Hotel RevPAR: Definition, Formula and Calculation

RevPAR measures the revenue generated per available room, considering both the occupancy rate and the average daily room rate (ADR). It tells you how much revenue a hotel is generating from its rooms, whether they are occupied or not.

What is the RevPAR formula?

There are two formulas that you can use to calculate RevPAR: 

1. You can calculate by multiplying the hotel’s average daily room rate by the occupancy rate. Average Daily Rate (ADR) X Occupancy Rate.

RevPAR = Average Daily Rate X Occupancy Rate

The hospitality industry's average daily rate (ADR) and occupancy rate are critical metrics to assess hotel performance. 

2. Another way to calculate is by dividing total room revenue by the total number of rooms available in a period: total room revenue ÷ total number of available rooms.

RevPAR = Total Room Revenue/Number of Available Rooms

Calculating RevPAR by this method provides a comprehensive view of a hotel's revenue-generating efficiency. By focusing on this metric, hoteliers can make data-driven decisions to enhance profitability. 

How to calculate RevPAR?

For example: 

There is a hotel with a capacity of 150 rooms, an average daily rate (ADR) of ₹5000, and an occupancy rate of 60%. 

Let’s calculate RevPAR using the first formula mentioned above: Average Daily Rate (ADR) x occupancy rate. 

If your hotel’s ADR is ₹5,000 and the occupancy rate is 60%, RevPAR will be ₹3,000.

RevPAR = 5000 x 0.6 = 3000 (Rs per room available)

Now, let’s calculate with the second formula i.e.Total rooms revenue ÷ total number of available rooms.

A hotel of 150 rooms, with an occupancy rate of 60%, means 90 occupied rooms. To calculate total revenue, we will multiply occupied rooms (90) by ADR (₹5,000), total room revenue will be ₹4,50,000.

Total Revenue = 90 x 5000 = 4,50,000 Rs

Now, let’s divide total room revenue (₹4,50,000) by the total number of available rooms (150), RevPAR will be ₹3,000.

RevPAR = Total Revenue/Total Available Rooms = 4,50,000/150 = 3000 (Rs Room Available Per Day)

Factors affecting RevPAR

Numerous factors can impact RevPAR, such as: 

• Room rates are directly proportional to RevPAR, although increasing room rates without any strategy can impact RevPAR negatively as well.
• ADR and Occupancy Rate are inversely related to RevPAR, raising one can often lower the other. 
• Seasonality can be a huge factor, as peak season boosts occupancy rates and daily revenue, which impacts RevPAR.  
• Length of stay is related to occupancy rates; long stay means fewer check-ins and check-outs. Longer stays = consistent occupancy.

How to increase your hotel RevPAR?

Below are some proven strategies to increase hotel RevPAR:

1. Balancing occupancy rate and ADR 

Maximizing RevPAR isn't just about pushing these metrics beyond a certain limit but rather creating the balance between them. 

If you reduce your room prices to increase bookings, then it can boost occupancy rates, but it won’t maximize your revenue. On the other hand, raising the bar can make you lose out on potential guests, thus lowering the occupancy rate.  

The sweet spot for hotels is balancing both metrics (Occupancy rate and ADR) to maximize RevPAR, which leads to the highest possible revenue and profitability.  

2. Dynamic pricing strategy 

Dynamic pricing is a crucial strategy required to enhance the ADR and simultaneously target occupancy rates to increase RevPAR.  It helps hoteliers make data-driven decisions based on current market demand, historical data, local events and competitor analysis.

Adjusting prices according to demand drives more bookings and increases the occupancy rate. By flexibly pricing rooms, hotels can capture the maximum possible revenue for each available room. 

3. Online presence and reputation

Optimize your website and social media profiles to enhance your online reputation.

You can build your online presence by.

• Regularly engaging with guests on social platforms, leveraging user-generated content, and partnering with social media influencers. 
• Using reviews and testimonials to assure guests that they are spending money at the right place.
• Actively monitor reviews on every platform and address concerns and negative reviews by giving a solution and responding promptly. 
• Invest in visuals to catch the attention of guests and show them your hotel property and your offerings. 
• Optimizing a website by creating an intuitive interface can help guests navigate through the website easily. 
• Making it mobile-friendly to avoid losing money on bookings made through mobile.

Thus, you can maintain your online presence and intrigue guests to maintain an inflow of bookings, boosting the occupancy rates and ADR which will enhance the RevPAR.

4. Packages and promotions

Packages are a bundle of services and amenities designed to enhance guest experience. 

You can intrigue guests by creating customized offers, and packages for them to plan a stay at your accommodation. By this, you’ll be able to maximize the revenue potential of a room.

There are a variety of packages you can provide like wellness packages, romantic packages, family packages, wedding packages and many more. 

Benefits of packages for hoteliers: 

• Allows you to practice upselling by allowing guests to customize their packages.
• By providing a well-curated and thoughtful package you can get a competitive edge, and this can also be the differentiating factor. 
• Allows you to track guest preferences and understand guest demand. 

5. Length of stay (LOS) restrictions

LOS directly influences occupancy rates and ADR thus affecting RevPAR. It serves as a critical revenue management technique.

By implementing these restrictions, hotels can maximize their potential earnings.

For instance – when you set a minimum LOS during the off-season, you maintain a consistent occupancy rate and prevent low-value stays. If you set a maximum LOS during peak season, you can maximize the revenue potential of a room.

6. Loyalty programs

It is a reward program for guests allowing them to earn points on stays, dining, spa services, credit card purchases and many more. By offering a loyalty program you can retain guests to maintain a stable occupancy rate and a healthy ADR together.

Devise a loyalty program to retain guests by offering them special discounts and complimentary amenities.

Craft personalized packages by leveraging the data of guests to make them feel at home. Track preferences like room selection, amenities, additional services and dining choices.

For instance, ALL – Accor Live Limitless hotel loyalty program offers more than services and stays. It focuses on enhancing the guest experience by offering exclusive benefits. It allows members to earn points on bookings as well as on spa and dining.

How can BOTSHOT maximize your hotel RevPAR?

With BOTSHOT’s Revenue Management Software RevMaxi, you can boost your revenue by maximizing occupancy rates, utilizing inventory to the full potential and selling the rooms at the highest rate possible.

With our Software RevMaxi:

• Intelligent algorithm to set hotel room price, it can be dynamic, it can be occupancy based as well
• Multiple rate templates according to your preference