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Industry prefers revpar benchmark

16 February 2006

Revenue per available room (revpar) remains the hotel industry's preferred benchmarking term despite its limitations, according to industry experts.

A disagreement erupted following a paper by Mark Dickens, deputy managing director of TRI Hospitality Consulting, which concluded that revpar should no longer be the primary business measure for the industry.

Dickens believes that with hotel facilities such as banqueting and conferencing becoming increasingly important money-spinners, and hotel ownership moving from operators to property companies, the use of revpar is no longer logical.

"Revpar has its place, but alone simply doesn't show enough of the picture," he said.

TRI advocates that a more useful benchmark would be to combine total revenue per available room with total gross operating profit per available room (goppar).

Although Julia Felton, director at Deloitte's HotelBenchmark, agreed in principle, she questioned whether this was achievable.

"Nirvana would be to have total revenue and goppar from all hotels, but in my experience businesses are sensitive about sharing profit data. "A benchmark is only as good as the sample, so is it not better to have a large, robust revpar instead of a small goppar selection?"

Robert Barnard, partner at accountant and business advisory firm PKF, added: "Goppar may indeed provide a better insight into a hotel's performance than revpar, but with profit accounts there are far more variables that can distort results.

"Irrespective of what individual measure is actually used, the most important thing is to look at as many as possible to get an accurate overall view."

Industry consultant Melvin Gold agreed that using any term in isolation was dangerous. "You always need to look at a variety of data. Goppar can be just as flawed as revpar," he added.

Paul Slattery, director at Otus & Co, said: "If you are a general manager of a hotel, revpar remains a great measure to show how you are doing against your local competitors."

By Chris Druce

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