What Does Revenue Per Occupied Room Mean?
Revenue per occupied room (RevPOR) is a performance metric in the hotel and lodging industry. RevPOR is calculated by dividing total revenue by the number of rooms actually sold to guests. The calculation takes into account services and other items a guest may buy, such as spa services and mini-bar sales.
- Revenue per occupied room is a performance metric that calculates a hotel’s total revenue divided by occupied rooms for a given time period.
- The calculation includes all guest revenue, such as money spent on room service, dry cleaning, spa services, etc.
- Revenue per occupied room is useful for gauging how the management of a particular hotel property is performing. This is because the metric strips out the impact of seasonally influenced occupancy rates.
Understanding Revenue Per Occupied Room (RevPOR)
The formula for calculating revenue per occupied room is:
RevPOR = Total Revenue / Occupied Rooms
The time period used can be daily, weekly, monthly, or annually depending on what type of insights the company is looking for. Revenue per occupied room is meant to show how much profit a hotelier is making from guests who stay at a specific property.
The metric can be very useful in evaluating a hotel’s performance through seasonal downtrends. Seasonal visiting trends will impact other hotel key performance indicators, but RevPOR ignores the overall number of guests in favor of measuring how much an average guest spends on the hotel’s products and services. Some hoteliers feel this is a better measure of the management of a hotel than seasonally influenced occupancy rates.
Revenue per occupied room takes into account items such as room service, dry cleaning, and spa sales to show how successful a hotel is in selling more than just a room to guests. Other industry metrics rise and fall with occupancy rates, which may say less about how the hotel is managed and more about seasonal trends.
RevPOR vs. RevPAR
RevPOR often takes a backseat to revenue per available room (RevPAR), which takes unoccupied rooms into consideration by multiplying the overall occupancy rate by the average daily rate (ADR). This is simply because occupancy rates have a far bigger influence on the bottom line than guest spending on the incidentals.
Often the room is the highest priced part of the transaction, so selling more rooms to more people translates quickly into more profit. RevPOR will never displace RevPAR as the main profitability performance measure. Improvements in RevPOR do translate into higher profits, but the effect is more gradual than the immediate impact of increasing the occupancy rate.
That said, RevPOR is a better measurement of the direct management of a particular property than RevPAR. Hoteliers operating networks across the country may handle marketing and promotions at a level above the individual hotel, so it can be difficult for the direct managers of the hotel to personally influence occupancy. What they often do control is how and when in-hotel purchases are marketed to guests as well as the quality of those products and services.
By focusing on RevPOR, hotel management can capture more revenue from their guests and soften the blow of regional or seasonal occupancy declines. More importantly, a good RevPOR in the down season suggests that total profitability will be even higher when the peak season arrives.
View more information: https://www.investopedia.com/terms/r/revpor.asp