#How #Is #Hotel #Revenue #Calculated?
To calculate your hotel revenue, you need to measure certain KPIs (Key Performance Indicators). Here are the most important KPI formulas used in hotel industry for effective revenue management.
most important rev management formulas
ADR (Average Daily Rate)
ADR is a KPI that shows your hotel’s average revenue per occupied room per day.
As it doesn’t include empty rooms, you can use it to compare hotel performance and revenue to previous periods, thus forecasting seasonal trends better.
ADR Formula
ADR = Room Revenue / Number of Sold Rooms
Example: If you’ve generated $10,000 room revenue with 20 rooms booked in a day, your ADR would be $500.
Total Room Revenue
Total room revenue is a KPI that shows how much revenue your hotel generates for all occupied rooms in a certain measured period. It’s a necessary performance metric for calculating your RevPAR and GOPPAR.
Total Room Revenue Formula
Total Room Revenue = Number of Sold Rooms * ADR
Example: If you have sold 45 rooms at an ADR of $400, your total room revenue would be $18,000. If your hotel has 30 available rooms, your RevPAR would then be $600.
RevPAR (Revenue per Available Room)
RevPAR takes all your rooms into consideration to help you determine the performance of your ADR and occupancy rate.
You can use it to see how well your hotel is performing during a certain period (day, week, month, or year), which makes it one of the key metrics for measuring profitability.
RevPAR Formula
RevPAR = Total Room Revenue / Number of Available Rooms
or
RevPAR = ADR * Occupancy Rate
Example: If your hotel has an ADR of $500 and an occupancy rate of 60%, your RevPAR would be $30,000.
RevPAR vs. ADR
ADR doesn’t take empty rooms into consideration, while RevPAR does. ADR shows how much revenue your every booked room is generating on average, while RevPAR shows your revenue for all rooms.
That’s why RevPAR is a more important KPI to measure. A high RevPAR means a high occupancy rate, or a high ADR (or both), which means better hotel performance and profitability.
GOPPAR (Gross Operating Profit per Available Room)
GOPPAR represents the revenue that’s left after handling various expenses, such as monthly bills, salaries, insurance, and taxes.
As it excludes operational costs, it’s a better KPI than RevPAR. You can use it to gain insights into your overall revenue and performance, as well as identify the most revenue-generating parts of your property.
GOPPAR Formula
GOPPAR = Gross Operating Profit (GOP) / Number of Available Rooms
Gross Operating Profit = Total Room Revenue - Gross Operating Expenses
Example: If your total room revenue is $50,000 and your gross operating expenses are $15,000, you would need to divide the GOP of $35,000 with 20 available rooms, for instance. Your GOPPAR would be $1,750.
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