ADR, REVPAR and GOPPAR
ADR (Average Daily Rate), RevPAR (Revenue per Available Room), and GOPPAR (Gross Operating Profit per Available Room) are key performance indicators in the hospitality industry. ADR tracks average room revenue, RevPAR combines occupancy and ADR for overall revenue efficiency, and GOPPAR measures overall profitability. These metrics are vital for strategic pricing, occupancy management, and financial health assessment.
Key Takeaways
- ADR Significance: ADR, or Average Daily Rate, is vital for comparing a hotel’s performance against competitors. It provides insights into the average price paid per room and helps monitor long-term trends.
- RevPAR Utility: RevPAR (Revenue per Available Room) differs from ADR in its application. It is crucial to assess how successfully a hotel is filling its rooms, thus reflecting occupancy efficiency.
- GOPPAR Importance: GOPPAR, or Gross Operating Profit per Available Room, extends beyond RevPAR by considering all revenue sources, not just room sales. This makes it a comprehensive measure of overall profitability.
- ADR Calculation: ADR is calculated by dividing total room revenue by the number of rooms sold, excluding rooms used by staff or given as complimentary.
- RevPAR Formula: RevPAR is computed by dividing total room revenue by the total number of rooms available, considering only the revenue generated from room sales and not other services like restaurants or bars.
Introduction
Revenue management is a data-driven approach to predicting customer behavior, with a view to optimizing product pricing and availability, to maximize revenue. It is especially useful in the hotel industry, because hotels have limited rooms available and experience varying levels of demand. When carrying out a revenue management strategy, there are several key performance indicators, or KPIs, which should be tracked. Essentially, KPIs are quantifiable measures that allow a business to assess and compare performance over time. In this article, we look at three of the main revenue management KPIs.
1. ADR – Average Daily Rate
One of the most important KPIs for measuring a hotel’s performance against competitors, especially those of a similar size and in a similar location, ADR stands for “average daily rate”. Using this metric, hotel management can know the average price paid per room on a specific day and monitor trends over a longer time frame.
To work out your ADR, you simply divide room revenue by the number of rooms sold. So, for example, if you have a revenue of €20,000 and have sold 200 rooms, your ADR would be €100.
It should be noted that only available rooms for sale should be factored into your calculations. This means that you should not consider any rooms that staff members are using, nor should you include any complimentary rooms you have allocated to guests.
Find more detailed information about ADR in the article “What is ADR?”.
2. REVPAR – Revenue Per Available Room
Another extremely important key performance indicator for revenue management is REVPAR, or “revenue per available room”. Although it may seem similar at first glance to ADR, its use is somewhat different, as it can help tell you how successful you have been at filling the rooms in your hotel.
To calculate REVPAR, you simply divide your total rooms revenue by the total number of rooms available. So, if your revenue is €30,000 and you have 600 rooms available, your revenue per available room would be €50.
Perhaps the main thing to consider when calculating your revenue per available room is that only revenue generated by selling hotel rooms should be included. This means that you should not factor in other revenue streams, such as revenue from your restaurant, or drinks sold at the bar.
Find more detailed information about REVPAR in the article “What is REVPAR?”.
3. GOPPAR – Gross Operating Profit Per Available Room
Finally, GOPPAR, or “gross operating profit per available room” follows on from REVPAR quite nicely in that it is also a KPI measurement based on the number of rooms you have available, rather than actual sales made. However, unlike REVPAR, when calculating GOPPAR you consider all revenue sources.
To calculate your gross operating profit per available room, you must first work out your gross operating profit, which is gross revenue minus gross expenses. From there, divide your gross operating profit by the number of rooms available to be sold to guests.
The primary value of GOPPAR as a metric is that it allows you to see the bigger picture. After all, while rooms are the main revenue source in hotels, you will likely be making money from other areas, such as food and drink sales. Therefore, it allows managers to see how their business is performing overall.
For more detailed information about GOPPAR, like how you can calculate it, also have a look at “What is GOPPAR?”.
Effective hotel revenue management is data-driven and requires tracking key performance indicators. Ultimately, by tracking your ADR, REVPAR and GOPPAR, you will be better placed to make decisions regarding pricing, which can then help you generate the maximum possible revenue from your hotel.
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