Hotelier’s Life : Let’s Talk about Revenue and the technical words to use….

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Hotelier’s Life : Let’s Talk about Revenue and the technical words to use….

This time I have thought to write something about the specific words and terms to use everytime that you need to express and calculate the Revenue at your Property…

Here are some of the probably most used words in the branche :
 1. RevPOR (Revenue Per Occupied Room) –> It is an indicator used in the Hotel Industry and indicates the revenue from the sale of sold rooms (on a time basis).When you want to express the average revenue room including other services (eg. Food & beverage and other amenities) then you discuss about the Total RevPOR. This allows you to highlight how the company is able to generate additional revenue compared to only overnight service (non-room RevPOR). RevPOR = Total Room Revenue (cost of meals included) / Total occupied rooms (number of rooms occupied).
2. RevPAR (Revenue Per Available Room) –> It is the easiest way to compare the performance of hotel companies of different sizes, because it takes into account the revenue generated from the sale of rooms in relation to the total number of rooms (including the rooms not sold). 
RevPAR is the index of the health of a Hotel in terms of revenue management. It establishes the economic value of each room on the precise time base (day, week, month, year). RevPAR = Total Room Revenue (Total Income from Rooms – Discounts – sales tax cost of meals included) / Total available rooms (number of rooms), or ADR (average daily room) * OR (occupancy rate).
The RevPAR takes into account the revenues from the sale of the room, excluding any other form of income (eg catering, meeting rooms etc..) and excluding operational costs arising from the use of it. This index therefore should not be considered complete explanation on the economic situation of the hotel, however, remains as the most commonly detected at an international level and among the most reliable in terms of Revenue Management.
 In fact, we take into account other evaluation indexes such as the occupancy rate (OR – Occupancy Rate) and the average price per room sold (ARR – Average Room Rate). However, these data could mislead the actual performance of the hotel. For example, you may wish to consider positively a Hotel with a very high percentage of occupancy, but if you have to reduce the sales price to get occupancy, the profit that you will achieve will be less satisfactory .
The RevPAR  takes into account the totality of the available rooms, even those not sold. This factor opens new horizons of interest in the politics of the sale of a hotel room, considering that a room not sold is simply lost forever. Also for this reason the hotel pricing policies (or at least the majority) focus on the absolute flexibility of selling prices, adapting to market trends and creating scissors tariff increasingly large, segmented by type of market.
As you know –> the Business Traveller is insensitive to the price since much of the expenses are paid by the business he works for, travels for specific reasons such as meetings, congresses, exhibitions, business events, incentive travel and corporate hospitality, makes short stays (out of the weekends) and when he/she comes back to the Hotel  requests some services you should be able to offer (eg Fitness Center, Bar/Restaurant etc), whereas the Leasure Traveller is sensitive to the Hotel Price but the primary motivation is to take a vacation from everyday life. Leisure travel is often characterized by staying in nice hotels or resorts, relaxing on beaches or in a room, or going on guided tours and experiencing local tourist attractions. Most meals are eaten out when traveling for pleasure, and often more expensive modes of transportation, such as taxis, are used to get around. In some cases, leisure travel might be used to refer to any trip that lasts more than a week, regardless of the primary focus.
So, We have to consider this target everytime we think about Revenue and flexible tariffs…Business/Leisure/Groups…
3. In business administration, the break-even point (BEP) is a value that indicates the amount, expressed in volume production and sales, product sales needed to cover the costs previously incurred in order to close the period with no profits or losses.
 A fundamental distinction is the type of company you want to make the analysis of the break-even point.
4.  The break even analysis is a method that allows us to know how to change output levels to reach the break-even point between costs and revenues. But this is not a popular method because it takes into account the constant prices is valid only in the short term, does not take account of seasonality, is not easily handled by the companies and multi finally takes no account of the stocks.I think that I could close this article and I’m already thinking about something else to publish the next time. I hope you appreciate my impressions…
Cheers !! See you the nex time.


Luisa Rellini
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0 thoughts on “Hotelier’s Life : Let’s Talk about Revenue and the technical words to use….

  1. Did you ask to yourself why? I think once you start you have to continue up to the top…the curiosity to know always more has an incredible push effect…don’t you think so too?

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