Because it provides a more holistic view of the revenue generated across an entire property, more hospitality leaders are turning to TrevPAR (Total Revenue Per Available Room) as a key measurement in their benchmarking and operational strategies.
NB: This is an article from MDO
To calculate TrevPAR, hotels add all revenue generated from room sales, food and beverage sales, meeting room rental and spa services, and other sources of revenue, such as parking, resort fees and pet fees. This total revenue is then divided by the total number of available rooms in the hotel.
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By analyzing TrevPAR, hoteliers can identify areas where they can increase revenue, such as by promoting the hotel’s food and beverage offerings or by increasing sales of additional services, such as spa treatments or other amenities.
It’s a timely topic as ancillary revenues outside of hotel rooms seem to be skyrocketing. According to STR, TrevPAR at U.S. hotels in March broke a record, clocking in at $238.22, up 17.5% over March 2022 and the highest for any month on record. Rooms revenue accounted for some of the growth – average Revenue Per Available Room (RevPAR) in March was $103.35 – but hotels made significant revenue gains outside of the rooms department.
“Ancillary revenues have picked up, especially post-COVID. Along with a renewed interest in travel, people are also taking advantage of the ancillary services that hotels offer,” says Raquel Ortiz, Director of Financial Performance at STR. “Definitely restaurant revenue has been up – not so much from group business – but transient guests are driving revenue gains in the F&B, spa and golf departments.”
Some of that revenue is driven by guests who are visiting the property specifically for restaurant reservations, a tee time or a spa appointment, and won’t end up staying overnight, which is fairly common in the luxury and resort spaces, adds Sudharshan Chary, founder and president of Datavision by MDO.
“At Mandarin Oriental, for example, there are guests who come to eat at the property even if they’re not staying there, and Mandarin tracks those guests through their recognition program,” Chary said. “They make quite a bit of revenue from people walking in to have lunch at a Mandarin Oriental and they want to understand what that guest’s total spend is, regardless of whether it’s on food, beverage, spa appointments or rooms. And that same kind of thinking goes for a lot of the other properties.”
“If you’re looking at revenue figures for somewhere like Atlantis – they’ve got a waterpark, they’ve got parking, they’ve got 30 different restaurants at a single property – TrevPAR is a nice figure that leadership can use to understand which divisions are under- or overperforming,” adds Ryan Smith, managing director at inTouch by MDO.
TrevPAR’s Impact on the Future of Hospitality
So, with record-breaking revenue coming from other departments outside of rooms, it begs the question: How much should hoteliers shift their attention from managing rooms revenue to managing revenue from ancillary services? Would a smart hotelier ever move away from offering overnight lodging and instead focus on running a spa, for example?
