RevPAR records can hide profit loss, here's what to watch instead
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You've seen it happen: a hotel hits a RevPARRevPARRevenue per available room blends price and occupancy into one figure. You get it by multiplying ADR by occupancy, or dividing room revenue by the rooms available. It is the headline metric for hotel performance. record and the director declares victory. Then the numbers land on the P&L and profit is flat or down. How?
Because RevPAR measures occupancy times rate, but it tells you nothing about what you actually kept. A hotel selling rooms at higher rates to a low-margin segment, or bleeding money on commissionsComisiónCommission is the percentage a channel keeps for each booking it brings the hotel. It is the cost of selling through an OTA and usually runs from 15 to 25 percent, more in niche channels. Cutting dependence on high co... and distribution costs, will post stellar RevPAR while the bottom line collapses. The metric answered one question well: are we pricing and filling the rooms? It failed at another: are we making money?
The problem runs deeper than semantics. Revenue managers trained to chase RevPAR optimization can inadvertently steer a hotel toward volume over profitability, or toward channels that look good on the surface but erode margins. OTAOTAAn online travel agency is a channel that sells accommodation and travel online in exchange for a commission. Booking.com and Expedia are the biggest. They bring volume and visibility, but charge commissions that eat... deals, last-minute discounts to fill nights, group bookings with wafer-thin spreads, they all pump RevPAR. They don't pump profit.
What matters now is seeing beyond the headline number. Profit per available room, cost per acquisitionCPACost per acquisition is the model where you only pay when the booking happens, like a commission. It shifts the risk to the channel, which only earns if it sells, and that is why it tends to cost more per booking than... by channel, and the spread between what you sell and what you keep. These three force you to ask better questions: which segments and channels are actually profitable? Where are the leaks? What price floor protects margin without losing volume? That's not spreadsheet busywork. That's the difference between a hotel that looks busy and one that makes money.
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