Submitted by Anonymous on Thu, 05/09/2013

## RevPAR, GOPPAR, ProfPAR: Which Is A KEY Metric?Sep 05, 13 | 12:06 am
Everyone has heard of RevPAR and its importance to the hotel industry, but is it still the preeminent measurement tool to assess financial performance of hotels? ## Back to Basics – How Is RevPAR Calculated?Revenue per available room, or RevPAR, is believed to be the most crucial ratio commonly used to measure the financial performance in the hospitality industry. The metric is a function of both room rates and occupancy. Indeed, it provides a useful snapshot of how well a company is filling its rooms and how much it is able to charge. There are two ways to calculate RevPAR; the first formula is:
Alternately, the same figure can be calculated as follows:
It is worth highlighting the difference in computing ADR and RevPAR as hotel general managers adjust their RevPAR measure by placing some of their room inventory out of order so that RevPAR index increases. Few hotel chains have forbidden the use of “out of order” function unless authorization is given by head office to avoid a misleading figure of RevPAR; ADR is computed by taking your total gross room revenue and dividing it by the number of rooms occupied, while RevPAR is computed by taking your total gross room revenue and dividing it by your total available room nights (minus out of order rooms). RevPAR identifies how a hotel is combining the two strategies of maximizing rooms sold and maximizing the average room rate in order to maximize total room revenue. If a hotel&rsquo% |

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