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Building an Effective Revenue Strategy for Hotels

by Vinay Goswami

Rooms are the major source of income for the hotel. Any strategy for building revenue will pass through the occupancy of these rooms. Even though it should be straightforward that higher the occupancy rate higher the revenue still there are many factors taken into consideration for building an effective revenue strategy for the hotel.

Although Hotels are a large entity with restaurant, bars, events area, shopping malls, and many more sections but Rooms sale on daily basis form the major share of revenue in Hotels. Modern software’s are built to capture data at all micro and macro levels for tracking hotel revenue management. These financial data provide administration to build budgets, goals, and target for their establishments.

Room of rate used to change as per season, holidays and weekends only but now location, events, and even the competitors pricing matters now these days. New age Hoteliers use REVPAR as one of the effective strategies to check the performance of their business.


REVPAR or Revenue per available Room is one of the performance metric used by Hoteliers in their revenue strategy. REVPAR takes into account the two main fundamentals of Hotel business in account. Occupancy and Revenue both need to have the right balance to keep the growth of the establishment in the right direction. Prediction and booking must be done in keeping these factors in mind.

How REVPAR is Calculated?

Revpar is normally calculated as by multiplying the Hotel Average daily room rate (ADR) by the rate of its occupancy or dividing the hotel’s room revenue by total available number of rooms in the given duration.

High Occupancy means the maximum number of rooms sold for that day, Whereas a Higher Revpar gives the right profit index as the high revenue is based on the average room sold along with occupancy keeping both measurements in check.

Using a professionals Hotel PMS can offer you this calculation on daily, weekly, monthly and periodically to come up precise predictions as well as projections for budgets respectively. Since the Revpar only takes into account the earning from the room, not the operational costs, it doesn’t have the right calculations for organization profits. As higher occupancy rate results into high Revpar still doesn’t signify higher profitability if the rooms are sold at reasonable low rates to increase the occupancy.


RevPar alone cannot be the profitability index for Hotel businesses as there are many operational costs one needs to include for coming at accurate information. GOPPAR is another hotel revenue strategy that takes into consideration both revenue and operational costs.

GOPPAR is calculated by dividing the Gross Operating Profit by the number of rooms available in the hotel. It is a better picture of the current status of the Hotel business and offers better insights into the revenue generation.

Zero Based Budgeting

Although GOPPAR takes into account both the revenue and operational costs still these are not transparent to the smallest expenses which might be required to improve the efficiency of the whole system. A Zero-based concept has proven to be quite successful where everything starts from scratch i.e. zero only. Every part of the budget is planned from zero keeping factors like increase cost of manpower, forecasting, predictions, and marketing as well as inflation in check.

Zero Based Budgeting is recommended for keeping the Hotels Balance sheet in check. However, it requires listing a lot of minor steps and their justification and manual work. But modern Hotel Property Management Systems are highly sophisticated to manage these workloads with ease. Administrations can pinpoint the areas of expenses for improvements and cost-cutting in reaping the benefits from the smallest of margins.

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