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ACCA Strategic Professional · Advanced Performance Management · Performance improvement models and techniques

Lakeside Hospitality operates hotels in two countries. Hotel A has 200 rooms and achieved occupancy of 70% in a 30-day month at an average room rate of $120 per occupied room night. Hotel B has 150 rooms with occupancy of 80% at an average rate of $110. Which statement about revenue per available room (RevPAR) is correct?

RevPAR equals occupancy multiplied by average room rate. Hotel A earns 0.70 x $120 = $84 and Hotel B earns 0.80 x $110 = $88, so Hotel B performs better. Looking at room rate alone would wrongly favour Hotel A.

  1. AHotel A RevPAR is $84 and Hotel B RevPAR is $88, so B performs better on this measureCorrect
  2. BHotel A RevPAR is $84 and Hotel B RevPAR is $80, so A performs better
  3. CHotel A RevPAR is $120 and Hotel B RevPAR is $110, so A performs better
  4. DHotel A RevPAR is $4,200 and Hotel B RevPAR is $3,960, so A performs better

Explanation

RevPAR = occupancy x average daily rate. Hotel A: 0.70 x 120 = $84. Hotel B: 0.80 x 110 = $88. Check: A revenue 200 x 0.7 x 120 = 16,800 per night over 200 rooms = 84; B 150 x 0.8 x 110 = 13,200 over 150 = 88. Using only average rate ignores occupancy.

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