Revenue Management Formulas Definition / Meaning

What are the most important Revenue Management Formulas in the hospitality industry and how to calculate them?

Here you will find the top 5 Key Performance Indicators (KPI):

It is a Hotel KPI calculation that shows the percentage of available rooms or beds being sold for a certain period of time.
It is important for hotels to keep track of this data on a daily basis to identify the average daily rate, forecast and apply revenue management.

How do you calculate Occupancy?

Formula:
Occupancy = Rooms Sold / Room Available

Occupancy

ADR

ADR stands for: Average Daily Rate.
It is a KPI to calculate the average price or rate for each hotel room sold for a specific day.

It is one of the most common financial indicators to measure how successful the performance of the hotel is against other hotels that have similar characteristics such as size, clientele and location and/or its own previous figures.

How do you calculate ADR?

Formula:
ADR = Room Revenue / Rooms Sold

RevPar

RevPAR stands for: Revenue Per Available Room.
It is a very classic KPI and regarded as one of the most important financial calculation for any hotel to see how much revenue they have made within a certain period of time.

When an analysis is carried out, RevPar figures can be compared to RevPar of the hotel during the same time frame of the previous years or to its compset.

With RevPAR you can only evaluate your income as a percentage of room sales, not including any other factors that also take account into making profitability (like toursales, room service, and spa bookings).

How do you calculate Revpar?

Formula:
RevPAR = Rooms Revenue / Rooms Available

GopPar

GopPAR stands for: Gross Operating Profit Per Available Room
It is one of the most effective ways to look at your hotel´s performance and make adjustments that impact the best interests to achieve the hotel´s goals.

GopPAR is a KPI that allows hotels to apply the laws of economics to a complete drill down of the process of Revenue Management and make adjustments not only on achieving the top line but aligning it with the bottom line as well. From an ownership perspective, GOPPAR allows you to see what the value of your asset is at any given time. A hotel is really two assets in one: a real estate asset and an operating business.

How do you calculate GopPAR?

Formula:
GopPAR= GOP (Gross Operating Profit) / Available Rooms

NRevpar

N RevPAR stands for: Net Revenue Per Available Room

N RevPAR metric is similar to RevPAR, except that it factors in the net revenues (meaning that it accounts for distribution costs, transaction fees and travel agency commissions).

Compared to RevPAR, N RevPAR removes the “apples to apples” comparison, which is absolutely necessary for effective measurement of a property’s revenue management strategies. Factoring the cost of distribution into its calculation it is a more transparent performance indicator.

How do you calculate N RevPAR?

Formula:
N RevPAR= (Room Revenue – Distribution Costs) / Available Rooms