RevPAM is a key performance indicator hotels use within their revenue management. RevPAM means revenue per available metre.

NB: This is an article from SiteMinder, one of our Expert Partners

RevPAM is a metric that takes the entire space of the property into the equation, as opposed to simply looking at RevPAR or TrevPAR. This means hoteliers can get even more granular with their revenue management strategies.

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Other metrics that take into account revenue outside of room charges include RevPOM (revenue per occupied metre) and RevPEC (revenue per event customer).

The hotel industry never rests for long, particularly when it comes to revenue management. There is always a new metric to consider, new ways to increase efficiency, and new strategies to boost profit. RevPAM is one of those metrics that are growing in prominence, changing the way hoteliers look at the earning potential of their property.

This blog will tell you everything you need to know about RevPAM, formula to calculate it, and tips on optimising your revenue management plans.

How to calculate RevPAM

RevPAM, as the name states, is calculated by measuring the revenue of the hotel per available metre.

Total revenue / divided by the total available square metre(s) of the space (m2).

For example:

$60,000 / 2000m2 = $30 per square metre.

While you can calculate the RevPAM of the entire hotel, it’s generally more useful to calculate and compare the RevPAM of individual spaces. Here are some examples:

  1. Hotel Restaurant

Let’s say a hotel has a restaurant that is 200 square metres in size. Over a month, the restaurant generates $20,000 in revenue.

RevPAM = Total Revenue / Total Square Metres

RevPAM = $20,000 / 200

RevPAM = $100 per square metre

  1. Conference Room

A hotel’s conference room is 150 square metres. In a week, it’s rented out for three events, generating a total of $3,000.

RevPAM = $3,000 / 150

RevPAM = $20 per square metre

  1. Hotel Spa

The spa area of a hotel covers 100 square metres. Over a month, it provides services that amount to $15,000 in revenue.

RevPAM = $15,000 / 100

RevPAM = $150 per square metre

  1. Outdoor Event Space

A hotel has an outdoor event space of 500 square metres. In a year, it’s used for 10 events, generating a total of $50,000.

RevPAM = $50,000 / 500

RevPAM = $100 per square metre

  1. Boutique Store within Hotel

A hotel has a boutique store that occupies 50 square metres. Over a quarter, it sells products worth $25,000.

RevPAM = $25,000 / 50

RevPAM = $500 per square metre

In these examples, you can see that the boutique store has the best RevPAM, and is thus the most effective use of available space. Meanwhile, the conference room is generating the lowest amount of revenue per square metre and is thus the least efficient space.

Read the full article at SiteMinder