Investors Rethink Hotel Sector's Main Performance Metric
Skift Take
Every commentary on hotel performance refers to revenue per available room as a key industry metric — RevPAR. Yet non-room revenue from cafes, co-working, spas, and events is growing in importance. Hoteliers should focus more on overall earnings per square meter.
Early Check-In
Editor’s Note: Skift Senior Hospitality Editor Sean O’Neill brings readers exclusive reporting and insights into hotel deals and development, and how those trends are making an impact across the travel industry.Hotel investors want more reliable performance metrics. Hotel companies already offer a few performance measures — and the most popular is revenue per available room — so called RevPAR.
There’s a good reason to add others to the list, says HVS, a global specialist hotel valuation, consulting, asset management, and brokerage firm.
HVS isn't saying we should outright reject revenue per available room. It's saying the metric shouldn't take precedence over others that may better capture a hotel's profitability. "Hotel operators need to learn to manage the entire building they operate and speak the language of commercial real estate investors, who typically measure performance as an amount per square meter," said Russell Kett, chairman of the London office of HVS. "And everyone needs to care about profitability."Revenue per available room is useful for its simplicity.
You calculate it by multiplying a property's average daily room rate by its occupancy rate, two figures that are hard to fudge. Or you calculate it by dividing total room revenue by the number of rooms available in the period. Its simplicity enables comparability with different types of properties worldwide for owners, franchisees, asset management firms, and investment bank analysts.Yet the biggest
