What is LPAR?

Labor is typically one of the highest expenditures for hotels on average. The issue of acquiring labor became more complex during the COVID-19 pandemic, with many workers opting for employment in other sectors or not returning to the hospitality workforce after a period of layoffs and furloughs. As hoteliers navigate more normalized times, it is more important than ever to strike the right balance between profitability and workforce needs. One helpful benchmarking metric that can be utilized is LPAR, or Labor per Available Room.

What does LPAR tell you?

LPAR is used to calculate hotel labor costs on a per-available-room basis to produce a clear picture of how much a hotel spends in labor expenses across all rooms available in any given time period.

According to USALI, Total Labor should be calculated by summing total salaries, wages, service charges, contracted labor and bonuses and total payroll-related expenses.

Sample calculation:

Total Labor = $10,000,000

Number of Rooms in Hotel = 250

LPAR = $10,000,000 / (250 rooms * 365 nights)

LPAR = $109.59

This hotel spends roughly $110 per room, per night, on staffing.

Why LPAR matters:

Many factors impact hotel labor costs, such as macroeconomic conditions that determine unemployment rates, or microeconomic drivers such as seasonality within a hotel’s specific market. There is also labor expense in nearly every department of a hotel, from rooms and F&B to A&G and property operations and maintenance. Regardless of how hotels return in a post-pandemic world, labor figures to remain one of, if not the highest, operating cost for hotels. Prior to COVID-19, labor expenses had been growing at a higher rate than revenues. This directly affects profitability, so it is imperative to closely examine this expense when trying to understand your hotel’s efficiency.  

Put it into context:

We believe it is most useful to look at LPAR relative to revenue growth, while also considering your competition and local market. Not every dollar of revenue per available room (RevPAR) is created equally when it comes to profitability—a hotel with RevPAR growth stemming from occupancy increases rather than from a lift in average daily rate (ADR) is more likely to see higher labor costs. Additionally, full-service hotels, as compared to select-service hotels, typically have a higher percentage of revenues spent towards labor costs.

Including profitability in your benchmarking experience with provide the insights needed to be more resource efficient and drive profitability. Learn more here.