The Truth Serum of Hotel Performance: Understanding RevPAR S1E8a

Got podcast love, a plot twist, or a lost-and-found tale? Send fan mail here. Bonus points for wit.

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.

Support the show

Episode Transcript

Speaker 1 (00:01):
Welcome to Housekeeping.
Didn't Come the only show wherewe take the emotion of the
mountaintop and the math of abalance sheet and put them in
the same conversation?
Hello, I'm Rob Powell andtoday's episode is for every
hospitality leader, gm, studentor curious guest who's ever
stared at a performance reportand whispered what in the world

(00:21):
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 revenuedivided by the number of
available rooms.
Let me say it again it's yourtotal room revenue divided by

(00:42):
the number of available rooms.
Rev par equals ADR timesoccupancy rate.
It's the truth serum of yourhotel.
It tells you not just if you'reselling rooms, but how
efficiently you're doing it.
Now why does this matter?
You can have a high occupancyrate and still underperform if

(01:04):
your rates are too low.
Or you can have a sky-high ADRaverage daily rate but empty
rooms and no profit.
Revpar slices through thatnoise.
It asks are you using yourinventory to its full revenue
potential?
But wait.
Revpar alone isn't enough.
It's not just your Revpar thatmatters, it's how your rev par

(01:27):
stacks up against yourcompetitive set.
We call on our friends at STRfor their reports, for our
competitive set information andhelp with this bit of the
analysis.
That's where we look at twoincredibly important performance
metrics.
One is the RevPar index,otherwise known as the Revenue
Generation Index or RGI.

(01:47):
This metric answers thequestion are you getting your
fair share of market demand?
Here's how it works RevParindex equals your RevPar divided
by a CompSets RevPar times 100.
Now, I know this is math, butit's extremely important and, as
you're, as you know, if you'rein this industry, we rely on

(02:11):
copious amounts of calculations,simple but powerful.
Descent rev par index.
If your rev par index equals100, 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 moneyand market share on the table.
So let's say your rev parequals $82.
Your comp set rev par is 75.

(02:34):
Then rev par index equals 109.
Boom, you're 9% of yourcompetition and the revenue per
room.
That's more than braggingrights.
That's pricing and positioningstrategy actually working.
Now the second index is RevparGrowth Index.
Now let's say your Revparhasn't changed, still at $82.

(02:56):
Feels stagnant, but your compset dropped from $75 to $67.
You've actually gained ground.
This index tracks your RevPargrowth compared to your
competitors over time.
Here's the calculation.
It's RevPar growth index equalsyour growth percentage divided

(03:17):
by your comp set's growthpercentage times 100.
Above 100, you're gaining share.
Below 100, you're fallingbehind.
At 100, you're running in pacewith the pack.
This is the one that separatesoperators from owners.
It's not just about the number,it's about the trend.

(03:38):
Now why this matters forleaders.
These indices don't just informmarketing.
They inform rate strategy,channel management, sales team
performance, brand positioning,owner confidence and many more.
If your RevPAR index is slidingbut your team's celebrating a
high ADR, something's off.

(03:59):
Great leaders read between thenumbers.
They don't just ask what did wemake.
They ask how did we performrelative to what we should have
made?
Here's a pro tip Stopworshiping occupancy.
95% occupancy at a 40% discountrate is not a victory, it's a
fire.
Sale Track Rev Par Index Areyou gaining share or losing it

(04:23):
to the comp set?
And understand your seasonality.
Your RevPar in July shouldn'tbe compared to January without
context or hot chocolate.
Revpar is not the enemy, it'syour diagnostic tool.
Ignore it and you're flyingblind.
Embrace it and you can startactually steering the ship.
This is Rob Powell, remember.

(04:45):
Good leaders read numbers.
Great leaders understand whatthey mean.
Revpar isn't the enemy, it'sthe conversation starter.
Use it well and you'll leadbetter, forecast sharper and
drive performance.
That actually means something.
You can learn more about RevPARrevenue strategy in the full
financial playbook ofhospitality at the University of
Arkansas Hospitality ManagementProgram.

(05:07):
Whether you're just gettingstarted or ready to take the
lead, we don't just teachhospitality, we train
professionals to read themetrics and own the mission.