The paper 'Revenue Management Issues' is a great example of a Management Assignment. In the hotel industry, there are three key performance metrics known as occupation rate, ADR, and RevPAR. Occupancy is the rate which measures the utilization of a hotel’ s property or rooms at a particular time and over a given period of time. Occupancy rate helps the management to ascertain the number of rooms that are available for occupation, and also in the determination of the revenue per available room. The RevPAR, also known as revenue per available room is a performance metric that shows the amount of average revenue collected in every room that a hotel has.
Whereas occupancy rate is calculated by dividing the total number of rooms occupied divided by the total number of rooms available, the revPAR is calculated by multiplying the occupancy rate with the average daily rate (ADR). In addition, revPAR is also arrived at by dividing total room revenue in a given period by the number of rooms available within that period. Average Daily Rate is the average room income per occupied room in a given period.
The following is a summary of the formulae of the above-mentioned performance metric. Metric Formula Occupancy ADR RevPAR Alternatively: Competition Analysis The hotel’ s average occupancy rate and the average percentage change indicate that it is performing better than its competitor. The Comp set has an average occupancy rate of 65.3%, which is much lower compared to My property. Besides, there is a significant difference in the average percentage changes in occupancy levels. This indicates that My property has been attracting and retaining guests during the period under review. The hotel is thus, more competitive than its rival. The hotel’ s occupancy level can be attributed to the ADR that is charged to guests.
From the analysis of the report, it is crystal clear that the competitors’ average daily rate per room is higher than My property’ s. Form the report, the ADR ranges between 40 and 42, whereas the competitors’ ADR ranges between 50 and 70. The average ADR for the competitors is at 69.39 and 58.9 for Comp set and Index respectively, whereas MY property records an ADR of 40.79. Since guests are usually attracted to low rates, it is for this reason that the hotel is receiving more guests than its competitors. The hotel does not perform well if the analysis is based on the revenue per room available.
RevPAR is determined by various variables such as occupancy, number of rooms, number of employees, and market conditions (Sainaghi, 2011, p. 297). Even though My property has the highest occupancy level, the revenue it collects is much lower compared to the competitors’ . The total revPAR for My property is 36.43 and the highest value is recorded for Index, which has a revPAR of 82.2.
For the Index, the high RevPAR is due to its high occupancy and high ADR. For the hotel, lower ADR affects the entire equations be reducing the impact of the high occupancy rate. The two worst-performing days of the week are Monday and Thursday. During Monday, many hotel guests end their reservations so that they can embark on their businesses and jobs. For Thursdays, guests prepare for the coming weekend which begins on Friday since most corporate guests usually use their weekends to explore and have fun with their families.
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