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Dear All,

 

Which is more precise ? Can anyone elaborate more in above captioned to justify overall peformance in rooms and hotel..?

 

Anyone can help me to  calculate if the property value 38 millions, 198 rooms, 4 star , what is the rack rate should we calculate average small size of room from 22 square meter to 48 square meter....how to calculate per room cost the according 38M, 198 rooms property...?

 

Would gratefull that any one can help me and need professional advice on this   

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Mr. Shaw,

Rev par is the most effective tool for every property to evalute the performance....as ADR & ARR WILL not give u an appropriate idea.

ADR IS CONCERN ONE NEED TO UNDERSTAND THE MARKET DYNAMICS.....
Dear Mr. Lawrence,
As per my experience and knowledge, RevPAR is the most effective tool to understand what have we acheived exactly out of the total rooms. To calculate the room cost, you need to know your expenditures on the room, viz- amenities, supplies, energy cost, etc.
Regards
Mohd. Ashique
Consider also the REVPAR Index ( RGI ), I mean your indication within your competitors set, as each hotel has different size ( No. of rooms).
hey guys, can any one send me the rev par, i want to have an idea of it, will be really thankful
my email is saheembalouch@hotmail.com
thanks
hI Saheem,
I did not understand wht r u looking for because
RevPAR means : the revenue (rooms) collected out of total rooms available
formula is : Rooms revenue div by per available room
any thing else,,,,, mail me on ash.fom@gmail.com
What Percentage of GOP (Gross Operational Profit) are you looking for? Secondly, what are the industry trends, industry segments, feeder markets and competitors strength in particular at your region.

you may write to me at rashidulislam@hotmail.com & ric786@live.co.uk
Dear Mr Lawrence,

Many steps are required to adequately calculate first the rate than the cost of your room. You need to know perfectly your competition in primary and secondary market, make a a benchmark study and perform thoroughly a Room Night Analysis. Once your RNA is finished you will know what is going to be your projected ARR. Now it's all up to you to keep your hotel operating with 50% GOP approx. You can project all that on a 12 year financial projections plan afterwise. Than you will be able to establish in advance a budget and cost per room. Projected ARR and REVPAR if ever it makes you feel happy to know those factors. Important thing for all this location, local taxes, labour laws, distance from airport, distance from closest URBAN CENTRES.

ARR, ADR and REVPAR are great calculations to monitor market trends (ARR, ADR) and monitor if you are going to do your 50% GOP (REVPAR). They are daily indicators but what the owner's really want is CFFO (Cash Flow From Operations): The bottom line, howfast they will get the inversion back and start to make real profit as more CFFO the higher gets the real estate asset value, which is the long term goal and aim.

Square meters of rooms as per your concern doesn't really is of your incumbent here. as you expressed concern about ARR and REVPAR. If your cost per SQM are used for construction budgeting only and space procurements analisys which are required at the planning stage only.


Shall yo u need any consulting for a specific project let me know: ar@arch-hr.com


Cheers


Alain
ADR is just the to make you happy that one can sell the room hypothetically at xyz high yield, but name of the game is how to achieve REVPAR if you focus on REVPAR then things are under your control in terms of all key performance indicators.

botton line is to only strive for REVPAR and try to increase the volume or if one things that volume is challenging then keep your ADR high enought to match the maximum REVPAR.......good luck
Total number of Rooms that are available to sell : 200
Occupancy %: 80%

Lets assume that Hotel A earns from selling rooms US$ 5,840,000/-
Lets assume that Hotel B earns from selling rooms US$ 6,716,000/-

Hotel A will not look so good when its management company/owner/financial institute compares its RevPAR to its competitor, Hotel B, because it will lose revenue for each of the room’s everyday for 365 days. Here we will calculate the REVPAR and then answer WHY?

REVPAR for Hotel A = US$ 100/- per night per room (5,840,000 / 365 days / 160 rooms). Rooms are taken as 160 as the hotel does 80% occupancy. Therefore 200* 80% = 160 rooms.

REVPAR for Hotel B = US$ 115/- per night per room (6,716,000 / 365 days / 160 rooms). Rooms are taken as 160 as the hotel does 80% occupancy. Therefore 200* 80% = 160 rooms



Mr Vijay

Thanks for your clarification pertaining to what you have transpired earlier, but what me confused about your calculation:-

Lets assume that Hotel A earns from selling rooms US$ 5,840,000/-
Lets assume that Hotel B earns from selling rooms US$ 6,716,000/-

It should: US5840000/ 365 days / 200 rooms
Available room for sell should be 200, 80%=160 rooms if calculated base on OCC day/mth/yr should back to calculation of ADR/ARR right..?

REVPAR: Total earning from room divide total available sellable=200 rooms instead of divide total accupied room for the day for instance 80%=160 rooms right...?

Sorry need your advice on this again to clear my confusion

Regards

Lawrence
Hi,

Yes Lawrence there is a correction that I need to do. The following is the REVPAR

REVPAR for Hotel A = US$ 80/- per night per room (5,840,000 / 365 days / 200 rooms).

REVPAR for Hotel B = US$ 92/- per night per room (6,716,000 / 365 days / 200 rooms).


The ARR is:
for Hotel A = US$ 100/- per night per room (5,840,000 / 365 days / 160 rooms). Rooms are taken as 160 as the hotel does 80% occupancy. Therefore 200* 80% = 160 rooms.

for Hotel B = US$ 115/- per night per room (6,716,000 / 365 days / 160 rooms). Rooms are taken as 160 as the hotel does 80% occupancy. Therefore 200* 80% = 160 rooms

Thanks for pointing the error. I,m posting the same with the correction.

Regards,
Vijay
Hi Lawrence
I have rectified the error and re-posting.

Both the ARR and REVPAR are financial reporting tools that are looked upon as important issue. The Owners and Property negotiators somehow are more attracted to value the hotel considering its REVPAR, while the Operators such as you and the other Front Office/Revenue Manager/GM's incline themselves towards the ARR.

For the understanding of others what is ARR? Its abbreviation/acronym of Average Room Rate. Here it is important to note "Rate". While REVPAR is abbreviation/acronym of Revenue Per Available Room. Here it is important to note "Available"

Lets break it down to two: REVPAR and ARR
REVPAR:
If you as a prospective buyer of a hotel property ask, Why is this hotel worth in comparison to another hotel. Which one is more of a "value" than the other, you will start asking how much each room in A hotel earns per day/year as compared to hotel B. Your best option is to quickly calculate the REVPAR. Now HOW do we do that?, Then we will ask WHY?

HOW to calculate REVPAR:
I will take two hotels as A and B to compare, as that will give a better understanding of the importance in considering the REVPAR. Lets assume that both the hotels have the following in common:

Star Category: 4 star
Location : Both are at a stones throw from each other.
Total number of Rooms that are available to sell : 200
Occupancy %: 80%

Lets assume that Hotel A earns from selling rooms US$ 5,840,000/-
Lets assume that Hotel B earns from selling rooms US$ 6,716,000/-

Hotel A will not look so good when its management company/owner/financial institute compares its RevPAR to its competitor, Hotel B, because it will lose revenue for each of the room’s everyday for 365 days. Here we will calculate the REVPAR and then answer WHY?

REVPAR for Hotel A = US$ 80/- per night per room (5,840,000 / 365 days / 200 rooms).

REVPAR for Hotel B = US$ 92/- per night per room (6,716,000 / 365 days / 200 rooms).

The above REVPAR demonstrates that Hotel B is better managed in selling rooms. What makes it better managed can be attributed to reasons such as: Better yield management, Revenue/Reservation/FO Manager/ GM are on the ball and have a pulse of the market and many more aspects.
In the above scenario both the Hotels enjoy the peak seasons and also suffer the slack season. The above answers the reason WHY?

Now let us tackle ARR.
ARR is a good benchmark for the Operators to know how they have performed in comparing "RATE" per room per night to any subsequent month/year. ARR can fluctuate in various months. The Budget planners mostly use ARR in computing their Room revenue in different months. ARR is calculated by dividing the Revenue from rooms by actual number of rooms sold.

Example 1 (Hotel A and B)
The ARR is:
Hotel A = US$ 100/- per night per room (5,840,000 / 365 days / 160 rooms). Rooms are taken as 160 as the hotel does 80% occupancy. Therefore 200* 80% = 160 rooms.

Hotel B = US$ 115/- per night per room (6,716,000 / 365 days / 160 rooms).

Example 2: Assuming Hotel A has earned a total of US$546,000/- for the last month of October 2010 with an occupancy of 70%. What is the ARR?

ARR (Average Room Rate) = US $ 135 per night per room[585,900 / 31 days / 140 (70% of 200 rooms)]

The basic and the most important difference than REVPAR is that, ARR considers the number of rooms actually sold in a period as compared to REVPAR that considers the Rooms AVAILABLE to sell as fixed. As you can see in ARR the number of rooms that has been taken into consideration is not 200 but on actual number of rooms sold.

However one must note that a hotel with a good REVPAR is not a benchmark to consider as a better hotel. The reason is that REVPAR gives us an indication of Revenues for the ROOMS and not the revenues of other revenue earning departments.

It can be possible that Hotel A exceeds the overall Hotel revenues as compared to Hotel B by generating substantial revenues on Food and Beverages.

I hope I was able to clear some doubts between ARR vs. REVPAR.
Good luck.
Mr Vijay,

Cheers....

Thanks & Regards

Lawrence

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