RevPAR (Revenue Per Available Room) is a key hotel performance indicator. It is a measurement of average daily room revenue. Understanding a hotel RevPAR, you manage rates more efficiently and, thus, increase your income.
In this post, we list nine tips & tricks to improve your property RevPAR.
What is RevPAR, and why is it important?
RevPAR is a pure profit from rooms. It does not comprise extras that guests buy. By calculating this metric every day, month, or year, you are aware of the value of any hotel room.
There are at least two reasons to calculate RevPAR:
- More accurate rates. When measuring your hotel metrics, you realize if you charge too little or too much. If you set rates right, you will make more money.
- Estimating your hotel performance. Your property is doing well if both RevPAR and your occupancy rate are high.
How to calculate RevPAR?
Let’s say your room inventory is 10 rooms. The income per night is approximately $1 000. You charge $200 for rooms on average and manage to sell 5 rooms at a time (the occupancy rate of 50%).
Calculate RevPAR, using both formulas.
How to increase hotel RevPAR?
Nine strategies help hotels increase RevPAR. We have classified them into the ones that have an instant and postponed effect.
4 instant effect strategies
1.Price management
The higher the ADR, the higher the RevPAR. But this does not mean that you should elevate room rates until clients cannot afford them.
There are three basic pricing strategies to implement in the first place:
- Adjust your hotel rates to demand. Alter rates during different seasons, days of the week. Learn more about TravelLine Price Optimizer. This is a solution that analyzes market changes and recommends prices daily.
- Offer different rates to customer segments (families, business travelers, etc.).
- Analyze the pricing strategies of your competitors to set optimum prices for rooms. TravelLine Rate Shopper will let you monitor all competitors in one place and figure out an appropriate price for each room category.
2.Balancing the ADR and the occupancy rate
Some hotels lower rates to reach full occupancy, considering that this ensures the highest profits. Having a higher hotel RevPAR is more beneficial for business.
Let’s see why maintaining a constant ADR is less efficient than a flexible one. Suppose that there are 10 rooms in your hotel, you sell them for $100 each.
3. Emphasis on direct bookings
OTAs bring hotels a significant number of guests, but they also charge a commission that reduces total revenue.
It is more profitable to focus on hotel website sales. Set up TravelLine Booking Engine to turn website visitors into hotel guests. Gradually increasing the number of direct bookings, you will depend less on indirect sales
4. Decreasing cancellation rate
If your cancellation rate is high, it has a negative influence on the hotel RevPAR. To prevent cancellations, add more non-refundable rates to the existing ones instead of changing the cancellation policy. This measure will increase the occupancy and, therefore, RevPAR.
5 postponed effect strategies
1. Reducing extra expenses
Imagine that your competitor with the same inventory hired 5 in-house housekeepers, who get the same paycheck no matter the occupancy rate. You outsource housekeepers. At the expected 100% occupancy, you call out 5 people; when fewer guests are arriving, you outsource just enough staff to do the hob.
This lets you optimize hotel expenses and increase RevPAR. You can also look for other cost-efficient strategies to adopt.
2. Length of stay requirement
This strategy increases a hotel occupancy rate and thus the revenue per room. Employ the following:
- Set a minimum length of stay restriction. For example, “Vacation in July: from two nights”.
- Encourage guests to stay longer by offering a discount. For example, “Book at least five nights to get 10% discount”.
3. Focus on online reputation
As 80% of Tripadvisor users read at least 6 reviews before booking, it is necessary to manage online guest reviews. This will improve users’ impression of the hotel, attract more clients, and affect the revenue.
As online reputation indirectly influences your income, pay more attention to negative reviews and carefully respond to them. When users see that you pay attention to the guest feedback, they are more willing to book a room.
4. Increasing online presence
Hotels reach their target markets on different digital platforms. To improve the conversion rates, try these digital marketing strategies:
- start a blog on the hotel website and post regularly
- make the most of email marketing
- launch online ad campaigns
- ask influencers to promote
- complete hotel listings on OTAs and metasearch engines
- post on social media and interact with users
5. Customer loyalty programs
Customer loyalty programs make clients repeat guests and encourage potential customers to choose you out of hotels in your area. They increase the occupancy and RevPAR.
Note that customer loyalty programs are only efficient when they offer something of value to guests (a discount or an extra for free).
