When evaluating the financial performance of a short-term rental (STR), one of the most insightful metrics is RevPAN, or Revenue Per Available Night. This key metric blends two important factors—Average Daily Rate (ADR) and Occupancy Rate—to provide a clear picture of a property’s earning potential.
Let’s break down RevPAN, how it’s calculated, and why it’s crucial for STR owners and investors.
What is RevPAN?
RevPAN measures the average revenue a property generates per available night, regardless of whether it’s booked. It’s calculated using one of these two formulas:
- RevPAN = ADR × Occupancy Rate
- RevPAN = Total Revenue ÷ Total Available Nights
For example, if your property’s ADR is $200 and your occupancy rate is 70%, your RevPAN would be:
$200 × 0.7 = $140
This means that, on average, your property earns $140 for each night it’s available, even if some nights are unbooked.
Why is RevPAN Important?
- A Balanced View
RevPAN combines ADR and Occupancy Rate to give a holistic view of a property’s revenue performance. While ADR shows how much you charge per night and Occupancy reflects how often you’re booked, RevPAN ties these metrics together to reveal your true earning power. - Performance Evaluation
By tracking RevPAN over time, you can assess how well your property is performing and identify areas for improvement. It’s also useful for comparing properties in your portfolio or market to determine which are performing best. - Crucial for Investment Decisions
For investors, RevPAN is a vital metric when evaluating a property’s return potential. A high RevPAN indicates a property is effectively generating revenue, making it a strong investment.
How to Improve Your RevPAN
To optimize RevPAN, focus on both ADR and Occupancy Rate:
Boost ADR:
- Upgrade amenities to justify higher nightly rates.
- Use professional photos and compelling descriptions to attract premium guests.
- Target high-demand periods with dynamic pricing strategies.
Increase Occupancy:
- Ensure your pricing is competitive using market data.
- Respond quickly to guest inquiries to secure bookings.
- Expand your property’s reach by listing on multiple platforms.
RevPAN: A Metric That Drives Success
RevPAN is one of the most important metrics in the short-term rental space. It blends the critical components of ADR and Occupancy Rate, offering a comprehensive view of your property’s revenue performance.
Whether you’re an investor evaluating potential properties or a host looking to optimize your earnings, RevPAN helps you measure success and identify opportunities for improvement.
Leverage tools like Rabbu to find your next property and make sure to keep the RevPAN in mind when considering the success of your investment!