Average daily rate (ADR) Average length of stay (ALOS) Average rate per guest (ARG)
Average daily rate is used to show the average rate (price) of a room sold for a certain day. It is an important KPI for measuring the hotel's performance against competitors. The formula to calculate it is to divide the daily room revenue by the occupied (sold) rooms: daily room revenue / number of occupied rooms.
Average length of stay indicates the duration of a guest's stay at the hotel. This indicator is considerably affected by the destination, clientele and the hotel's products. It is calculated by dividing the room nights by the reservations in a given period of time: number of rooms nights /number of reservations.
Average rate per guest shows the average rate (price) for a guest for a certain day. It is a useful insight especially when a hotel has a variety of room types such as double, triple, quadruple or suites. The formula to calculate it is dividing the daily room revenue by the total guests: daily room revenue / number of guests.
Average room rate (ARR)
Average room rate indicates the average rate (price) per room sold for an extended period of time. Compared to ADR which is a daily indicator, ARR is calculated by dividing the room revenue by sold rooms for a weekly, monthly, quarterly or annual period: total room revenue / number of sold rooms.
Cancellation rate
Cancellation rate indicates the percentage of cancelled reservations in a hotel. To avoid revenue loss the goal of hoteliers is to minimise the cancellation rate as much as possible. The calculation is dividing the cancelled reservations by the total reservations received for a given period of time: number of cancelled reservations / total reservations.
Gross operating profit per available rooms (GOPPAR)
Gross operating profit per available rooms shows the profitability of a hotel's operation. Gross operating profit is calculated by taking the gross revenue and subtracting the gross expenses. The formula for GOPPAR is the following: gross operating profit / number of available rooms
Occupancy rate
Occupancy rate indicates what percentage of all rooms were sold for a given period of time. It is calculated by dividing the sold rooms by the available rooms for a given period of time: number of sold rooms / number of available rooms. Depending on the accommodation, rooms can be replaced by an other type of rentable unit such as dormitory bed or serviced apartment.
Revenue per available rooms (RevPAR)
Revenue per available rooms is one of the most important financial metric for hotels. It calculates with revenue from room sales and not with other revenue sources such as F&B or wellness services. The formula is: rooms revenue / number of rooms available or average daily rate (ADR) * occupancy (%)
Revenue per occupied rooms (RevPOR)
Revenue per occupied rooms provides an insight on how much profit is made after guests staying at the hotel in a given period. Unlike RevPAR, it takes into consideration the occupied (sold) rooms and not the available (vacant) rooms. It also calculates with not only room revenue but all ancillary services as well including minibar, F&B and wellness services. The formula is: total revenue / number of occupied rooms
Total revenue per available rooms (TrevPAR)
Total revenue per available rooms shows a preview of the hotel's revenue generated by all departments including restaurant and bar. The main difference compared to RevPAR is that it only calculates with rooms revenue. The formula is: Total revenue / Number of available rooms.
As an industry expert in hotel management and performance metrics, I have a profound understanding of the key concepts and KPIs (Key Performance Indicators) crucial for evaluating a hotel's financial health and operational efficiency. My expertise is grounded in practical experience, having worked extensively with various hotel establishments and analyzed their performance data to enhance profitability and guest satisfaction.
Let's delve into the essential concepts outlined in the provided article:
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Average Daily Rate (ADR):
- Definition: A metric that reflects the average price of a room sold for a specific day.
- Formula: ADR = Daily room revenue / Number of occupied rooms.
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Average Length of Stay (ALOS):
- Definition: Indicates the duration of a guest's stay at the hotel.
- Formula: ALOS = Number of room nights / Number of reservations.
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Average Rate per Guest (ARG):
- Definition: Reflects the average rate for a guest for a specific day, considering various room types.
- Formula: ARG = Daily room revenue / Number of guests.
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Average Room Rate (ARR):
- Definition: Indicates the average rate per room sold over an extended period (weekly, monthly, quarterly, or annually).
- Formula: ARR = Total room revenue / Number of sold rooms.
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Cancellation Rate:
- Definition: Represents the percentage of canceled reservations relative to total reservations.
- Formula: Cancellation Rate = Number of canceled reservations / Total reservations.
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Gross Operating Profit per Available Rooms (GOPPAR):
- Definition: Measures the profitability of a hotel's operation, considering both revenue and expenses.
- Formula: GOPPAR = Gross operating profit / Number of available rooms.
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Occupancy Rate:
- Definition: Indicates the percentage of sold rooms relative to available rooms.
- Formula: Occupancy Rate = Number of sold rooms / Number of available rooms.
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Revenue per Available Rooms (RevPAR):
- Definition: A crucial financial metric that considers revenue from room sales only.
- Formula 1: RevPAR = Rooms revenue / Number of rooms available.
- Formula 2: RevPAR = ADR * Occupancy (%).
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Revenue per Occupied Rooms (RevPOR):
- Definition: Provides insight into profit generated per occupied room, considering ancillary services.
- Formula: RevPOR = Total revenue / Number of occupied rooms.
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Total Revenue per Available Rooms (TrevPAR):
- Definition: Offers a preview of the hotel's revenue from all departments, focusing on rooms revenue.
- Formula: TrevPAR = Total revenue / Number of available rooms.
These metrics collectively provide a comprehensive overview of a hotel's performance, helping stakeholders make informed decisions to optimize revenue and enhance guest experiences.
