For decades, the hotel industry has treated RevPAR (Revenue Per Available Room) as the ultimate “North Star” for performance. It is the metric that drives bonuses, defines strategies, and dominates board reports. But relying solely on RevPAR in today’s complex distribution landscape is dangerous.
NB: This is an article from Demand Calendar
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It tells you how well you filled your rooms and at what price, but it completely ignores the cost of getting those guests through the door.
We have built businesses where departmental “wins”, such as a Sales team hitting a volume target or Revenue Management spiking occupancy, can actually undermine overall profit if the cost of that revenue is too high.
The hard truth is that not all revenue is created equal. A dollar from a loyal corporate guest is not worth the same as a dollar from a high-commission OTA booking. If you are only optimizing for RevPAR, you might be winning the top-line battle while losing the bottom-line war.
To truly understand your business health, you need to evolve the conversation from “How full are we?” to “How profitable is our strategy?” It is time to move beyond the spreadsheet disputes and embrace a metric that tells the whole story: NetRevPAR.
The RevPAR Trap: Why “Busy” Doesn’t Mean “Profitable.”
In many hotels, “busy” is the ultimate goal. If the lobby is full, the restaurant is buzzing, and housekeeping is scrambling to turn rooms, it feels like success. But this activity can be deceptive.
The core issue lies in departmental silos. When you incentivize teams based on isolated metrics, you often get conflicting strategies that hurt the overall business.
- Sales teams might close high-volume corporate deals at discounted rates just to hit a room-night target.
- Revenue Managers might push inventory to high-commission OTAs just to spike occupancy and RevPAR index.
- Marketing might spend heavily on broad campaigns that drive traffic but not necessarily high-value bookings.
These “wins” look great on individual departmental reports, but they can sabotage your total profit. You are essentially paying too much to be busy.The flaw in RevPAR is simple: it is a gross revenue metric. It calculates Room Revenue / Available Rooms but ignores the Customer Acquisition Cost (CAC) required to generate that revenue.
Let’s look at a simple example:
Imagine two bookings for the same night:
