•( If you have differential room pricing) selling a higher proportion of your higherpriced rooms
RevPAR is useful in the hotel industry as it can be used as a comparator between different hotels within a group, or between hotel groups etc. In your case as the owner of a B & B, there will probably be no opportunity to compare“ RevPAR” figures with others, and nor would it be of much interest to you in all probability unless it related to your nearest competitors. So another way of measuring the same combination of occupancy and actual achieved price may be preferable to you: simply, the total sales of your B & B( excluding meals & beverages) measured over a unit of time – a week, a month, a quarter, a season, or even a weekend.
Total sales in any time period actually gives you the same information as RevPAR, but expressed overall rather than on a“ per room” basis. Assuming that you have not added or closed any rooms, comparing total sales between two similar periods will be the same as comparing RevPAR between the two periods.
We mention this because we feel that most B & B owners will feel no need to calculate“ RevPAR” but will be happy simply comparing their total B & B sales figure between periods. After all, it equates to your total gross revenue( if you don’ t sell meals or drinks, it will be the same as your total gross revenue), so it is a very important figure which should always be at the top of your mind!
The measurements above of course measure the income side of the business only; although in a B & B we do not have a“ raw material” to buy in as Fred does with his whelks, we do need to keep a close eye too on the outgoings. In a B & B, these are mainly overheads: ie advertising and marketing, insurance, cleaning etc. The closest we come to a“ raw material” cost is the cost of our property( mortgage, maintenance, utilities etc.), which of course can be expressed as a cost per day per guest bedroom, but in our case this is an overhead – it is a fixed cost, however many bookings we make.
Direct Costs and Gross Profit( GP). There are some direct costs per booking, of course: breakfast ingredients, cleaning, room consumables( soap, lavatory paper, shampoo, bin bags, tea & coffee etc.) and laundry costs. These also can be calculated pretty accurately on a per room, per night basis. But the important thing to recognize about the B & B business model of course is that these“ direct” costs are very small relative to the gross sales income. A typical figure might be £ 3 per night direct costs against a sale of £ 60 per night, in which example 95 % of the room price is“ gross profit”( GP).
In this example, £ 3 per room-night is your“ variable” or“ direct” cost, so any revenue above that level is a“ contribution” to your bottom line( ie to overheads and ultimately to profits). So selling a room at the last minute at half price(£ 30) gives you a £ 27(£ 30- £ 3)“ contribution”, not a £ 30“ loss”. The concept of“ contribution” is one to keep in mind in planning all your marketing activities.
Note: these calculations ignore any valuation of your own time( assuming that you will be doing the work yourselves). This is valid if you would otherwise be unemployed,