Revenue Management encompasses a set of sophisticated techniques and analyses strategically designed to optimize performance, particularly in relation to inventory. Traditionally, these methodologies have been broadly applied to the entire hotel, with limited emphasis on individual room types.
However, this overarching focus on the overall hotel performance, coupled with a prevailing "Hotel Oriented" mindset, poses significant challenges. One prominent issue is the scarcity of information pertaining to room typologies within both the hotel internal Reporting system and the broader industry context.
In addressing these challenges, this article introduces a groundbreaking metric: the RevPar Room Type Index, or ReRTI. This innovative index is geared towards a nuanced analysis, offering insights into whether the sales strategy for superior room categories aligns with optimal RevPar performance. It serves as a valuable tool to discern whether the sale of premium rooms contributes as effectively to RevPar as anticipated, or if adjustments are needed to avoid potential financial losses.
“ the RevPar Room Type Index (ReRTI) “
I'm pleased to introduce a significant development in the Revenue Management field: “ the RevPar Room Type Index (ReRTI)", meticulously crafted by the esteemed Diego Fernandez Perez de Ponga, Corporate Director of Revenue Management and Distribution at Palladium Hotel Group.
This key performance indicator is designed to assess the intricate relationship between room typologies and their impact on RevPar.
ReRTI's calculation method is grounded in evaluating the proportionality between the size of a typology within the room rack and its contribution to RevPar.
The ReRTI It's the cool metric in the hospitality scene that dives into the connection between the percentage of a particular room type and its impact on RevPAR. Basically, we're crunching the numbers to see how each room type's “size" stacks up against its contribution to the RevPAR. It's like matchmaking for rooms and revenue!
ReRTI Formula, a sophisticated approach to Revenue Management
This formula delves into the Room Type RevPAR Index, where we meticulously analyze each room type's percentage contribution to Revenue Per Available Room (RevPAR). By dividing this contribution by the percentage of Room Type Inventory, we gain valuable insights into how each typology impacts RevPAR relative to its overall representation. It's a nuanced examination, revealing the strategic interplay between room types and their proportional influence on revenue.
Room type RevPAR Index (ReRTI) = % Contribution to RevPAR per Room Type / % Room Type Inventory
What approach would you employ for the calculation?
Percentage of Room Type Inventory: This metric delineates the proportion of each room typology within the overall room inventory. It serves as a gauge for assessing the significance or weightage of each room type in relation to the total room inventory.
% Room Type Inventory = (Inventory Room Type / Total Hotel Room Inventory) X 100
Contribution to RevPAR per Room Type: This metric gauges how each room type influences the hotel's RevPAR, shifting the spotlight from the overall establishment to the unique charm of individual room types or a set of stylish accommodations.
% Contribution to RevPAR per Room Type: Same metric but expressed in %.
% Contribution to RevPAR per Room Type = (Room Type Revenue / Total Hotel Rooms) X 100
A ReRTI exceeding 1 signifies that a typology is over-contributing to RevPar relative to its volume, while a result below 1 indicates an underperformance.
The optimal scenario entails:
- Lead Category: ReRTI less than 1, suggesting superior rooms may be overemphasized in RevPar contributions.
- Superior Rooms: ReRTI greater than 1, showcasing rooms that outperform expectations given their inventory.
Get to know Diego
Diego Fernández Pérez de Ponga, studied Hotel Business Management at the Centro Superior de Hostelería de Galicia and he is currently the Corporate Director of Revenue and Distribution at the Palladium Hotel Group.
Passionate about hospitality with more than a decade of experience in the sector. Throughout his career, he has worked to implement an agile, dynamic and two-pillar-based Revenue Management style: people and technology.
He enjoys managing large projects and teams and defends a democratic and flexible leadership style.
Diego says: "My team's success is THEIR success, my team's failures are MY failures".
Diego Fernandez has presented us with a powerful tool in ReRTI, offering a nuanced perspective on the contribution of room types to RevPar.
Thank you very much Diego for taking part in our blog! Let's leverage this innovation to refine our strategies and elevate our Revenue Management practices.
You can learn more about ReRTI by downloading the whitepaper below, and get Diego's full book in this link!