Net Revenue Per Available Room (NRevPAR) is a comparison metric similar to RevPAR, but whereas RevPAR looks only at a property’s room revenue, NRevPAR takes into account all net revenues for a hotel or property. Looking at net revenue, moreover, means that NRevPAR also takes costs into account, such as travel agency commissions, transaction fees, and distribution and operating costs.
What is Net Revenue Per Available Room (NRevPAR) For?
NRevPAR is used as a KPI for revenue managers because of how it overcomes the limitations of RevPAR. NRevPAR allows revenue managers to make more accurate comparisons of past revenue management strategies by allowing for “apples to apples” comparisons by accounting for fluctuating costs that RevPAR does not.
Benefits of Net Revenue Per Available Room (NRevPAR)
NRevPAR offers more transparency into hotel performance than other KPIs because it accounts for net revenues, rather than looking only at revenue as a percentage of sales (such as with RevPAR). This additional transparency makes it a better KPI for planning revenue strategies and promotions for a hotel property.
Essentially, NRevPAR allows revenue managers to better analyze a hotel’s ability to generate revenue through room sales, and the costs that those rooms incur. At the same time, it also accounts for the number of rooms actually available, and the distribution costs associated with those rooms.
Limitations of Net Revenue Per Available Room (NRevPAR)
The major limitation of NRevPAR lies in the difficulty of accurately calculating the many different types of distribution costs, transaction fees, and commissions. It also fails to indicate revenue generated through other sources and is not useful in determining actual hotel occupancy rates.
How is Net Revenue Per Available Room (NRevPAR) Calculated
NRevPAR is calculated by first subtracting distribution costs from room revenue. The resulting number is then divided by the total number of available rooms to achieve the final result.
Example of Net Revenue Per Available Room (NRevPAR) Calculation
NRevPAR = (Room Revenue – Distribution Costs) / Available Rooms
Room Revenue = $2,225,000
Distribution Costs = $1,465,000
Available Rooms = 380
NRevPAR = ($2,225,000 (Room Revenue) – $565,000 (Distribution Costs)) / 245 (Available Rooms) = $2,000