TrevPAR vs RevPAR – both matter but which is best?

TrevPAR World

When looking at any hotel, regardless of size or market we always seem to focus on three main benchmarks – occupancy, average daily rate and RevPAR, with RevPAR being dubbed as king, but why?

We are always hearing questions such as is my RevPAR where it should be, are we tracking it correctly and how can we increase it without having to suffer a decrease in average daily rate – all very valid questions as RevPAR has and always will be important. RevPAR can also be seen as the foundation or building block for TrevPAR as rooms is the core product of any hotel.

TrevPAR can be considered the new boy on the block in terms of bench-marking, TrevPAR is the Total Revenue Per Available Room and takes a more meaningful look at the profitability of the entire hotel taking into account the historic and current revenues of not only the rooms department but also the food & Beverage department, Spa Department or any department that can be classified as a profit center.

In depth historical data for the rooms department is readily available and can be analysed in great depth but when looking into departments such as food & beverage as well as spa the data seems to get less and less. Often one finds that the room data is considered the most important however when looking at what other data is available the real fun starts – if we were only meant to look at rooms data why do hotels build restaurants, spas, golf courses and even large car parks – as a Revenue Manager it is your key responsibility to maximize every revenue generating department in the hotel, and in essence deliver a TrevPAR focused strategy.

Tracking data from every department can deliver some massive insights in terms of consumer behavior, pricing as well as demographics, all which can be used to deliver a more successful sales & marketing strategy.

Some of the key benefits of tracking TrevPAR include.

– Analyse Consumer Behavior Patterns 

As you will be dealing with a guests entire journey from reservation to what they did during their stay a savvy Revenue Manager can predetermine movements of future guests and align each package to make the most profit. If you have guests that are big incremental spenders you do not mind dropping rates to get them into your hotel as you will now know that they will spend more in other departments and make more total revenue for you – often we scare guests away with a high rate not knowing what their actual spending patterns may be.

– Analyse Geography of your guests

A common revenue practice is to look at where the already stayed guests have come from, the country data is easily available on most PMS systems and often analysed to determine where the sales team needs to head to next.

With up to 40% or hotels business coming via OTA channels means a whole new way of looking at country data needs to be looked at, as you collect the data of the guests that have already checked out you should also start analyzing the data of guests looking to book. This will assist in making sure that any online promotion is correctly targeted to the require audience allowing for world wide marketing at a click of a button.

– Analyse Departmental Performance 

When looking at TrevPAR a constant emphasis is put on each profit generating department in the hotel , unlike when the focus is RevPAR only rooms will get attention where TrevPAR focus ensures that each department is maximizing where possible.

With a constant focus on each departments targets all managers and teams will automatically step up as each action to deliver revenue will be targeted and with reason which will mean better team work as well as results.

– More Accurate Pricing 

By taking the bigger picture of your guest in mind you will be able to price more accurately to each of the different segments that you are targeting. With data that provides insides of guests before, during and after their stays the ability to place the right product at the right time at the right price to the targeted customer becomes a much easier task.

So what is next…

We cannot say that RevPAR is no longer important as it is the core bench marking tool used for the core product in the hotel, rooms will always be the core product of any hotel that is trying to be successful.

Hotels evolve and have started adding various activities that their guests can use and this needs to be taken into account when developing a business strategy, the days of setting a room rate resulting in a check in and check out guest is over, the modern day hotelier is trying to maximize on each reservation by offering world class restaurants and spas as well as award winning golf courses.

All these different activities that are offered can be seen as tools to attract guests to stay at your hotel however they also need to be seen as revenue generating tools to maximize the overall profits of each department.

TrevPAR is most certainly the future of hotel bench-marking and will soon become the main focus of all savvy General Managers and Revenue Managers – TrevPAR, the job of analyzing large amount of data across various departments and bringing it all together to form a successful strategy that not only delivers higher top line revenues but also higher profits and better guest review scores.

Author: Derek Martin