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Ways To Drive TRevPAR

Hoteliers Should Reconsider American Plan To Help Boost Profitability

By Larry and Adam Mogelonsky | July 26, 2022

Some hotel terminology from a bygone era and one that is very much critical for today:

  • American Plan (AP): a room type or package including three meals per day into the daily rate;
  • Modified American Plan (MAP): includes breakfast and one of lunch or dinner;
  • European Plan (EP): strictly accommodations with no meals included;
  • TRevPAR: short for total revenue per available room and a useful metric to evaluate which guest types are spending the most and which profit centers are generating the most revenue.

With the world already surging back into a state of travel, the aptly named American Plan should be on your radar for maximizing TRevPAR. Moreover, there is the notion that this period of ‘revenge travel’ won’t last forever, so you will need to anticipate this by developing solid programs to defend your profitability even when there are fewer overall guests in the market.

While undoubtedly you have B&B packages in place, we emphasize that you look again at how you are engaging guests and upselling them. The 100% occupancy summer weekends won’t last forever; you need systems in place to optimize TRevPAR at a marginal labor cost.

When approaching any hotel asset management or financial optimization consulting assignment, one critical area we review is the dining operations and, especially nowadays, how technology platforms are being used to cross-sell F&B for maximum TRevPAR.

This is because some golf, some drive to the property, some like spa treatments…but everyone eats. Thus, developing a great AP with all the right marketing and omnichannel distribution links can truly help to both pad margins and increase guest satisfaction to ensure good word of mouth or return visits.

And the ‘everyone eats’ mentality is gaining steam with the wider acceptance of this TRevPAR term over and above the classical RevPAR. Sometimes it’s not all that simple, especially when comparing the weekend getaway leisure guest to a midweek MICE group block where the latter may spend far less per guest but also use up less labor per guest. Consider these two guest profiles:

Guest ABC

  • Purchases suite at $400 per night for two nights at BAR and double occupancy;
  • Arrives and departs hotel by Uber;
  • Dines entirely off-property;
  • No additional purchases onsite;
  • TRevPAR stays at $400 per night.

Guest XYZ

  • Purchases deluxe room at $250 per night for two nights at B&B rate and double occupancy;
  • Uses valet and overnight parking for a sum of $50 during the entire stay;
  • Eats breakfast (included) as well as dinner a la carte on-property for an average spend of $150 each night including alcohol;
  • Uses the spa with a treatment purchase total of $150;
  • TRevPAR is $500 per night.

Looking at the latter, this B&B may work as a loss leader of sorts, luring guests in with more per-night value to arrive at a greater overall property spend. Thus, a big part of your strategy over the next two years should be to try to ensure more XYZ guests while retaining the ABC nightly rate. For this, there are manifold solutions, especially with the emerging of some fantastic pre-arrival upselling and cross-selling platforms that help to automate this TRevPAR optimization.

Ultimately, this is what strategic planning consultants like us do. Whether it’s APs, MAPs or any other package, your hotel’s ongoing success requires a tailored approach to how to make operations and technology work with your local market conditions.

 

Credit
Larry and Adam Mogelonsky

Together, Adam and Larry Mogelonsky represent the world’s most published writing teams in hospitality, with over a decade’s worth of material online. As the partners of Hotel Mogel Consulting Ltd. a Toronto-based consulting practice, Larry focuses on hotel strategies and operations while Adam specializes in wellness planning, technology and marketing. Their experience encompasses properties worldwide, with a primary focus on luxury independent properties. Their work includes seven books “Are You an Ostrich or a Llama?” (2012), “Llamas Rule” (2013), “Hotel Llama” (2015), “The Llama is Inn” (2017), “The Hotel Mogel” (2018), “More Hotel Mogel” (2020), and “In Vino Veritas” (2022). You can reach them at adam@hotelmogel.com to discuss how they can help with business challenges.


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