Hotel KPIs: RevPAR, GOPPAR, NRevPAR…
5 January 2018 · 4 min read
Yield/revenue management offers pricing adapted to demand according to the time of year or week and the type of customer. While this pricing strategy is essential to optimise a hotel’s revenue, the sheer number of rates offered to customers creates a risk of confusion when tracking the prices actually charged. To deal with this difficulty, it is essential to monitor key performance indicators, or KPIs, in order to have an objective view of a hotel’s performance and keep sight of the business’s figures.
Which KPIs are most appropriate in the hotel sector to measure business performance and apply a relevant revenue management strategy?
There are several performance indicators, each highlighting different, complementary information. Here is a list of indicators used to monitor a revenue management strategy in the hotel sector:
The best-known KPI: REVPAR (REVenue Per Available Room)
= Room revenue / Available rooms
= Average rate x Occupancy rate (%)
REVPAR is probably the most widely used indicator in the hotel industry. It represents revenue per available room. “Available” rooms are all the rooms on sale, whether booked or not. This number can vary over the year: a room undergoing renovation, for example, is not counted.
This indicator reflects revenue performance independently of the number of bookings, since it gives the average rate across all the hotel’s rooms.
GOPPAR (Gross Operating Profit Per Available Room)
= Gross operating profit (GOP) / Available rooms
GOPPAR is the gross operating profit per available room. Because it takes operating costs into account, it shows how each booking affects the hotel’s profitability.
NREVPAR (Net Revenue Per Available Room)
= (Room revenue – (Distribution costs + Transaction costs + intermediary commissions)) / Available rooms
Net revenue per available room, or NREVPAR, deducts the commission fees of the various intermediaries a hotel uses. The resulting figure is the net revenue per room.
Discount rate
= (rack rate – average room rate) / rack rate * 100
The discount rate is the difference between the published rate (rack rate) and the average price of a room over a given period.
No-show rate
= Number of no-shows over a period / number of room nights over the period *100
Knowing the average no-show rate is important when practising overbooking.
Some hotels apply a total revenue management strategy: a customer’s profitability is calculated taking into account all their spending on the hotel’s ancillary services. The following indicators are then used:
TREVPAR (Total Revenue Per Available Room)
= (Room revenue + ancillary services) / Available rooms
Total revenue per available room is the per-room average of the revenue generated by all of the hotel’s services.
TREVPEC (Total Revenue Per Client)
= (Room revenue + ancillary services) / Number of guests
Total revenue per guest is the per-guest average of the revenue generated by all of the hotel’s services.
REVPAM (Conference and Banqueting Revenue per Available Square Metre)
= Revenue / (Number of available m²)
REVPAM, or revenue per available square metre, is used to calculate the profitability of a conference or banqueting room.
REVPASH (Food & Beverage Revenue Per Available Seat Hour)
= Revenue / (Number of seats x Number of opening hours)
REVPASH is a restaurant’s revenue per seat per hour. It is used to optimise the management of time and space.
This non-exhaustive list covers the main activity-tracking indicators in the hotel sector. As needs and issues differ from one hotel to another, it is up to the revenue manager to make these performance indicators their own and keep only those most relevant to monitoring their business and the analyses they want to carry out.
Océane BOCA, consultant at Aérogestion