Housekeeping Didn't Come

The Truth Serum of Hotel Performance: Understanding RevPAR S1E8a

Rob Powell Season 1 Episode 9

Revenue Per Available Room (RevPAR) serves as hospitality's truth serum, revealing not just if you're selling rooms, but how efficiently you're doing it. This essential metric equals your total room revenue divided by the number of available rooms and helps determine if you're using your inventory to its full revenue potential.

• RevPAR alone isn't enough - what matters is how your RevPAR compares to your competitive set
• RevPAR Index (or Revenue Generation Index) shows if you're getting your fair share of market demand
• Index over 100 means you're outperforming your comp set; below 100 means leaving money on the table
• RevPAR Growth Index tracks your performance compared to competitors over time
• Great leaders don't just ask "what did we make" but "how did we perform relative to what we should have made"
• Stop worshiping occupancy - 95% occupancy at a 40% discount rate isn't a victory
• Understand your seasonality when comparing RevPAR across different time periods

You can learn more about RevPAR revenue strategy in the full financial playbook of hospitality at the University of Arkansas Hospitality Management Program. Whether you're just getting started or ready to take the lead, we don't just teach hospitality, we train professionals to read the metrics and own the mission.


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Speaker 1:

Welcome to Housekeeping. Didn't Come the only show where we take the emotion of the mountaintop and the math of a balance sheet and put them in the same conversation? Hello, I'm Rob Powell and today's episode is for every hospitality leader, gm, student or curious guest who's ever stared at a performance report and whispered what in the world is RevPar? Let's get into it. Revenue per available room. It's not new, it's not sexy, but it is essential. So what is RevPar really? It's your total room revenue divided by the number of available rooms. Let me say it again it's your total room revenue divided by the number of available rooms. Rev par equals ADR times occupancy rate. It's the truth serum of your hotel. It tells you not just if you're selling rooms, but how efficiently you're doing it. Now why does this matter? You can have a high occupancy rate and still underperform if your rates are too low. Or you can have a sky-high ADR average daily rate but empty rooms and no profit. Revpar slices through that noise. It asks are you using your inventory to its full revenue potential? But wait. Revpar alone isn't enough. It's not just your Revpar that matters, it's how your rev par stacks up against your competitive set.

Speaker 1:

We call on our friends at STR for their reports, for our competitive set information and help with this bit of the analysis. That's where we look at two incredibly important performance metrics. One is the RevPar index, otherwise known as the Revenue Generation Index or RGI. This metric answers the question are you getting your fair share of market demand? Here's how it works RevPar index equals your RevPar divided by a CompSets RevPar times 100. Now, I know this is math, but it's extremely important and, as you're, as you know, if you're in this industry, we rely on copious amounts of calculations, simple but powerful.

Speaker 1:

Descent rev par index. If your rev par index equals 100, you're getting exactly your fair share. If it's over a hundred a 100, you're outperforming your comp set. Below 100, you're leaving money and market share on the table. So let's say your rev par equals $82. Your comp set rev par is 75. Then rev par index equals 109. Boom, you're 9% of your competition and the revenue per room. That's more than bragging rights. That's pricing and positioning strategy actually working.

Speaker 1:

Now the second index is Revpar Growth Index. Now let's say your Revpar hasn't changed, still at $82. Feels stagnant, but your comp set dropped from $75 to $67. You've actually gained ground. This index tracks your RevPar growth compared to your competitors over time. Here's the calculation. It's RevPar growth index equals your growth percentage divided by your comp set's growth percentage times 100. Above 100, you're gaining share. Below 100, you're falling behind. At 100, you're running in pace with the pack.

Speaker 1:

This is the one that separates operators from owners. It's not just about the number, it's about the trend. Now why this matters for leaders. These indices don't just inform marketing. They inform rate strategy, channel management, sales team performance, brand positioning, owner confidence and many more. If your RevPAR index is sliding but your team's celebrating a high ADR, something's off.

Speaker 1:

Great leaders read between the numbers. They don't just ask what did we make. They ask how did we perform relative to what we should have made? Here's a pro tip Stop worshiping occupancy. 95% occupancy at a 40% discount rate is not a victory, it's a fire. Sale Track Rev Par Index Are you gaining share or losing it to the comp set? And understand your seasonality. Your RevPar in July shouldn't be compared to January without context or hot chocolate. Revpar is not the enemy, it's your diagnostic tool. Ignore it and you're flying blind. Embrace it and you can start actually steering the ship. This is Rob Powell, remember. Good leaders read numbers. Great leaders understand what they mean. Revpar isn't the enemy, it's the conversation starter. Use it well and you'll lead better, forecast sharper and drive performance. That actually means something. You can learn more about RevPAR revenue strategy in the full financial playbook of hospitality at the University of Arkansas Hospitality Management Program. Whether you're just getting started or ready to take the lead, we don't just teach hospitality, we train professionals to read the metrics and own the mission.