Conversion. RevPAR. GOPPAR. If you’re still getting to grips with promoting your property online, the number of technical-sounding terms can be off-putting.
But it doesn’t need to be that way. Understanding how to refer to these business concepts will help you master the art of hotel revenue management – and increase your profits.
In this article, we’ll explain some of the most common revenue management terms, and how they apply to your business.
1. Occupancy Rate (OCC)
What does it mean?
Your occupancy rate is a way of saying how full your property is over a given period of time. Generally speaking, the higher your occupancy rate, the better. That’s because a high occupancy rate reflects a high number of bookings.
How is it calculated?
OCC is always a percentage, calculated as rooms occupied divided by rooms available. So if your property has 30 rooms and 22 of those have guests in them, then your occupancy rate is 73% for that night. Over time, you’d be talking about average occupancy rate for a month-long period, for example.
Anything else?
While a high occupancy rate is generally a good thing, it needs to be measured alongside other factors like your average daily rate (ADR). If your property is full but you’re underpricing your rooms, then you’re still not making as much profit as you could.
2. Average Daily Rate (ADR)
Your ADR is exactly what the name suggests: the average price for all rooms that you sold over a given period (a week, a month, a quarter, etc). It’s a simple way of seeing more or less what you’re charging your guests over a certain period of time. This is particularly useful when comparing your prices in high season against your prices in low season – and also when comparing your property against your comp set.
How is it calculated?
ADR is calculated as total room revenue divided by rooms sold. So if you make $2,420 in revenue in one night, and 22 of your rooms are occupied, your ADR is $110 for that night.
Anything else?
ADR doesn’t take into account your unsold rooms, so by itself it doesn’t give a full picture of how business is going.
3. Revenue Per Available Room (RevPAR)
RevPAR is about how much revenue you’re making on each available room. It’s a good indicator of the overall health of your property. If you increase your RevPAR, you’ll be moving in the right direction.
How is it calculated?
RevPAR combines the two previous concepts to give a more sophisticated picture of how your business is going. You take the ADR and multiply it by your OCC (which is a percentage).
So following on from the previous example, if your average daily rate is $110 and your occupancy rate is 73%, then your RevPAR is $80.30. This is the amount of revenue you’ve made per available room for that period.
