Hotel KPIs: RevPAR vs RevPAN - Why Both Metrics Matter?

How do you measure success? Two important metrics often used for this purpose are Revenue Per Available Room (RevPAR) and Revenue Per Available Non-Room (RevPAN). In this blog post, we will explore the key differences between these two metrics and their significance in hotel management. But before we dive deeper, let's understand these definitions.

Important Definitions:

Revenue: The total revenue generated by the property or portfolio in a specified time period.

Available Nights: Nights that were available for sale and were not blocked by owners or otherwise unavailable for guest reservations.

What is RevPAR?

RevPAR represents the revenue generated per available room, whether or not those rooms are occupied. RevPAR helps hotels measure their revenue-generating capability to accurately determine room prices. Since it's such a widely used metric, RevPAR can help hotels compare themselves with other properties or brands.

RevPAR is used to assess a hotel's ability to fill its available rooms at an average rate. If a hotel's RevPAR increases, it means that the average room rate or occupancy rate is increasing. This metric is calculated for a specific time period, typically on a monthly or yearly basis at the property or portfolio level.

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How to Calculate RevPAR? (RevPAR Formula)

There are two formulas you can use to calculate RevPAR:

Room Revenue ÷ Rooms Available

Average Daily Rate x Occupancy Rate

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Why is RevPAR important?

RevPAR is important because it helps hoteliers measure the overall success of their hotel. But as useful as it is to illustrate growth, RevPAR doesn't take profit into account - and while growth and profit sometimes go hand in hand, this is not always the case.

What is RevPAN?

RevPAN stands for Revenue per Available Night and is calculated using data that's familiar to every property manager or owner. It is calculated for a specific time period, typically on a monthly or yearly basis at the property or portfolio-wide level.

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How to Calculate RevPAN? (RevPAN Formula)

Total Revenue ÷ Available Nights

Why Is RevPAN Important?

When compared to other metrics like occupancy and ADR, RevPAN shows a more accurate and equal picture of revenue management performance over a given period of time. With available nights as the common denominator for RevPAN, the metric can be compared to historical date ranges and factors in how many actual nights could have been sold at a property.

RevPAN can help solve a number of issues, including the fact that revenue management success should not be dictated by something that is out of the property manager's control like owner stays or maintenance blocks at a property.

RevPAN is the best metric to use for evaluating the overall success of a revenue management strategy.

Another benefit of using RevPAN is that it can help easily demonstrate the opportunity cost of owner stays or maintenance blocks that can have a substantial impact on performance. RevPAN is also a fantastic indicator of profitability, since it's able to clearly communicate whether or not a property is effectively selling all bookable nights when compared to operational costs.

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Why Both Metrics Matter?

Both RevPAR and RevPAN are essential metrics for evaluating a hotel's financial performance, but they serve different purposes. RevPAR focuses on room revenue per available room, providing insights into pricing and occupancy, while RevPAN delves deeper by considering all available nights and providing a more accurate representation of revenue management performance.

Hotel managers should use RevPAR to assess how well they are utilizing their room inventory and RevPAN to evaluate the overall success of their revenue management strategy. By considering both metrics, hotels can make informed decisions to optimize their revenue and profitability.

If you need further clarification on these metrics or assistance in implementing them effectively, don't hesitate to reach out to our experts. We're here to help you on your journey toward greater revenue and success.

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