RevPAR vs RevPAG: Which should hotels be focused on?

RevPAR vs RevPAG: Which should hotels be focused on

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In the ever-evolving landscape of the hospitality industry, hoteliers face a constant challenge: finding the most effective metrics to measure and improve their performance. Two key indicators, RevPAR (Revenue Per Available Room) and RevPAG (Revenue Per Available Guest), often take center stage in these discussions. In this article, we delve into the intricacies of these metrics, exploring which one should be the primary focus for hotels aiming to maximise their revenue.

Understanding RevPAR and RevPAG

RevPAR: A Standard Benchmark

RevPAR, a long-standing industry standard, calculates the revenue generated per available room. It provides a broad overview of a hotel’s performance by taking into account both occupancy rates and average room rates. The formula for RevPAR is simple: divide the total room revenue by the total number of available rooms.

RevPAG: A Holistic Approach

On the other hand, RevPAG introduces a more nuanced perspective by considering the revenue generated per available guest. This metric not only includes room revenue but also accounts for income from additional services, such as dining, spa, and other guest expenditures. To calculate RevPAG, divide the total revenue (including room revenue and other services) by the total number of available guests.

The Case for RevPAR: A Historical Benchmark

RevPAR has long been the go-to metric for hoteliers, and for good reason. Its simplicity and ability to provide a snapshot of room revenue performance make it a valuable benchmark. Hotel managers often rely on RevPAR to compare their property’s performance to industry standards and competitors, allowing for strategic adjustments to stay competitive.

The Rise of RevPAG: A Holistic Revenue Approach

In recent years, the hospitality landscape has witnessed a shift towards a more comprehensive understanding of revenue. RevPAG has gained prominence as it offers a holistic approach, considering not only room revenue but also additional income streams. This metric aligns with the industry trend of providing personalised experiences and upselling additional services to guests.

Driving Ancillary Revenue: The Role of Personalised Upselling

Both RevPAR and RevPAG play a crucial role in driving direct bookings, a key objective for many hotels. Personalised upselling, tailored to individual guest preferences, can significantly impact both metrics. By offering add-on services or room upgrades based on guest profiles, hotels can enhance the overall guest experience and boost revenue per available room or guest.

Targeted Marketing: A Catalyst for Direct Bookings

Effective marketing strategies are pivotal for driving direct bookings and, subsequently, influencing both RevPAR and RevPAG. By leveraging data analytics and guest insights, hotels can implement targeted marketing campaigns using a Marketing CRM solution. This approach ensures that promotions and offers resonate with the specific preferences of potential guests, ultimately encouraging them to book directly and increasing revenue per available guest.

Striking the Right Balance: Integrating RevPAR and RevPAG

While RevPAR has long been the industry standard, the rise of RevPAG indicates a growing need for a more comprehensive revenue approach. Striking the right balance between these metrics is crucial for hotel success. By focusing on RevPAR for benchmarking and industry comparison and simultaneously incorporating RevPAG to capture the full spectrum of guest spending, hotels can develop a well-rounded revenue strategy.

Conclusion: A Holistic View for Holistic Success

In the dynamic world of hospitality, staying ahead requires a nuanced understanding of revenue metrics. While RevPAR remains a reliable benchmark, the emergence of RevPAG highlights the industry’s shift towards a more holistic approach. Hoteliers must embrace both metrics, leveraging guest engagement, targeted marketing and personalised upselling to drive direct bookings and maximise total revenue. Ultimately, it’s not a question of RevPAR vs RevPAG but rather an integration of both for a comprehensive and successful revenue management strategy.

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