The 3 Hotel Revenue Management KPIs the Experts Really Use to Drive Profitability
Driving your profitability in the most efficient manner is a challenge that all hotels face. But here at Xotels, we have found that there are certain key performance indicators (KPIs) that are particularly powerful. Some of the commonly used KPIs include Average Room Rate (ARR), Bedroom Occupancy Rate (OCC) and Cost per Occupied Room (CPOR). But, in this article we focus on the three hotel revenue management KPIs that experts use to maximise profitability in particular.
- Gross Operating Profit Per Available Room (GOPPAR)
- Net Revenue Per Available Room (NREVPAR)
- Total Revenue Per Available Room (TREVPAR)
Hotel KPIs are essential towards maximising your hotel’s profitability. They provide unique insights into the performance of a number of crucial criteria across your hotel. They also help you to understand the results of your revenue management strategy effectively. Furthermore, hotel revenue management KPIs help you to set and measure financial goals. It is these goals that help drive your hotel’s growth and profitability.
The 3 Hotel Revenue KPIs that will Drive your Profitability Goals
1. Gross Operating Profit Per Available Room (GOPPAR)
GOPPAR offers one of the most effective methods of measuring your hotel’s performance. It’s that simple. We recommend that it be front and centre of your measurement strategy. It gives you a detailed holistic view of your hotel’s entire revenue management process. It shows you where you can make adjustments towards improving your top line growth as well as aligning it with your bottom line too.
GOPPAR allows you to view the value of your hotel as an asset at any time - together as an operating business and real estate property.
The GOPPAR formula: Gross Operating Profit (GOP) / Number of Available Rooms
2. Net Revenue Per Available Room (NREVPAR)
NREVPAR is similar to another useful KPI: Revenue Per Available Room (REVPAR), but it offers an important difference. NREVPAR includes net revenues in its calculations, so when using, you’re getting an insight into distribution costs, transaction fees and travel agency commissions too.
This inclusion gives you a more transparent measurement of revenue management performance. It will assist enormously in your strategic planning. The only caveat is that it can be a challenge to gather and calculate the various costs that we mentioned above. But it is worth the extra effort.
The NREVPAR formula: (Room Revenue - Distribution Costs) / Number of Available Rooms
3. Total Revenue Per Available Room (TREVPAR)
TREVPAR offers you an important distinction to REVPAR or NREVPAR. It encompasses all revenue generated by each room across all hotel revenue sources. These include food and drinks, leisure, events and any other guest expenditure.
This hotel KPI offers a more immediate view to management of all generated revenues and of where adjustments can be made for further growth. Is guest restaurant expenditure low, for instance? If so why and what improvements can be made? This is the kind of insight that TREVPAR offers.
The TREVPAR formula: Total Revenue* / Total Available Rooms
*Total Revenue = Accommodation + Breakfast + Spa + Bar + Mini Bar +[Any other extra revenue]
At Xotels, we are seeing how these three hotel revenue management KPIs have grown in use. This has led to more hotels making wiser choices and achieving long-lasting profitability growth.
Learn more about what we do and how we can help your hotel achieve greater profitability.
Patrick Landman @ Xotels
Need more expert advice about Revenue Management? Have a look to our 10 Tips for Successful Hotel Revenue Management