Boosting your profits in the most efficient way is a challenge all hotels face. But here at Equity Hotel and Property Management finds that there are some very strong performance indicators (KPIs). Some commonly used Key Performance Indicators (KPIs) include Average Room Rate (ARR), Occupancy Rate (OCC) and Cost per Occupary Room (CPOR). However, in this article we focus on three hotel revenue management KPIs that experts use to maximize profitability in particular.
- Gross Operating Profit Per Available Room (GOPPAR)
- Net Revenue Per Available Room (NREVPAR)
- Total Revenue Per Available Room (TREVPAR)
Hotel KPI is very important to maximize the profitability of your hotel. Its purpose is to provide a unique insight into the performance of a number of important criteria at your hotel. The KPI also helps you understand the outcome of your income management strategies effectively. Furthermore, hotel revenue management helps you set and measure financial goals. These are the goals that help drive the growth and profitability of your hotel.
3 KPI Ratio that will Drive Profitability Target of Your Hotel:
1. Gross Operating Profit Per Available Room (GOPPAR)
GOPPAR offers one of the most effective methods to measure the performance of your hotel. GOPPAR gives you a holistic view of your hotel’s overall revenue management process. It shows you where you can make adjustments to increase growth to align between upper and lower levels.
GOPPAR lets you see your hotel’s value as an asset anytime – together as an operating business and a real estate property.
GOPPAR formula: Gross Operating Profit (GOP) / Number of Rooms Available
2. Net Revenue Per Available Room (NREVPAR)
NREVPAR is similar to other very useful KPIs offering important differences. NREVPAR includes net revenue in its calculations, so when you use it you gain insight into distribution costs, transaction costs and travel agent commissions as well.
This gives you more transparent revenue management performance measurements. This is very helpful in your strategic planning. The only thing to note is that any thing can be a challenge to collect and calculate the various fees we mentioned above.
NREVPAR formula: (Room Revenue – Distribution Charges) / Number of Rooms Available
3. Total Revenue Per Available Room (TREVPAR)
TREVPAR offers important differences on REVPAR or NREVPAR. This includes all revenues generated by each room on all hotel revenue sources. This includes meals and drinks, holidays, events and other guest expenses.
The hotel KPI offers a quicker view of the management of all revenue generated and where adjustments can be made for further growth. Example: Is restaurant guest spending low? Then why and what can be done? This is the kind of analysis TREVPAR offers.
Formula TREVPAR: Total Revenue / Total Available Rooms
* Total Revenue = Accommodations + Breakfast + Spa + Bar + Mini Bar + [Any additional income]
Im Equity Hotel and Property Management, we look at how these three hotel revenue management have evolved well. This has led to more hotels making wiser choices and achieving long-term profitability growth.
Learn more about what we do and how we can help your hotel make bigger profits.