What metrics are critical for evaluating your revenue management strategy?

1 Occupancy Rate

Occupancy rate is the percentage of available rooms that are sold during a given period. It is calculated by dividing the number of rooms sold by the number of rooms available. Occupancy rate is a basic indicator of how well you are filling your rooms and generating demand. However, it does not tell you how much revenue you are earning per room or per guest. Therefore, you should not rely on occupancy rate alone, but use it in combination with other metrics.

2 Average Daily Rate

Average daily rate (ADR) is the average revenue earned per room sold during a given period. It is calculated by dividing the total room revenue by the number of rooms sold. ADR reflects how well you are pricing your rooms and capturing value from your guests. A higher ADR means you are charging more per room, which can boost your profitability. However, ADR does not account for the costs of operating and maintaining your rooms or the impact of discounts and promotions.

3 Revenue Per Available Room

Revenue per available room (RevPAR) is the average revenue earned per room available during a given period. It is calculated by multiplying the occupancy rate and the ADR. RevPAR combines both demand and pricing factors and shows how well you are utilizing your inventory and maximizing your revenue potential. A higher RevPAR means you are selling more rooms at higher rates, which can increase your market share and competitive advantage. However, RevPAR does not consider the total revenue generated by your hotel or the costs of acquiring and retaining guests.

4 Revenue Per Occupied Room

Revenue per occupied room (RevPOR) is the average revenue earned per room occupied during a given period. It is calculated by dividing the total revenue by the number of rooms occupied. RevPOR includes not only room revenue, but also other revenue sources such as food and beverage, spa, parking, and ancillary services. RevPOR reflects how well you are upselling and cross-selling your products and services and enhancing your guest experience. A higher RevPOR means you are increasing your revenue per guest, which can improve your customer loyalty and satisfaction. However, RevPOR does not account for the variable costs of providing different services or the impact of seasonality and fluctuations.

5 Gross Operating Profit Per Available Room

Gross operating profit per available room (GOPPAR) is the average profit earned per room available during a given period. It is calculated by subtracting the total operating expenses from the total revenue and dividing by the number of rooms available. GOPPAR is the most comprehensive metric that measures your overall profitability and efficiency. It takes into account both revenue and cost factors and shows how well you are managing your resources and optimizing your bottom line. A higher GOPPAR means you are generating more profit per room, which can enhance your financial performance and sustainability. However, GOPPAR does not include non-operating expenses such as taxes, depreciation, and interest.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?