Shift your focus to ‘total RevPOR’ and drive profits

In my experience, RevPAR is not the most effective tool for measuring the performance of boutique hotels against their competitive set and local market. The lower key count and unique designs and themes in a boutique can foster high annual occupancy and rate, but that’s just one piece of the pie. The key to growing gross revenues, profit and guest loyalty is to drive total capture from each guest by featuring creative and unique enhancements and amenities that entice the guests to do more while staying with you. But what about guests who are not staying with you, but patronize your facilities?

In my estimation, “RevPOR” (Total Revenue Per Occupied Room) is the better performance indicator. It measures how much capture you get from every occupied room, and it can grow in a positive direction by successfully generating revenue from non-hotel food and beverage and spa guests, for example.

Total RevPOR is calculated by dividing the total revenue (including rooms, food and beverage, spa, retail, miscellaneous income, etc.) by the number of occupied rooms. This is a step up from measuring RevPAR or ADR since it includes all other revenue sources. The metric is very effective for evaluating the overall performance of resorts and any other property with an extensive amenity program. The boutique segment typically features food and beverage along with spa and/or retail that are well known and popular with local non-hotel guests. This allows RevPOR to grow very high since much of the revenue-generating potential is from non-hotel guests, thus inflating the total spend per occupied room.

At large resorts, the facilities are often just big enough to satisfy the needs of the 200 to 1,000 keys, and there is little capacity to benefit from significant revenue generation from non-hotel guests. The large resorts have the keys to drive room revenue at a 70% to 80% profit margin and tend to look at amenities like spa, food and beverage and retail as necessities, but not major profit contributors. Boutique hotels like ours (Mirbeau Inn & Spa) — with 34 suites — even at 80% occupancy are limited in room revenue, so it becomes important to drive those other areas to become profit centers.

In my next post, I’ll provide ideas that, in my experience, help drive total RevPOR in a way that can significantly increase gross revenue and profit for boutique hotels.