ARPAR is a key performance metric commonly used in the hospitality and hotel industry to evaluate the financial performance of a hotel or a group of hotels. It provides a more comprehensive understanding of revenue generation compared to traditional revenue metrics.
What is the ARPAR (Adjusted Revenue per Available Room)?
ARPAR is a hotel industry metric that measures the average daily revenue generated by each available room. It is calculated by dividing the total room revenue by the number of available rooms. ARPAR is a key performance indicator (KPI) used by hotels to track their financial performance and compare it to other hotels in the market.
The metric can be used to assess the overall health of a hotel's business. A high ARPAR indicates that the hotel is generating a lot of revenue from its rooms, while a low ARPAR indicates that the hotel is struggling to fill its rooms. ARPAR can also be used to identify trends in a hotel's business. For example, a hotel may see its ARPAR increase during peak season and decrease during off-season.
What Affects the ARPAR (Adjusted Revenue per Available Room)?
There are a number of factors that can affect a hotel's ARPAR, including:
- Occupancy rate: The percentage of rooms that are occupied on a given night.
- Average daily rate (ADR): The average price paid for a room on a given night.
- Ancillary revenue: Revenue generated from sources other than room rentals, such as food and beverage sales, parking fees, and spa services.
How Do You Calculate ARPAR (Adjusted Revenue per Available Room)?
Here's a breakdown of the calculation for ARPAR:
- Calculate total room revenue: This includes all revenue generated from room sales, such as room rates and any additional charges like room service, mini-bar, or amenities.
- Deduct commissions and travel agent Fees: Subtract any commissions paid to booking platforms or travel agents, as these are expenses that reduce the hotel's revenue.
- Deduct allowances for room discrepancies: This step accounts for discrepancies, such as complimentary rooms or rooms provided for maintenance issues, which should be subtracted from the total room revenue.
- Deduct unavailable room revenue: If rooms are unavailable for sale due to maintenance, renovation, or any other reason, subtract this revenue loss.
- Calculate adjusted room revenue: Subtract the deductions from the total room revenue to get the adjusted room revenue.
- Calculate available room Nights: Determine the total number of room nights available for sale during a specific period.
- Calculate ARPAR: Divide the adjusted room revenue by the available room nights. This gives you the ARPAR, which reflects the average revenue generated per available room night.
How Do Hotels Optimize ARPAR (Adjusted Revenue per Available Room)?
Hotels can use a variety of strategies to increase their ARPAR, such as:
- Increasing occupancy rates: This can be done by offering discounts, promotions, and other incentives to guests.
- Increasing ADR: This can be done by raising room rates, offering premium amenities, and providing personalized service.
- Generating more ancillary revenue: This can be done by offering a variety of food and beverage options, charging for parking, and providing spa services.
FAQs About ARPAR (Adjusted Revenue per Available Room)
Q: What is ARPAR in the hotel industry?
A: ARPAR, or Adjusted Revenue per Available Room, is a metric that measures the average revenue generated by each available room, factoring in deductions like commissions and unavailable rooms.
Q: How does ARPAR differ from traditional revenue metrics in hotels?
A: Unlike traditional metrics, ARPAR provides a more comprehensive view of revenue by considering various adjustments, offering a clearer understanding of a hotel's financial health.
Q: What factors influence a hotel's ARPAR?
A: Key factors affecting ARPAR include occupancy rate, average daily rate (ADR), and ancillary revenue from additional services like food, beverage, and spa services.
