Reading a RevPAR Index Decline: Comp-Set Change, Mix Shift, and Rate Integrity
A 250-room upscale hotel reviews its benchmarking report against a six-hotel comp set. This month the hotel ran 71.2% occupancy at $168.00 ADR; the comp set ran 73.5% at $166.00, producing a RevPAR index of 98.0. Last year in the same month the hotel ran 74.0% at $167.30 and indexed 104.6. A 180-room upscale-lifestyle hotel joined the comp set eight months ago (66% occupancy, $215 ADR, strong leisure transient). Excluding it, the remaining five properties ran 74.1% at $159.00. Internally, group rose from 22% to 30% of occupied rooms; group ADR is $140 and transient ADR $180, versus $158 and $170 a year ago. The owner wants to know why the hotel "lost 6.6 points of index."
1. Recompute the index on a like-for-like comp-set basis and assess how much of the 6.6-point decline is real.
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This month
- Hotel RevPAR: 0.712 × $168.00 = $119.62
- Six-hotel comp RevPAR: 0.735 × $166.00 = $122.01
- Index: $119.62 ÷ $122.01 = 98.0 ✓
Like-for-like comp set (five hotels, excluding the new build)
- Comp RevPAR: 0.741 × $159.00 = $117.82
- Index: $119.62 ÷ $117.82 = 101.5
Last year
- Hotel RevPAR: 0.740 × $167.30 = $123.80
- Index 104.6 implies comp RevPAR of $123.80 ÷ 1.046 = $118.36
Conclusion About 3.5 of the 6.6 index points are pure comp-set composition: adding a $215-ADR hotel lifted comp RevPAR from $117.82 to $122.01 while the subject hotel did nothing differently. Roughly 3 points are real erosion - worth about $3.50 of RevPAR against fair share. The remaining story is directional: hotel RevPAR fell 3.4% while the like-for-like comp set rose 0.5%.
2. Decompose the ADR change into rate and mix effects. What does it say about pricing behavior?
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Blended ADR checks
- This year: (0.30 × $140) + (0.70 × $180) = $42.00 + $126.00 = $168.00 ✓
- Last year: (0.22 × $158) + (0.78 × $170) = $34.76 + $132.60 = $167.36 ✓
Decomposition
- Rate effect (this year's rates at last year's mix): (0.22 × $140) + (0.78 × $180) = $171.20. Versus $167.36 = +$3.84 (+2.3%).
- Mix effect: $168.00 − $171.20 = −$3.20 (−1.9%).
- Net: +$0.64 (+0.4%).
Reading it Transient rate rose $10 (+5.9%) while group rate fell $18 (−11.4%), and group's share of occupied rooms rose 8 points. The transient pricing engine is working; the group effort is buying occupancy with rate. That is a rate-integrity problem, and it is why the hotel ended with occupancy down 2.8 points and ADR essentially flat - the least attractive combination available. The reported +0.4% ADR growth hides a 2.3% underlying rate gain that mix gave back.
3. What should be reported to the owner, and what actions follow?
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Report
- Headline the like-for-like index of 101.5 against the five-hotel set; show 98.0 as a footnote with the comp-set change disclosed.
- Restate the prior year on the same five-hotel basis so the trend is comparable; never show a trend across two different comp sets without a bridge.
- Add segment index (transient ADR index, group ADR index) so the owner sees where the erosion sits.
Act
- Set a group rate floor by date and require displacement analysis for blocks above roughly 50 rooms. At $140 versus a $180 transient rate, every group room night costs $40 of contribution before F&B.
- Test whether transient pricing is over-tightened on shoulder dates: occupancy fell 2.8 points while transient ADR rose 5.9%, which often means midweek rooms are being left unsold.
- Treat the new hotel as a leisure-transient competitor - watch weekend channel mix, OTA share, and package pricing rather than responding with group rate cuts.
- Do not chase index with discounting. At 101.5 like-for-like with falling occupancy, the fix is mix discipline and shoulder-date yield, not rate reductions that would push both measures down together.