and some do not. Revenue management is for all hotels. We try and provide some useful tips whatever your level of experience.
Using a Revenue Management System and Price Optimiser can do a lot of the work for you. Tools like Outperform RMS are for hotels of small through to large room capacity.
If you are researching into revenue management systems for your hotel, make sure you get a demo of Outperform RMS to see how you can improve your RevPAR
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