Hotel Revenue Management Formulas: KPIs, Calculations & Use Cases

hotel revenue management formulas
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Hotel revenue management is one of the most important processes that your front office can use to make strategic, data-based decisions. It can help you forecast demand, optimize prices and room availability, and boost hotel revenue.

How Is Hotel Revenue Calculated?

To calculate your hotel revenue, you need to measure certain KPIs (Key Performance Indicators). Here are the most important KPI formulas used in hotel industry for effective revenue management.

ADR (Average Daily Rate)

ADR is a KPI that shows your hotel’s average revenue per occupied room per day.
As it doesn’t include empty rooms, you can use it to compare hotel performance and revenue to previous periods, thus forecasting seasonal trends better.

ADR Formula

ADR Formula

 

ADR = Room Revenue / Number of Sold Rooms
Example: If you’ve generated $10,000 room revenue with 20 rooms booked in a day, your ADR would be $500.

 


Total Room Revenue

Total room revenue is a KPI that shows how much revenue your hotel generates for all occupied rooms in a certain measured period. It’s a necessary performance metric for calculating your RevPAR and GOPPAR.

Total Room Revenue Formula

Total Room Revenue Formula

Total Room Revenue = Number of Sold Rooms * ADR
Example: If you have sold 45 rooms at an ADR of $400, your total room revenue would be $18,000. If your hotel has 30 available rooms, your RevPAR would then be $600.


RevPAR (Revenue per Available Room)

RevPAR takes all your rooms into consideration to help you determine the performance of your ADR and occupancy rate.
You can use it to see how well your hotel is performing during a certain period (day, week, month, or year), which makes it one of the key metrics for measuring profitability.

RevPAR Formula

RevPAR Formula

RevPAR = Total Room Revenue / Number of Available Rooms
or
RevPAR = ADR * Occupancy Rate
Example: If your hotel has an ADR of $500 and an occupancy rate of 60%, your RevPAR would be $30,000.

RevPAR vs. ADR

ADR doesn’t take empty rooms into consideration, while RevPAR does. ADR shows how much revenue your every booked room is generating on average, while RevPAR shows your revenue for all rooms.
That’s why RevPAR is a more important KPI to measure. A high RevPAR means a high occupancy rate, or a high ADR (or both), which means better hotel performance and profitability.


GOPPAR (Gross Operating Profit per Available Room)

GOPPAR represents the revenue that’s left after handling various expenses, such as monthly bills, salaries, insurance, and taxes.
As it excludes operational costs, it’s a better KPI than RevPAR. You can use it to gain insights into your overall revenue and performance, as well as identify the most revenue-generating parts of your property.

GOPPAR Formula

GOPPAR Formula

GOPPAR = Gross Operating Profit (GOP) / Number of Available Rooms
Gross Operating Profit = Total Room Revenue - Gross Operating Expenses
Example: If your total room revenue is $50,000 and your gross operating expenses are $15,000, you would need to divide the GOP of $35,000 with 20 available rooms, for instance. Your GOPPAR would be $1,750.


TRevPAR (Total Revenue per Available Room)

TRevPAR includes all the revenue your hotel generates beyond booked rooms, such as from your restaurant, spa, fitness center, parking, and any other amenity.
You can use it to measure the performance of your amenities and understand different demographics better. You can then capitalize on different markets and boost revenue.

TRevPAR Formula

TRevPAR Formula

TRevPAR = Total Net Revenue / Number of Available Rooms
Example: If your hotel has 150 rooms and you’ve generated total revenue of $25,000 in a day, your TRevPAR would be $166.


RevPASH (Revenue per Available Seat Hour)

RevPASH represents the revenue that a particular food and beverage outlet in your hotel (restaurant or bar) has generated per seat per hour.
You can use it to find out which times during the day are most profitable and when you may be missing out on opportunities. It can help you manage your service hours better and optimize your prices.

RevPASH Formula

RevPASH Formula

RevPASH = Total Outlet Revenue / (Number of Seats * Opening Hours)
Example: If your restaurant, for instance, which has 50 seats and is open for 8 hours, has generated a revenue of $18,000, your RevPASH would be $45.


ALOS (Average Length of Stay)

ALOS is the average length of stay, that is, the average number of days people stay at a hotel during a particular period.
You can use this metric to identify an opportunity to offer better rates for longer stays, thus increase your revenue.

ALOS Formula

ALOS Formula

ALOS = Total Occupied Room Nights / Number of Bookings
Example: If you’ve had 15 separate bookings during a particular month that make a total of 60 room nights, your ALOS would be 4. That means that your hotel guests stayed an average of four nights at your hotel during that month.


LOS (Length of Stay)

LOS is the number of nights a particular guest has stayed in your hotel. It can help you optimize occupancy and room rates.
You need to use this calculation when measuring the ALOS.

LOS Formula

LOS Formula

LOS = Checkout Date - Check-in Date
Example: If a guest has checked in on March 15 and checked out on March 21, the LOS would be 6. If you add up the LOS of all the other guests during a month, you will get a total LOS for that month. Dividing it with the number of bookings will show you your ALOS.


EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs)

EBITDAR helps you measure your hotel’s financial performance and profit opportunities when your expenses are higher than average, or you’re restructuring your hotel.
You can also use it to compare your financial performance against other hotels in the area.

EBITDAR Formula

EBITDAR Formula

EBITDAR = EBITDA (Total Revenue - Expenses) + Restructuring or Rent Costs
Example: Let’s say your total revenue for a particular period is $100,000, and you need to spend a total of $45,000 for interest, taxes, depreciation, and amortization. If your restructuring or rent costs are $20,000, your EBITDAR would be $75,000.


CPOR (Cost per Occupied Room)

CPOR helps you keep track of your room profitability.
You can use the hotel cost per room calculation to determine how much your booked rooms cost you in terms of fixed and variable expenses.

CPOR Formula

CPOR Formula

CPOR = Total Rooms Departments Cost / Number of Sold Rooms
Example: If you paid a total of $14,000 in operating expenses for your 15 booked rooms in January, your CPOR is $933.


Occupancy Rate

The occupancy rate is the most basic KPI for hotel revenue management. You can apply it to any period to see how well your hotel is performing over time.

Occupancy Percentage Formula

Occupancy Percentage Formula

Occupancy = (Total Number of Occupied Rooms / Total Number of Available Rooms) * 100
Example: If your hotel has 50 occupied rooms out of 70 during a particular period, the occupancy rate for that period is 71.4%.


Occupancy Forecast Formula

Occupancy Forecast Formula

Occupancy Forecast = (Number of Rooms Forecasted to Be Booked / Total Available Rooms) * 100
Example: If you expect to have 45 out of 70 rooms booked during a specific period, it would mean you expect a 64.2% occupancy.


Room Nights Calculation

Room Nights Calculation

Room Nights = Total Sold Room Nights / Total Property Accommodation
Example: In April (30 days), you had a total of 50 rooms available. That’s a total of 1,500 sellable room nights. If you sold 985 room nights, your room nights would be 19.69% (0.65% * 30 days).

Conclusion

Using all these hotel revenue management formulas regularly will help you keep track of the key KPIs for increasing revenue and profits. The most important ones to measure are ADR, RevPAR, GOPPAR, and occupancy, but don’t underestimate the power of all the others.

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Graduated from Standford University, Arielle has over 5 years of experience in the Hospitality industry. She holds an MBA in business administration from the IDC Herzliya, Israel. She currently works as Account Manager at Upstay, building and maintaining strong, long-lasting customer relationships. She is deeply passionate about helping hoteliers unlock significant new revenue streams from unsold premium inventory.

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