3 hotel guests drinking at the hotel bar reflecting the importance of shifting revenue management thinking from revpar to revpag

In an era where guest experience and satisfaction play pivotal roles in a hotel or resort’s success, the hospitality industry would be well-advised to invest in a concerted effort toward shifting how it measures financial health from traditional metrics like Revenue Per Available Room (RevPAR) to a more comprehensive metric known as Revenue Per Available Guest (RevPAG).

NB: This is an article from Agilysys

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This transition signifies a move beyond room-centric revenue evaluation to a holistic approach that includes all guest expenditures. Examining this shift is crucial for hotels and resorts aiming not only to measure their total profitability accurately but also to enhance it by keeping guests on their properties and encouraging additional spending.

This article delves into the shift from RevPAR to RevPAG and explores how hotels and resorts can create a “sticky” environment to encourage guests to spend more on property.

RevPAR Overview

Revenue Per Available Room (RevPAR) has long been the standard metric for evaluating a hotel’s financial performance. It is calculated by dividing total room revenue by the number of available rooms over a given period.

Limitations of RevPAR

While RevPAR provides a useful snapshot of room revenue, it doesn’t account for other revenue streams such as dining, spa services, or recreational activities. As the industry evolves, there’s a need for a more holistic metric that considers the total guest spend.

Introducing RevPAG: A Holistic Approach to Revenue Evaluation

Beyond Room Revenue

Revenue Per Available Guest (RevPAG) addresses the limitations of RevPAR by encompassing revenue generated from all guest expenditures, not just room revenue. This includes on-site dining, entertainment, spa services, and other amenities, providing a more nuanced understanding of a hotel’s financial performance.

Strategies for Transitioning to RevPAG

1. Integrated Revenue Management Systems:

Investing in integrated systems that consolidate data from various departments facilitates a comprehensive analysis of revenue streams. This integration ensures that non-room revenue is factored into the overall revenue management strategy, empowering hoteliers to make informed decisions regarding pricing, promotions, and service offerings to maximize RevPAG.

2. Personalized Guest Experiences:

Building a personalized approach to guest services involves understanding individual preferences and tailoring services accordingly. Leveraging guest data for personalization not only enhances satisfaction but also encourages additional spending on personalized services.

3. Dynamic Pricing Models:

Embracing dynamic pricing models beyond room rates allows hotels to optimize pricing for ancillary services based on demand, seasonality, and specific guest profiles. This flexibility ensures that prices are aligned with the perceived value of these services.

Creating a “Sticky” Environment for Increased On-Site Spending

1. Curated On-Site Activities:

Hotels and resorts can curate a variety of on-site activities such as guided tours, workshops, or cultural events to keep guests engaged and entertained without leaving the property. By offering diverse experiences on property, hoteliers can encourage guests to extend their stay and explore more of what the hotel or resort has to offer.

2. Culinary Excellence:

Elevating the dining experience is a powerful tool for increasing on-site spending. Investing in quality ingredients, diverse culinary options, and themed dining events can turn dining into an experience, prompting guests to dine on-site instead of seeking alternatives.

3. Wellness and Recreation:

State-of-the-art wellness and recreation activities contribute to the “sticky” factor, providing guests with ample reasons to stay on the property for leisure and relaxation. From spas to fitness centers, golf outings and other outdoor activities, these activities enhance the overall guest experience.

4. Loyalty Programs:

Implementing or enhancing loyalty programs can be a key driver for on-site spending. By offering exclusive perks, discounts, or access to premium services, hotels and resorts can incentivize guests to choose on-property options, fostering loyalty and repeat business.

5. Seamless Technology Integration:

Leveraging technology for a seamless guest experience is essential. From streamlined check-ins to in-room automation, implementing user-friendly mobile apps that provide easy access to on-site services enhances guest satisfaction and increases the likelihood of additional spending.

In the ever-evolving landscape of the hospitality industry, transitioning from RevPAR to RevPAG is not just a trend; it’s a strategic imperative. Hotels and resorts that embrace this shift are better positioned to gauge their total profitability accurately and implement targeted strategies to maximize revenue. Creating a “sticky” environment, where guests are enticed to stay on the property and engage in on-site activities, is a multifaceted approach that involves personalized experiences, advanced technology, and strategic offerings. By focusing on RevPAG and fostering on-site spending, hotels can not only adapt to changing industry dynamics but also thrive in an increasingly competitive market, ensuring sustained success in the long run.

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