Pearson New International Edition International pcl tp indd 1

RevPar Index
A hotel’s RevPar index is the ultimate measurement of a revenue manager’s skill.
FRONT OFFICE SEMANTICS
RevPar index:
Ratio measure computed as
REVENUE MANAGEMENT
ADR index
Assessment and recommended action
Far below 100%
Management is ineffective. Actions: Evaluate appropriateness of the competi-
tive set; evaluate rack rate structure; increase rack rate.
Below 100%
Management is less than effective. Actions: Evaluate weekday and/weekend
ADR index, increase rates for either period if the index for that portion of the
week exceeds 100%.
At (near) 100%
Management is effective. Actions: Monitor the competitive set’s percentage
change in ADR from prior month and prior year for evidence of competitors’
increases in room rates; maintain rate parity.
Above 100%
Management is less than effective. Actions: Evaluate room rates in conjunc-
tion with the occupancy index. If the occupancy index is above 100%,
increase rates. If the occupancy index is below 100%, consider increasing
discounts during slower periods to maximize RevPar.
Far above 100%
Management is ineffective. Action: Evaluate competitive set for appropriate
fit. (The ADR 
may be too high if occupancy index is significantly below 100%.)
FIGURE 11
ADR index evaluation.
RevPa
r of a selected hotel
RevPa
r of that hotel's competitive set
=
RevPa
r index
300

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In addition to the revenue manager’s decision making, a variety of other factors
can cause a hotel’s RevPar index to be lower than that of its competitive set:
•
Inferior management of room cleanliness and facility maintenance
•
Poor franchise (brand) name
•
Poor exterior signage, property access, or both
•
Poor room mix for the market
•
Substandard furnishings or decor
•
Sales and marketing and advertising budgets too small
•
Sales and marketing staff too small
•
Ineffective marketing staff