Calculate your Property’s TRevPAB
Your Property's TRevPAB is:
Most hostels today offer more than just a place to stay. They’re a social hub full of opportunities for guests to connect and make the most of their stay. From walking tours to pub crawls and onsite restaurants, there’s much more than room revenue for hostelers to capitalize on.
That’s why total revenue per available bed or TRevPAB is such a critical metric for hostel operators, offering a comprehensive view of a property's revenue-generating efficiency. Unlike traditional metrics that may focus solely on occupancy rates or room revenue, TRevPAB encompasses all revenue streams.
In this article, we'll explore the intricacies of TRevPAB, including how to calculate it and strategies to maximize it.
What is TRevPAB?
Total revenue per available bed is a metric used by hostels that calculates the average revenue generated per bed, taking into account all the hostel’s revenue streams. This includes not only income from bed sales but also contributions from the hostel's restaurant, onsite bar, rentals (such as bikes, hair dryers, towels), and activities (like bar crawls and walking tours). Even miscellaneous income, such as cancellation or late checkout fees, plays a part in this calculation.
By dividing the total income by the number of beds available for sale—regardless of whether those beds were sold, unsold, occupied, or unoccupied—TRevPAB provides a comprehensive measure of revenue performance.
Why measure TRevPAB?
TRevPAB is more than just a financial metric; it's a tool for strategic decision-making. By breaking down revenue by available beds and ancillary services, it offers a granular perspective on financial performance.
This allows hostel owners and operators to understand the profitability of per-bed sales in detail, helping to identify which areas of the business are most profitable and which may need improvement. Whether it’s adjusting pricing strategies, enhancing ancillary services, or reevaluating operational efficiencies, TRevPAB provides the data needed to make informed decisions.
TRevPAR vs. TRevPAB: Understanding the distinctions
In hospitality revenue management, both TRevPAR (total revenue per available room) and TRevPAB serve as pivotal metrics. TRevPAR focuses on the revenue generated per available room, encompassing all income streams of a property, divided by the total number of rooms available for booking. This metric is traditionally applied in hotels, where the primary unit of sale is the room itself.
TRevPAB narrows the focus down to the revenue generated per available bed, a distinction that makes it particularly relevant for hostel revenue management. In environments where accommodations are often sold by the bed—such as in hostels and dormitories—TRevPAB becomes a crucial metric.
The significance of non-room revenue
Increasingly, hostels are diversifying their income streams by incorporating non-room sources of revenue such as onsite restaurants and bars, excursions, and rentals. These amenities not only enhance the guest experience but also contribute significantly to the property's total revenue.
Calculating TRevPAB: A step-by-step guide
Here's a detailed look at how TRevPAB is calculated and the information needed.
Steps to calculate TRevPAB
- Gather revenue data. Collect all relevant financial information that contributes to the total revenue. This includes the net revenue from room or bed bookings and additional revenue streams.
- Determine total available bed nights. Calculate the total number of bed nights available for sale during the period in question by multiplying the total number of beds at the property by the number of nights in the calculation period.
- Calculate. Divide the total revenue by the total available bed nights to determine the TRevPAB.
TRevPAB formula
TRevPAB = (total revenue) / (total available bed nights)
TRevPAB example
Imagine a hostel that offers several types of accommodations, including shared dorm rooms and private rooms. Over a specific period, the hostel generates revenue from various streams such as bookings, food and beverage sales, and other services like laundry and tours.
- Total number of beds: 100 beds
- Occupancy period: 30 days
- Bed revenue: $15,000
- Food and beverage revenue: $5,000
- Other services revenue (laundry, rentals, tours, etc.): $2,000
- Total revenue: $15,000 (Bed) + $5,000 (F&B) + $2,000 (Other) = $22,000
Calculation.
To calculate TRevPAB, we need to divide the total revenue generated by the total number of available bed nights (the number of beds multiplied by the number of nights in the period).
Total available bed days = 100 beds x 30 days = 3000 bed nights
TRevPAB = $22,000 / 3000 = $7.33
The TRevPAB for this hostel, based on the given data, is approximately $7.33 per available bed/day. This means that, on average, each bed available for booking (regardless of whether it was booked or not) generated $7.33 per day from all revenue sources combined (room bookings, food and beverage, and other services) over the specified period.
What affects your TRevPAB
Understanding what influences your TRevPAB is crucial for effective revenue management. Here's a breakdown of the key factors that can impact your TRevPAB.
- Total beds available for sale. The more beds you have available, the greater your potential revenue. However, having too many unsold beds can negatively affect your TRevPAB.
- Total beds sold each night. High occupancy rates directly contribute to higher TRevPAB, as more bed nights sold means more revenue generated.
- Products and services for sale. Offering a variety of services and amenities can increase total revenue, positively impacting TRevPAB.
- Pricing of beds and ancillary services. Competitive and dynamic pricing strategies for beds and additional services can optimize revenue per available bed.
- How much guests spend on amenities and activities. Encouraging guests to spend on property through attractive offerings boosts overall revenue, enhancing TRevPAB.
- Discounts, promotions, and packages. While promotions can increase occupancy, they need to be carefully balanced to ensure they don't negatively impact overall revenue per bed.
- Types of guests. Different guest segments (e.g., digital nomads, budget backpackers, groups) have varying spending habits and preferences, influencing total revenue.
- Channel mix. The mix of distribution channels used to sell beds can affect both the volume of sales and the costs associated with each channel, impacting net revenue.
- External factors. Market Demand, economic conditions, weather, and travel disruptions can significantly influence occupancy rates and guest spending behavior.
By closely monitoring and adjusting strategies in response to these factors, hostel operators can better manage their total revenue per available bed, ensuring a more profitable and sustainable business model.
6 strategies to increase TRevPAB
Increasing TRevPAB is a strategic goal for hostel operators aiming to maximize their revenue and profitability. Here are several actionable strategies hostels can adopt to increase TRevPAB.
- Set TRevPAB objectives. Establish clear, measurable TRevPAB goals that align with your annual budget and operational plans.
- Share objectives with your team. Make sure your team is informed about TRevPAB objectives and how they can contribute to achieving them.
- Expand ancillary services. Introduce new products and services that meet your guests' needs and enhance their overall experience, and advertise them properly across distribution channels and on property.
- Consider increasing your pricing. Regularly assess the market and your competitors to determine if a pricing adjustment is necessary.
- Review your business mix. Analyze guest segments to identify which ones bring in the highest TRevPAB and adjust your offerings accordingly.
- Optimize your channel mix. Focus on sales channels that lead to higher TRevPAB and offer opportunities for upselling.
A critical metric for hostelers
TRevPAB is a crucial metric for lodging businesses looking to optimize their revenue management practices. By analyzing and optimizing TRevPAB, hostelers can ensure that every aspect of their operation contributes effectively to the bottom line, driving their hostels towards enhanced financial performance and sustained growth in an increasingly competitive market.
