What it means
Hotel and residential-care managers need a quick way to judge whether they are charging enough for the rooms they fill. RevPOR answers that by focusing only on occupied rooms, so empty rooms do not drag the number down.
It is a pricing measure, not an occupancy measure. The calculation is simple.
Take all revenue earned from rooms over a period, then divide it by the number of rooms occupied during that period, usually counted as room-nights (one room occupied for one night). In senior living the same idea is applied to occupied units, and the revenue often includes care charges as well as rent.
RevPOR is closely related to two other familiar hotel measures. Average daily rate (ADR) is room revenue divided by rooms sold, which for most hotels gives the same answer as RevPOR.
Revenue per available room (RevPAR) divides by every room on offer, whether occupied or not, so it combines pricing with occupancy. That relationship is useful in practice, because RevPAR equals RevPOR multiplied by the occupancy rate.
If RevPOR is rising while RevPAR is falling, the operator is charging more but filling fewer rooms. If RevPAR is rising only because occupancy has improved, the underlying price per room may not have moved at all.
Managers use RevPOR to test pricing changes, compare properties and judge the effect of discounts and packages. Investors in hotel and care-home operators watch it because it shows whether growth is coming from higher prices or from simply selling more nights.
A steady rise in RevPOR suggests pricing power, while a fall can reveal heavy discounting. There are a few cautions.
Definitions vary between companies, since some include food and extras while others count only room charges, so comparisons are only fair when both sides use the same definition. RevPOR also says nothing about costs, so a high figure does not guarantee a healthy profit.
In practice
Real-world examples.
Example
A city-centre hotel earns $450,000 from 3,000 occupied room-nights in a month. Its RevPOR is $150, and the revenue manager compares this with last year's $140 to see whether the price increase worked.
Example
A senior living operator earns $2,400,000 in a quarter from 600 occupied units each month for three months. That is 1,800 unit-months, so RevPOR is about $1,333 per occupied unit per month, which includes care services as well as rent.
Example
A resort offers a mid-week discount that lifts occupancy from 60% to 80%. RevPOR falls from $200 to $170, but RevPAR rises from $120 to $136, so the discount adds to revenue overall.
Formula
Calculation
RevPOR = Total room revenue / Number of occupied rooms (room-nights)
RevPAR = Total room revenue / Number of available rooms (room-nights)
Suppose a hotel earned $450,000 in room revenue in a month, with 3,000 room-nights occupied out of 4,000 room-nights available.
RevPOR: $450,000 / 3,000 = $150
Occupancy rate: 3,000 / 4,000 = 75%
RevPAR: $450,000 / 4,000 = $112.50
As a check, RevPOR multiplied by occupancy gives $150 x 75% = $112.50, which matches RevPAR.Case study
Seen in the real world.
Seaview Suites is a fictional boutique hotel used in an illustrative scenario. The general manager notices that occupancy has been strong at 85%, but profit is flat, and she asks the revenue team to look at RevPOR.
The numbers show RevPOR has dropped from $180 to $150 over the year because of repeated discounting through online travel sites. Occupancy rose, but the extra guests were paying much less per night. The team cuts the discounts, raises the weekend rate and introduces a package with breakfast.
Six months later occupancy has slipped to 78%, yet RevPOR has recovered to $175. Because each occupied room now earns more, RevPAR is higher than before, and cleaning and laundry costs are lower because fewer rooms are turned over each week. The manager concludes that chasing occupancy alone had been hiding a pricing problem.
Watch out
Common mistakes.
- Confusing RevPOR with RevPAR. RevPOR divides by occupied rooms only, while RevPAR divides by all available rooms.
- Comparing RevPOR across companies without checking definitions. One firm may include food and extras while another counts only room charges.
- Reading a high RevPOR as high profit. The measure ignores costs, so a hotel with expensive staffing can still earn little.
Questions
People also ask.
Is RevPOR the same as average daily rate?
For many hotels the two are effectively the same, since both divide room revenue by rooms sold, although some operators define them slightly differently.
Why do senior living companies use RevPOR?
Their revenue per unit includes rent and care fees, so RevPOR shows how much each occupied unit earns in total.
Can RevPOR rise while profit falls?
Yes, if costs rise faster than revenue or if occupancy drops sharply enough to hurt total revenue.
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