Since the pandemic snuffed out hotel room demand, hoteliers have been digging through the resulting financial rubble in search of revenue.
NB: This is an article from HotStats
Unfortunately, focusing solely on revenue generation from rooms can obscure financial recovery vision.
Exploring and mining for revenue generation outside of rooms is a first step in getting back to profitability. By measuring and monitoring total revenue per available room (TRevPAR), hoteliers have the ability to take a magnifying glass to all revenue sources and identify both underperformance and outperformance.
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Above all, it can reveal revenue opportunities to help carry a hotel out of the pandemic carnage.
What Is TRevPAR?
Total revenue per available room (TRevPAR) is a hotel metric that measures all of a hotel’s revenue sources. When the full pool of revenue is tallied, TRevPAR divvies that number on a per-room basis. Here’s a simple formula for finding TRevPAR:
TRevPAR = Total revenue/Total available rooms
TRevPAR vs. RevPAR: What’s the Difference?
Don’t let the similar names fool you. There’s a big difference between measuring a hotel’s revenue per available room (RevPAR) and its TRevPAR. RevPAR is a much narrower metric. It only tells hoteliers how much money is coming in from the sale of rooms. And while revenue generated from room sales is typically the largest source of revenue at a hotel, it’s not the only.
That’s where TRevPAR comes in. It accounts for all of the hotel’s revenue sources. Instead of stopping at room sales, TRevPAR considers food and beverage (F&B) revenue, golf operations revenue, parking revenue, spa and health program revenue and all of the other revenue-generating operations of a hotel.
Ultimately, because TRevPAR covers the whole breadth and depth of an operation’s incoming cash, it paints a more accurate picture of a hotel’s income at any given time.
How Does TRevPAR Benefit Hotels?
Of course, revenue will only tell part of a hotel’s full financial story. However, when you fit it into a holistic benchmarking strategy, you can use TRevPAR to boost hotel profit. Here are a few ways TRevPAR helps fortify a hotel’s performance strategy:
Determine the Perfect Revenue Mix
Within each operation, hoteliers face a hefty decision: How much money, labor and resources should be dedicated to each service? What services should be offered altogether? TRevPAR gives hoteliers the data to answer these strategic questions with confidence.
With TRevPAR, it’s easy to root those decisions in data that describes profitability. For instance, if you’re running a F&B service, you’ll want the operation to focus on the most profitable decisions. Are guests moving toward more room service offerings? Maybe buffets are flailing or grab-and-go options on the rise. TRevPAR helps identify the most steady revenue streams in the operation so hoteliers can determine a more profitable revenue mix.
See New Demand Quickly
Especially during market disruption, new trends that completely change demand and a hotel’s income can pop up. For instance, many hoteliers may have been tempted to shut down all services the moment COVID-19 dampened room demand. However, demand for some revenue sources, such as golf resorts, actually jumped during the pandemic.
Going forward, new opportunities and trends will pop up as the pandemic fades. Because it accounts for all of the hotel’s revenue sources, TRevPAR can flag those dwindling revenue streams and point out which operations are becoming popular.
Widen Your Ancillary Revenue Flow
In the hotel industry, room revenue will always be the greatest source of revenue. However, with TRevPAR, you can see how to widen non-room revenue. Plus, by identifying ways to stretch alternative revenue sources, hoteliers will rely less on rooms alone.
That’s especially handy when room demand dries up.
With TRevPAR, hoteliers can see how to shift resources to the most profitable non-room revenue streams. That makes it easier to reach a hotel break-even point and start clawing back toward higher profit.
See Where Money Is Coming from Now
It’s not enough to know how much money is coming in. Hoteliers need to know where it’s coming from. That way, they can identify where to invest and how to amplify those channels.
TRevPAR reveals these current revenue flows so you can adjust departments to meet appropriate demand. It’s possible for hoteliers to see which departments are pulling their weight by stacking each’s revenue source up against TRevPAR. Here are some examples:
- F&B revenue as a % of TRevPAR
- Golf revenue as a % of TRevPAR
- Spa and health revenue as a % of TRevPAR
By using TRevPAR in tandem with operational metrics, it’s easy to recognize which investments will result in higher profit.
Take a Holistic Approach to Measuring Revenue
As beneficial as TRevPAR is, it still has limitations. Because it focuses solely on revenue, it won’t account for expenses that funnel money out of the hotel operation. That’s why it’s important to use TRevPAR as one tool within a complete hotel benchmarking strategy. By understanding the full facts about revenue and tapping into total revenue figures, hoteliers can use TRevPAR to harness cash and boost the hotel’s bottom line.
