Net revenue per available room, or NRevPAR, is used by those within the hotel industry as part of a wider revenue management strategy, helping them to assess overall business performance. As a KPI, the NRevPAR metric is similar to RevPAR, but factors in distribution costs. Therefore, it is arguably a more accurate performance indicator.
What is NRevPAR?
The NRevPAR metric is used to calculate the net revenue generated per available room in a hotel. In this context, net revenue refers to the room revenue generated, minus any costs associated with distributing the room. As a KPI, it provides a picture of how successful a hotel is at making money from each of its available rooms.
NRevPAR can also be used alongside other revenue management metrics to make adjustments to pricing, in order to increase levels of occupancy, or the revenue received. It can be calculated with the following formula:
NRevPAR = (Room Revenue – Distribution Costs) / Number of Available Rooms
What is the Difference Between RevPar and NRevPAR?
In many ways, the NRevPAR metric is very similar to RevPAR, in that it is concerned with revenue generated on a per available room basis. However, unlike RevPAR, NRevPAR looks at net revenue, rather than simple room revenue. Therefore, distribution costs, such as travel agent commissions and transaction fees, are subtracted from room revenue first, before the number is divided by the number of rooms available.
Uses and Limitations
NRevPAR is a useful KPI for those in the hotel industry carrying out a revenue management strategy. In particular, it can reveal how successful a hotel is at generating revenue through the sale of rooms, while also factoring in the number of rooms that are actually available to be sold and the distribution costs associated.
However, it does not reveal the actual occupancy rate, or revenue generated through other sources. Moreover, certain distribution costs, like commission, can sometimes be difficult to accurately calculate.
More Revenue Management KPI’s
KPI stand for Key Performance Indicator. With KPI’s you can measure and identify areas of success and failure, as well as trends related to demand and customer behaviour. Besides NRevPAR, other important Revenue Management KPI’s are Occupancy rate, RevPOR, ADR, TRevPAR, EBITDA, ARPA and GOPPAR.