There are many metrics a hotel owner might use to determine how the facility is performing. RevPOR is one of them.
In this article, we will discuss RevPOR in detail. We will cover its formula and calculation. We will also go over some tips on how to raise your RevPOR. Finally, we will compare it with RevPAR, another metric you should know about if you’re in charge of a hotel.
RevPOR means a hotel’s revenue per occupied room. It is a metric that measures how well a hotel is performing by calculating its total room revenue divided by its occupied rooms during a given length of time.
When you calculate RevPOR, and you divide the total room revenue that a hotel is bringing in by the number of rooms that have actually been sold to guests, you are also taking into account the other items and services that a guest might buy when they are staying with you. Those might include, depending on each hotel, things like mini-bar sales, room service, dry cleaning, etc
It’s always useful as a hotel owner to have some metrics available through which you can tell how your property is performing. That is certainly true of RevPOR.
This is a particularly useful one because you can use it to determine how your hotel is doing while stripping away the impact of occupancy rates that are being influenced by the season. Since the focus is on occupied rooms, the metric isn’t influenced by things like changes in demand. These might occur during a hotel’s less busy season.
Since RevPOR also includes the additional items and services that a guest might be buying from you, it is not just a metric for room revenue (depending on how the hotel is dividing its revenues).
Now, let’s look at the formula for calculating RevPOR.
The formula for calculating RevPOR can be written in the following way:
Depending on the insights you are looking for, you can calculate RevPOR for different lengths of time, such as a week, month, quarter, or year. Hoteliers can use the formula to quickly determine how much revenue they are making from guests who book a stay at a specific property.
Let’s look at an example of the formula in action. We’ll say that your hotel has brought in $30,000 for the month room revenue. You have a total of 175 rooms occupied.
$30,000 / 175 = 171.42. Your RevPOR for that month is $171.42.
As a hotelier, once you look at how to calculate RevPOR and understand what the metric signifies, it makes sense that you would want to raise it. How can you do that, though?
One way to potentially raise RevPOR is to optimize your distribution strategy. When you do so, you can focus only on the channels that help you maximize your reach. In other words, you want to select the most relevant and profitable channels that your hotel’s target audience uses while distancing yourself from others that haven’t been working as well.
To do this, you can start by evaluating channel performance. This is something that your marketing team can do. They can look at each channel you’re using and determine customer acquisition costs, booking volume, and booking revenue.
If you see that you have some channels that are working better than others, concentrate on those. If some of the ones you’ve been using aren’t performing as well as you’d like, consider either deprioritizing those or no longer using them at all.
You can also consider working with third-party platforms. Some of them may be able to offer package deals that allow hotel guests to bundle experiences or services when they book a room.
Upselling to your hotel’s customers can help you across many metrics. RevPOR is about room revenue, but remember that it is also about increasing the revenue that you’re extracting from each guest through other means. Upselling and cross-selling would certainly be areas to look at if you have this strategy in mind.
Having the right booking engine in place should help you in this area. Have it suggest optional extras and room upgrades during the booking process.
Its suggestions should not be too intrusive, but they should also highlight what your hotel has to offer in addition to rooms and to portray those choices in the best light possible. A brief, enticing description of what a guest can get in addition to a room might be what it takes to get them to spend a little extra and pamper themselves.
After a customer books with your hotel, you can also take advantage of the contact information they’ve given you to follow up. Sending an email that mentions things like faster internet access, meals, spa treatments, tours, and so forth might get them to open their wallet again before they ever set foot on your property.
It’s true that RevPOR incorporates other elements besides the price of a room into the final number you’ll get when you use the formula. However, the price of a room will still be the biggest determining factor that goes into this metric. Therefore, you need to optimize your room pricing however and whenever that’s possible.
Adjusting pricing based on the current demand from your customer base is almost always the easiest way to do that. Your marketing team needs to look closely at when the demand is highest. That will probably be impacted by what season it is, whether there are festivals or other local events happening nearby, etc.
When demand is higher, you’re leaving money on the table if you charge the same rate for a room as you would during the slower times of the year. Charging more for your rooms is sure to boost your RevPOR if you can still persuade your target market to pay those higher prices.
However, optimizing your room rates is not the only way you can increase your RevPOR. You can also do so by strategically changing the pricing of other services or experiences you offer.
Another option if you’re trying to boost your RevPOR is to try to get to know your guests better and to anticipate their needs.
If you have a guest who likes to drink a particular brand of alcohol when they stay with you, then offering them a bottle of it when they book their next stay makes sense. If they like you to provide them with a flower bouquet because they’re staying with you to celebrate a meaningful birthday or a wedding anniversary, suggesting they make the same arrangement again can potentially raise your RevPOR.
You might also look into improving the quality of your in-room services and guest amenities if you’re still not getting the RevPOR that you want. If guests aren’t ordering room service enough, maybe you’ll mention on your website or in literature you leave in each of your rooms that you have brought in a well-known chef to revamp the available room service items. Perhaps you’ll offer a longer list of spa services.
Studying your target audience and figuring out who is staying with you the most can help you in this area. The better you know the individuals who are spending the most time in your hotel, the more likely you can come up with additional or upgraded amenities and experiences that they will find irresistable.
You can extrapolate a great deal of information about your guests, including their likes and dislikes, if you study their habits and activities as it relates to your hotel. You can then take the appropriate actions to improve the various crucial metrics that you’re monitoring, such as RevPOR. However, you might sometimes find it even better to ask your guests directly what they liked and disliked about staying with you.
Reach out to guests who have stayed at your hotel via a survey. You can send them one via email, since you now have their contact information. You might also consider sending them a quick survey via text message instead, since some guests might respond to that better.
Incentivize your guests filling out a questionnaire by telling them you’ll enter them in a drawing for a free weekend stay. You might tell them they can book with you for 10% off in the next month if they fill out the survey instead.
Any way you can get guests to comment directly about what they liked and disliked during their stay, the better it is for increasing your RevPOR. If many of your guests found the same services lacking, you’ll know you need to get better in that area. If many of them give you rave reviews about a particular menu item or guest experience, you’ll know that’s working and you need to keep it around.
We’ll conclude by talking about the difference between RevPOR and RevPAR. RevPAR is another useful metric in the hotel industry. It stands for revenue per available room.
To calculate RevPAR, you can divide your total hotel room revenue by the total number of rooms that your hotel has available. You can use it to assess how well your hotel is using its available rooms. You can also use it to compare different sizes of hotels.
These two metrics are similar in that you are using both of them to measure the revenue that your hotel is bringing in. However, they calculate revenue differently. They also indicate different aspects of how your property is performing.
For many hotel owners, RevPOR takes a back seat to RevPAR in terms of importance. While both are undeniably useful, RevPAR seems like the more vital metric to some hoteliers because it also takes unoccupied rooms into consideration. Because of this, some hotel owners view it as a more thorough or all-encompassing metric.
Now you know what RevPOR is and how to calculate it. You know what that number reveals, and we’ve also given you some ideas for how to boost yours if you find it to be lagging.
RevPOR isn’t just an abstract number that looks better for your hotel if it’s higher. You can use it to make decisions.
You can use it to make staffing decisions as well. If you’ve tried to scale back your front desk staff and multiple guests complained they didn’t have someone to speak to when they were checking in or out, you can make the necessary changes based on those reports.
The insights that RevPOR provides can help you to make facility improvements that guests will find meaningful. The more you listen to your target audience and try to accommodate it, the more likely the changes you make will allow you to drive up your RevPOR, not to mention the other vital metrics you should know about as a hotelier.
Remember that if you’re trying to increase your hotel’s RevPOR, some experimentation will likely be necessary. Just like with many of the other key performance indicators (KPIs) that hotel owners use to determine how their property is doing, trying different strategies before settling on one that seems to work best is usually advisable. Last but not least, one thing is certain: the more rooms you give away for free, the worse your RevPOR will be. That's why it is important to monitor those gratuities.
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