What is RevPAR and what you can do to increase it? There is plenty you can do! Read on to find out more!
Revenue per available room, or RevPAR, is one of the most common and important hotel metrics. This key performance indicator gives insights into the number of rooms being sold at the hotel, the revenue these rooms are generating and if they were sold at the right rate.
RevPAR gives an indication of overall revenue performance, taking into account all rooms, whether sold or unsold. If a hotel’s RevPAR increases or decreases, that means the average room rate or occupancy rate is increasing or decreasing. With easy-to-do weekly, monthly, quarterly or yearly comparisons, hotels can compare against different properties and get a quick snapshot of their hotel performance.
While RevPAR gives a good overview, it doesn’t factor in expenses, so it won’t give you insights into the profitability of your hotel. Even with an impressive RevPAR, if your operating costs outweigh your revenue, it may impact your bottom line. Another pitfall of RevPAR is that it doesn’t factor in any additional income the hotel might generate from spas, catering or parking.
There are two formulas that you can use to calculate RevPAR.
Multiply the Average Daily Rate by your Occupancy Rate
Occupancy Rate x ADR = RevPAR
For example, if your hotel is 50% occupied with an ADR of $100, your RevPAR will be $50.
0.5 x 100 = $50 RevPar
Divide the Total Room Revenue by the Number of Rooms in the hotel
Total room revenue / Total rooms available = RevPAR
For example, if you sold 25 out of 50 rooms at an ADR of $100, this gives you a total revenue of $2500. This is then divided by the 50 total available rooms and results in a RevPAR of $50.
$2500 / 50 = $50 RevPAR
There is no doubt a consistent goal amongst hotels: to generate revenue and profit while bringing down expenses. To increase RevPAR, there are a few strategies that you can follow.
1. Price Management & Dynamic Pricing
RevPar can be a great way to understand if you are charging the correct rate for your rooms and if rate adjustments are required.
Sometimes high occupancy rates don’t always equal a strong RevPAR. For example, if you have a 100% occupancy rate and $80 ADR, this will equal a RevPAR of $80. But, if you were to adjust your ADR to $100 and if occupancy dropped by 10% to 90%, your RevPAR would, in fact, increase to $90. While drops in occupancy might cause alarm, this price adjustment helps generate higher revenue while bringing down potential operating costs.
While increasing your room rates is great in theory, if raised too high, these rooms may become uncompetitive and unsellable. This is why having a clear pricing strategy that factors in seasonality, supply and demand, customer segments and competitors is important.
Dynamic pricing can be a valuable tool that can positively impact your RevPAR, by updating room prices in real-time, based on internal and external factors, to help maximise occupancy. By setting up predefined rules to update your room listings, you can manage pricing and increase occupancy with no manual intervention.
2. Length of Stay Requirement
Setting a length of stay requirement is another proven tactic in increasing revenue per room. Hotels can implement this strategy in different ways by setting a minimum length of stay in which they only accept longer-term stays or by placing a maximum length of stay in which they offer a small discount or add-ons to attract long-stay bookings.
3. Upselling
Another way to boost RevPAR is by upselling or cross-selling your hotel customers during the booking process, on arrival, or using automated pre-stay emails offering upgrades and additional services. These upsells may include room upgrades, airport transfers, champagne on arrival or welcome hampers, massages or spa treatments, and tickets to local attractions or events.
4. Customer Experience
Ensuring the best customer experience can build a loyal customer base that helps guarantee repeat business while improving hotel reviews to attract new customers, which can all help to increase RevPAR. To improve customer experience, you need to look at their entire journey from booking online to customer service and luxury extras during their stay to post-stay loyalty programmes and perks.
Seamless Booking Experience
We can help create a seamless desktop and mobile booking experience with a fully responsive and customisable platform filled with RevPAR boosting features, including real-time visibility on room rates and availability, multi-language and local currency, a secured payment gateway, faster load times and a room-rate upholding timer to create a sense of urgency.
More Direct Bookings
Why lose out when you can help grow RevPAR through more direct bookings? We can help you map the customer journey to give you insights to help drive conversion and more direct bookings on your site. With Roomstay, you can display customisable value-added benefits, perks, complimentary breakfast and last-minute offers to maximise direct bookings.
Upsell & Cross-Sell
We can help boost RevPAR by creating upsell and cross-sell opportunities via multiple avenues that encourage your customers to spend more on room upgrades and additional services, from airport shuttles and welcome packages to massages, spa treatments and more.
Loyalty
With a seamless booking experience and secure payment gateway, we can help build trust and loyalty with your customers. We can also help create customer retention loops, build guest relationships with exclusive deals, packages, add-ons and more, and help prioritise members by offering competitive pricing or upgrade opportunities to loyal guests.
Customer Experience
Ensuring the best customer experience can build a loyal customer base that helps guarantee repeat business while improving hotel reviews to attract new customers, which can all help to increase RevPAR. To improve customer experience, you need to look at their entire journey from booking online to customer service and luxury extras during their stay to post-stay loyalty programmes and perks.
