Two Hotels the Same RevPAR
- Mario Cezar Nogales
- há 2 dias
- 6 min de leitura
Two Hotels the Same RevPAR: In 5 Minutes, Discover Which One is Yours
By Mario Cezar Nogales
To understand what the RevPAR metric is all about—created in 1989 by Dr. Sheryl E. Kimes and applied in practice by STR specifically for the hotel industry—we need to go back to the question it tried to answer: what would be a fair comparison metric between two hotels of different sizes?
To do this, we need to understand the fundamentals of Revenue Management, created by Robert Crandall between the late 1970s and early 1980s. Crandall, marketing director at American Airlines, wanted to solve a simple problem: automating the pricing and inventory of seats.
The hotel industry adopted the concept in the mid-1980s when Bill Marriott, concerned about falling profitability, sought inspiration from Crandall himself. He understood that a hotel room, much like an airplane seat, is perishable inventory: an unsold room tonight is revenue lost forever.
Up to this point, this is the history of what we call Gestão de Receitas (Revenue Management) in Brazil.
But for this style of management to truly serve as the foundation of any hotel administration, RevPAR alone is not enough—because it does not show the hotel's efficiency for its survival. The same RevPAR can exist in two different hotels with a different number of rooms and different occupancy rates.
Take a look:
Hotel A: Average Daily Rate (ADR) of R$ 200.00 and 50% occupancy generates a RevPAR of R$ 100.00.
Hotel B: Average Daily Rate (ADR) of R$ 100.00 and 100% occupancy generates the same RevPAR of R$ 100.00.
Which of the two was more efficient?
Many will say it was the one with 50% occupancy. But almost no one reflects on a little number that is always bothersome: CPOR (Cost Per Occupied Room), the average operational cost of that same room night. And the reason no one stops to think about it is simple—no one publishes it, because it is strategic business information.
Not to mention the total cost structure, which answers how much I need to spend to produce 50% or 100% occupancy, and how much Gross Operating Profit is left over—which, from a Revenue Management perspective, becomes the GOPPAR metric.
Let's look at the results for the same period:
Hotel | RevPAR | CPOR | GOPPAR |
A | R$ 100.00 | R$ 50.00 | R$ 20.00 |
B | R$ 100.00 | R$ 20.00 | R$ 25.00 |
Consider that CPOR is calculated based on total occupancy, and not on availability, as is the case with RevPAR and GOPPAR.
Which of the two indicates efficiency now? It depends on the investor's focus—whether it is purely revenue, hospitality, both, or how much the investor's pocket needs. RevPAR is not an invalid metric—it isn't and never will be. But when analyzed alone, the hotel's performance results will sink, proving that management failed to understand what Revenue Management truly is.
After all, this practice reached the modern world through an ancient habit of merchants: how much profit will I make on each piece sold, where, and to whom? It is in the history books—5th-century Arab merchants already practiced "I have already sold enough for today, now it's the other guy's turn." In Brazil, a similar practice happened in open-air street markets: the price varies according to the client's profile, the time of day, and product quality—which is why it is higher at 5:00 AM with fresh products and demanding clients, and negligible at noon when what is left in stock becomes a guaranteed loss.
Crandall didn't copy anyone, but he shared the same question as the ancient merchant and the owner of the onion stall: what to do to avoid being left with product in stock, reduce losses, and increase profits.
The Blind Spot of Classical Revenue Management
Crandall didn't need to worry about whether the passenger left the plane happy—he just needed to sell the seat. The hotel industry does not have that luxury. An unhappy guest does not buy again, speaks poorly of the establishment, drives down future daily rates, and increases the acquisition cost of the next guest. Any Revenue Management metric that ignores satisfaction is, in practice, mortgaging tomorrow's revenue to show a beautiful result today.
This is not my opinion. It is the core of the Service-Profit Chain by Heskett, Sasser, and Schlesinger (Harvard Business Review, 1994): guest satisfaction and profitability walk hand-in-hand, not in parallel. And decades of Net Promoter Score studies by Reichheld (2003) show the exact same thing through a different path—a promoter guest costs less to win back and is worth more over time. This is guest lifetime value, not the month's daily rate.
Efficiency Within Revenue Management
To truly indicate a hotel's efficiency, when analyzing a client's metrics, I perform a calculation I developed years ago and am only now releasing publicly, after seeing and analyzing dozens of lodging facilities in search of an answer to a single question: what do I need to do to understand the real efficiency of the hotel in relation to guest satisfaction, company longevity, and profitability?
I present the Hotel Efficiency Index (HEI):
HEI = (GOPPAR/CPOR) × Satisfaction Coefficient (0 to 1)
The Satisfaction Coefficient (SC)—read the article about this index here on this blog—is also my own creation. It combines three sources that the hotel already produces:
The internal NPS—a post-stay survey with Reichheld’s classic question: "On a scale of 0 to 10, how likely are you to recommend this hotel?"
The aggregated public review index—Google, Booking, TripAdvisor, which platforms like TrustYou and ReviewPro already consolidate into a Global Review Index from 0 to 100.
The return rate or repeat guests—those who are satisfied come back, and this is the hardest indicator to fake because it reflects behavior, not opinion.
Let's Look at the Numbers
Suppose that the post-stay survey, public reviews, and return rate of the two hotels in our example produced the following satisfaction coefficients during the period:
Hotel | GOPPAR | CPOR | SC |
A | R$ 20.00 | R$ 50.00 | 0.82 |
B | R$ 25.00 | R$ 20.00 | 0.61 |
Hotel A—with 50% occupancy, a higher daily rate, and a team dedicated to a smaller volume of guests per period—presented an SC of 0.82.
Hotel B—with 100% occupancy, a leaner daily rate, and an operation running at the limit of its capacity—presented an SC of 0.61, reflecting the natural wear and tear of serving a full house at maximum capacity all year round.
Applying the formula:
HEI Hotel A = (20÷50)×0.82=0.40×0.82=0.328
HEI Hotel B = (25÷20)×0.61=1.25×0.61=0.7625
Hotel B had a better performance—0.7625 compared to 0.328 for Hotel A. More than double.
The RevPAR of both was identical. GOPPAR slightly favored Hotel B. CPOR already showed a large gap between the two. And when satisfaction enters the equation as a multiplier—rather than an afterthought in a shelved post-stay survey—the gap between the two hotels becomes wide open.
But here is the challenge that you, as an owner, manager, director, or president of a lodging property, need to consider before finishing this article: the SC numbers I used above are for educational purposes; they are not your hotel's numbers. Is your hotel like Hotel B, and does it really have an SC of 0.61, or have you never measured this and are just assuming everything is fine because the GOPPAR ended up in the black? Or is your hotel like Hotel A—is your higher daily rate being sustained by real satisfaction, or by brand inertia that hasn't felt the competition yet?
Ultimately, which of the two was efficient? That is the question I leave for you to answer—not with a calculator, but with your own hotel's spreadsheet in hand. Equal RevPAR does not mean equal operation. Higher GOPPAR does not mean a healthier business. And profitability without satisfaction is not efficiency: it is an expiration date ticking away, with no one looking at the clock.
The Hotel Efficiency Index does not exist to complicate your spreadsheet. It exists to force you to ask, every month, the question that most of the Brazilian hotel industry avoids: am I making a profit, or am I just delaying the inevitable?
Mario Cezar Nogales
Consultant specialized in Hospitality, professor, and industry researcher.
Founder of SN Hotelaria Consultoria Especializada, he has worked for over two decades on management, repositioning, and restructuring projects for hotel enterprises throughout Brazil. Columnists for magazines and portals focused on hospitality, with an emphasis on operational efficiency and maximizing value for hotel owners.
Text translated from Brazilian Portuguese into American English by Gemini
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