What does RevPAR tell a small hotel?
RevPAR, revenue per available room, answers one question: how much did each room in the building earn, sold or not? It joins the two things you control, occupancy and ADR, into one number you can compare month to month. Our worked example, a 24-room hotel on the Welsh coast, earns £74.86 per available room in this month. See also the RevPAR glossary entry.
The three formulas
- Occupancy = rooms sold ÷ rooms available × 100
- ADR = room revenue ÷ rooms sold
- RevPAR = room revenue ÷ rooms available, which is the same as ADR × occupancy
Rooms available is rooms in the hotel × nights in the period, so 24 rooms over 30 nights is 720.
Why you need both ADR and occupancy
Two months can share a RevPAR and feel completely different. A month at 85% occupancy and an ADR of £88 earns £74.80 per available room. A month at 68% and £110 earns almost the same, with fewer rooms to clean and fewer guests to look after. Chasing occupancy alone means you may be selling rooms too cheaply; chasing rate alone means empty rooms.
What it means for a 20-room hotel
Each £1 added to RevPAR is worth about £7,300 a year to a 20-room hotel (20 rooms × 365 nights). That is why a small rise in rate on your busy nights, or one fewer empty midweek room, shows up so clearly. Work out your figure for each month, compare it with the same month a year ago, and look at which of the two parts moved. If you want to set rates with this number in mind, read how to price hotel rooms, check what the commission on an OTA booking leaves you, and when you want your rates and your market in one place, try RatePulse free.