RevPAR Vs Average Daily Rate Focus

POWER TIPS SERIES

Power Tip 1 – RevPAR Vs Average Daily Rate Focus

RevPAR VS Average Daily Rate Focus

RevPAR VS Average Daily Rate Focus

Recently, while working with my customer, I was asked this question: Why should hotel RevPAR be preferred over Average Daily Rate? My response was this.

If you were an archer and granted a boon to choose strength (power) against distance, which would you choose? Which is best?

The best would be neither power nor distance individually but the two together. The two are complementary to each other. The two enhance each other.

Business is no different. If you were tasked with achieving a revenue target, you will need both quantity and price (power and distance comparably). Just one of them is good but not good enough. You need both. This is why you would choose RevPAR over ADR.

Illustration

RevPAR = ADR x Occupancy %

See how RevPAR uses both ADR (power) and Occupancy % (distance) – the best combination.

It tells you what the combination of occupancy and rate is producing. This is the reason RevPAR has become a global norm to measure asset utilization in the hospitality industry.

Look out for Power Tip 2 which will be: Food and Beverage as a profit boost combination

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About S Lakshmi Narasimhan

I am the Founder of Ignite Insight LLC a New York City based consultancy, which specializes in Group Executive Training, Coaching and Consulting. I coach, train hotel non-financial managers how to optimize profits in the operation. I run my own online financial academy called Cloud Academy – Master Numbers without a Degree. Visit http://www.elearningcloudacademy.com for details on the courses that are offered. These courses are self-paced, easy to understand in an inter-active, blended learning environment. I teach Hospitality Finance Graduate class and Financial Management Under Graduate class during the Spring and Fall semestes as an Adjunct Faculty member at the New York University, Tisch Center for Hospitality, and Tourism in the School for Professional Studies.
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