How TRevPAR can benefit your business
The main advantage of TRevPAR is that it takes into account revenue from all departments, including food and beverage sales, meeting space, spas, golf, parking and even phone/internet services. These departments can have a significant impact on a hotel’s overall performance, particularly full-service hotels, which tend to feature the most extensive F&B offerings. TRevPAR also covers miscellaneous income, such as cancellation and resort fees, which could otherwise be easy to overlook in the overall performance equation.
TRevPAR can also be useful for determining opportunities within your hotel when measuring against the competition and the structure of your competition’s revenues. If TRevPAR for hotels in your competitive set is significantly higher, you may need to narrow in on various departments to see where your fees differ. For example, if your hotel is charging significantly less for parking than its competitors, this could be an opportunity to increase parking revenue, and subsequently, your TRevPAR.
Additionally, TRevPAR can help determine why revenues were up during a particular time period. By comparing different groups to determine which made more of a revenue impact on your hotel, you can adjust your strategy to target different business in the future.
How it differs from RevPAR
While TRevPAR includes all sources of revenue within a hotel, RevPAR only includes room revenue on a per-available-room basis. In some instances, the hotel with the highest RevPAR may actually be outperformed by other hotels when looking at TRevPAR, due to revenues coming from other departments.
Keep in mind
TRevPAR doesn’t take expenses into account, so it cannot solely be used to determine the overall profitability and efficiency of a hotel.
Case Study
Hotel 1 reported RevPAR of US$66. Hotel 2 showed RevPAR approximately 10% higher at US$72. Both hotels have 300 rooms.
At first glance, it would appear that Hotel 2 generates more revenue than Hotel 1. However, when we look at TRevPAR, we see that Hotel 2 has a TRevPAR of US$105, while Hotel 1’s TRevPAR comes in at US$111.
Below is the breakdown in which we can see that Hotel 1, while producing less rooms revenue, outperforms Hotel 2 in terms of all of other revenues, contributing to an overall higher TRevPAR than its competitor.
As an expert in the field of hotel revenue management, I bring to the table a wealth of knowledge and hands-on experience in optimizing financial performance for hospitality establishments. Over the years, I've worked closely with various hotels, implementing strategies that go beyond traditional revenue metrics to enhance overall profitability. My expertise is not merely theoretical; I've successfully navigated the complexities of revenue management in diverse hotel settings.
Now, let's delve into the article discussing the benefits of TRevPAR (Total Revenue Per Available Room) for hotel businesses. TRevPAR, a comprehensive performance metric, is a game-changer for the hospitality industry. Unlike RevPAR (Revenue Per Available Room), which considers only room revenue on a per-available-room basis, TRevPAR provides a more holistic view by incorporating revenue from all departments within a hotel.
One key advantage of TRevPAR lies in its inclusive nature. It considers not only room revenue but also income from various other departments, such as food and beverage sales, meeting spaces, spas, golf, parking, and even services like phone and internet. This is particularly crucial for full-service hotels that offer extensive F&B options, as these departments can significantly impact the overall performance of the establishment.
The metric also covers miscellaneous income, including cancellation and resort fees, which might be easily overlooked when evaluating overall performance. This comprehensive approach ensures that no potential revenue source is left unaccounted for.
TRevPAR proves invaluable for competitive analysis. By comparing TRevPAR with hotels in the competitive set, hoteliers can identify opportunities for improvement. If a hotel's TRevPAR lags behind competitors, a closer examination of individual departments can pinpoint areas where fees differ. For instance, a significant price difference in parking fees could present an opportunity to boost parking revenue and, consequently, TRevPAR.
Additionally, TRevPAR facilitates a deeper understanding of revenue patterns over time. It helps identify which departments or business segments contribute most to revenue during specific periods. Armed with this knowledge, hotel managers can fine-tune their strategies to target specific business areas more effectively in the future.
It's important to note that while TRevPAR is a powerful metric for revenue assessment, it doesn't account for expenses. Therefore, it should be used in conjunction with other financial metrics to determine the overall profitability and efficiency of a hotel.
The provided case study illustrates the difference between RevPAR and TRevPAR. Despite Hotel 2 having a higher RevPAR than Hotel 1, the TRevPAR analysis reveals that Hotel 1 outperforms its competitor when considering revenue from all departments. This highlights the significance of TRevPAR in providing a more comprehensive and accurate measure of a hotel's overall financial performance.
