Should ADR and RevPAR include meal plans?
I have been calculating ADR and RevPAR with meal plans included for over a year, for two main reasons:
- The meal-plan allocation was far from ideal, so calculating a room-only ADR would not have given me a true picture either.
- I was working at a resort with four hotels, where half-board and all-inclusive plans made up a large share of the business.
For a while I struggled with this approach, because I was not fully comfortable with it. More recently, though, I have carried out several analyses that support this model. (It also goes against what I argued just a few weeks ago in my post about closing meal plans.) I have been so focused on this topic that I searched online for some clarity and came across an article by Pablo Delgado of Mirai, which suggested that, given their specific characteristics, holiday hotels may be on the right track when they calculate ADR and RevPAR with meal plans included.
Given that meal-plan allocations in PMSs are usually below their commercial value, and that accommodation revenue is inevitably bundled with meal-plan sales, I do not just think this approach is acceptable: I think it is essential for holiday hotels.
Example:
Commercial value of a half-board room: €60 per person (€45 accommodation + €15 dinner)
Dinner allocation: €12
Accommodation allocation: €60 − €12 = €48 ( €3 above its commercial value)
ADR and RevPAR need the meal-plan mix for context
Even ADR and RevPAR do not tell us much on their own unless we also look at the share of each meal plan behind those prices.
Example:
A 250-room hotel at 85% occupancy, with €890,000 in revenue over a 31-day month.
Scenario A | ADR = €890,000 / (250 × 0.85 × 31) = €135.10 (10% room only / 20% bed and breakfast / 50% half board / 20% all-inclusive)
Scenario B | ADR = €890,000 / (250 × 0.85 × 31) = €135.10 (20% room only / 40% bed and breakfast / 20% half board / 20% all-inclusive)
At first glance, scenario B looks much better than A because of its meal-plan mix, if we assume lower staffing and supply costs. Clearly, many other factors remain, such as the mix of net rates and public rates, and distribution costs. Considering those takes us down the rabbit hole of calculating actual GOPPAR. Has anyone managed it?
The conclusion is that a revenue manager has to make the most of the data available while pushing for better systems that lead to more refined and accurate metrics.
P.S. This is why I take the Spanish National Statistics Institute (INE) figures for ADR and RevPAR with a pinch of salt. Who knows how each hotel calculates them.