Revenue Management Formulas

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Revenue Management Formulas

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):

Occupancy

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

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.
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
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

See Also:
ARI
ARR
ATR
CPOR
MPI
RGI
REVPAM
REVPASH
REVPATH
REVPOR
SREVPOR
SUR
TREVPAR
TREVPEC
EBITDA
EBITDAR