What Is RevPAR?
RevPAR is a measurement made to calculate the overall performance of your rental properties using the metric system. It works to assess the availability of rentals and the average rate at which they are filled. RevPAR helps rental homeowners measure the overall success of their property.
What Does RevPAR Mean?
RevPAR stands for revenue per available rental. Its goal is to increase the overall revenue of a rental property. When a property’s RevPAR increases, the average occupancy rate or rental rate also grows.
One thing RevPAR doesn’t take into consideration is profit. Unfortunately, profit and growth do not always go hand in hand. So while RevPAR measures the revenue of individual hotel rooms, it doesn’t necessarily reflect the profit.
Why Is RevPAR Important for Vacation Rentals?
When used correctly, RevPAR is crucial because it can boost your vacation rental revenue. You can use the information in two ways to increase your income. One way is by lowering the daily rate, which ensures more guests will book with you to save money. The other way is to maintain a higher average daily rate so that even if you have less occupancy, you’ll make more money on the bookings that are made.
Understanding vacation rental revenue on a per-rental basis allows hosts and real estate investors alike to have a broad view of the industry. It also helps spread the revenue evenly across all your listings, allowing you to research and benchmark against the average revenue per listing.
Tracking this data has helped tourist boards and property managers track lodging supply and demand in any given area.
RevPAR Formula: How to Calculate RevPAR
The RevPAR formula is a simple way to calculate your revenue per available rental. Simply divide your total revenue by the number of available listings.
For example, if you made $4000 from your vacation rental this month and there were 30 nights of available listings, then your RevPAR would be $133.33. ($4000/30 listings=$133.33)
What Is the Difference between ARR and RevPAR?
ARR or ADR stands for average room rate or average daily rate. These rates refer to the average price of the rentals booked per day. On the other hand, RevPAR refers to the revenue per available room, that is, each available room’s price per day, month, or year.
To illustrate, if you have 100 available listings between all of your rental properties in a month but only 80 of them were booked, your occupation percentage would be 80%. With 80% of your listings booked, you make $5000. To find your ARR or ADR, you divide $5000 by 80, giving you an ARR of $62.5.
The RevPAR calculation is based on the number of listings available rather than the number of actually booked listings. In this case, you would divide $5000 by the 100 listings you had available giving you a RevPAR of $50.
Ideally, you would have all your available listings booked for the entire month, and the ARR and RevPAR would match, but it’s more likely that they will vary.