In a previous post, we discussed the vital role of RevPAR when measuring hotel performance. While RevPAR remains the gold standard for top-line performance, other metrics provide deeper insight when analyzing the overall health of a property or market. One of those key metrics is total revenue per available room, or TRevPAR.
TRevPAR assesses the total income a hotel generates on a per-available-room basis and is calculated using the following formula:
The main advantage of TRevPAR is that it takes into account revenue from all departments, including food and beverage sales, meeting space, spas, golf, parking and even phone/internet services. These departments can have a significant impact on a hotel’s overall performance, particularly full-service hotels, which tend to feature the most extensive F&B offerings. TRevPAR also covers miscellaneous income, such as cancellation and resort fees, which could otherwise be easy to overlook in the overall performance equation.
TRevPAR can also be useful for determining opportunities within your hotel when measuring against the competition and the structure of your competition’s revenues. If TRevPAR for hotels in your competitive set is significantly higher, you may need to narrow in on various departments to see where your fees differ. For example, if your hotel is charging significantly less for parking than its competitors, this could be an opportunity to increase parking revenue, and subsequently, your TRevPAR.
Additionally, TRevPAR can help determine why revenues were up during a particular time period. By comparing different groups to determine which made more of a revenue impact on your hotel, you can adjust your strategy to target different business in the future.
While TRevPAR includes all sources of revenue within a hotel, RevPAR only includes room revenue on a per-available-room basis. In some instances, the hotel with the highest RevPAR may actually be outperformed by other hotels when looking at TRevPAR, due to revenues coming from other departments.
TRevPAR doesn’t take expenses into account, so it cannot solely be used to determine the overall profitability and efficiency of a hotel.
Hotel 1 reported RevPAR of US$66. Hotel 2 showed RevPAR approximately 10% higher at US$72. Both hotels have 300 rooms.
At first glance, it would appear that Hotel 2 generates more revenue than Hotel 1. However, when we look at TRevPAR, we see that Hotel 2 has a TRevPAR of US$105, while Hotel 1’s TRevPAR comes in at US$111.
Below is the breakdown in which we can see that Hotel 1, while producing less rooms revenue, outperforms Hotel 2 in terms of all of other revenues, contributing to an overall higher TRevPAR than its competitor.