GOPPAR, RevPAR, ADR, Now NRevPAR? How About Just Making Money?!
By Jean Francois Mourier, CEO of REVPAR GURU
Every revenue manager has a different opinion on which revenue management metric is the “best”; in fact, there are probably as many opinions as there are revenue managers.
Some revenue managers prefer occupancy because it shows how full the hotel is on any given night – but looking at occupancy alone ignores the price paid and the revenue earned on each room, which are obviously also important factors in pricing.
Other revenue managers prefer ADR (Average Daily Rate) because it shows whether a property is earning enough money for each room – but again, a high ADR is only good if the hotel rooms aren’t sitting empty.
Some revenue managers think that GOPPAR (Gross Operating Profit Per Available Room) is a much more effective way of measuring a hotel’s financial success because it factors in the costs associated with running the business, not simply the profits – but then, doesn’t it just make it more difficult to actually isolate and compare sales numbers?
And then for others, RevPAR (Revenue Per Available Room) is the way to go, because it is something that you can actually take to the bank. (I tend to fall within this school of thought but that’s another story, for another day!)
Finally, there’s NRevPAR (Net Rooms Revenue per Available Room), a brand new metric recently dreamed up by a well-known hotel management firm (you know who you are!). This metric is similar to RevPAR, except that it factors in the net revenues (meaning that it accounts for distribution costs, transaction fees and travel agency commissions). But there’s the problem; if what we are trying to measure is the efficiency of a revenue management strategy, then revenues should be measured prior to being diminished by such varied factors as the above (which can change drastically from one sales channel to another). In short, NRevPAR removes the “apples to apples” comparison, which is absolutely necessary for effective measurement of a property’s revenue management strategies.
At the end of the day though, metrics only matter so much. Yes, metrics are an important part of the revenue management process. Yes, we need metrics to be able to evaluate whether one initiative, promotion or sales channel sells more rooms than others. And of course, we need metrics to prove to the management team that we are being effective. The harsh reality is this though: at the end of the day, if you’re not making money, metrics are never going to make up for that fact.
So here’s a crazy thought: who cares about metrics! Let’s just focus on making money! After all, that’s what we revenue managers were hired to do.
Close your eyes and imagine this scenario…
You’re the revenue manager of a four-star boutique property with occupancy levels around 65% and ADR of $200. Not bad performance overall. Every month, you create extensive, complicated reports to show your boss – the general manager - how your team is performing. During the meeting, you present your impressive brick of a report to the general manager and he is modestly pleased, but of course, he wants more.
Now imagine this scenario…
You’re the same revenue manager, working at the same hotel. You’ve implemented highly innovative revenue management software that helps to optimize your rates on the online channel, and you’re experiencing substantial increases in RevPAR each and every day. Now during your monthly meetings, you show the general manager one simple report that tells him the amount that you are increasing his revenues every day. No fancy-schmancy pie charts, no complicated jargon and definitely no fluff-filled explanations as to why performance hasn’t improved.
Do you think that the general manager is missing those fancy reports or those never-ending discussions of metrics?
But he is celebrating the huge improvements that he’s seeing in the property’s revenues – and it’s all because of you. Nice, right?
You can be that revenue manager.
You can make your hotel more money that you ever thought possible. You just need the right tools and the right philosophy guiding your actions. Think less about metrics and reporting, and more about making money. Your bottom line will thank you… no GOPPAR calculations needed!!
About REVPAR GURU
REVPAR GURU provides hotels around the world with an alternative revenue management software system, designed to deliver maximum bookings and profits. As REVPAR GURU's custom-designed Yield Dynamic Price Engine is the only real-time revenue management system available on the market, it meets the rapidly changing needs of hotels in a very demanding business environment. REVPAR GURU’s system offers dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management and GDS sales distribution, to increase a hotel's RevPAR intelligently and effectively, while maintaining rate integrity and automated rate parity. Since 2004, REVPAR GURU’s software system has been used by hotels worldwide to increase occupancy and RevPAR. For more information, visit www.revparguru.com.
SOURCE: REVPAR GURU