Potential Average Rate (PAR)

PAR or Potential Average Rate is a very important ratio in the revenue management department. The Potential Avg. Rate (PAR) is a collective statistics that combines the potential average rate, multiple occupancy percentages and the rate spread.

There are two steps involved to calculate the potential average rate

Step 1: Multiplying the Rate Spread by the hotel's Multiple Occupancy Percentage.

Step 2: Add the result from Step 1 to hotel's Average Single Rate which will then give the 'Potential Average Rate (PAR)'

The Formula for Potential Average Rate:

Potential Average Single Rate = (Multiple Occupancy Percentage X Rate Spread) + Potential Average Single Rate

E.g. - Potential Avg. Rate:

Multiple Occupancy Percentage = 5.00

Rate Spread                            = 15.00

Potential Avg. Single Rate         = 100.00

Potential Average Rate (PAR)    = (5.00 X 15.00) + 100

                                             = (75) + 100

                                             = 175

Formula For Calculating Room Achievement Factor (Rate Potential Percentage)

The Room Achievement factor is also known as Rate Potential Percentage of a hotel, is defined as the percentage of the Rack Rate that the hotel actually receives by selling their rooms. Room Achievement factor is calculated by dividing the Actual Average Rate by the Potential Average Room Rate.

Additionally, depending upon the hotel's management policy the Actual Average Rate is either divided by the total Rooms Sold or Occupied Rooms. Room Sold = (Occupied Rooms - Complimentary and House use)

The Formula for Room Achievement Factor

Room Achievement Factor = Actual Average Rate / Potential Average Rate

E.g. Where Actual Average Rate Taken as Rooms Sold:

Actual Average Rate                 = 123.00

Potential Average Rate (PAR)    = 183.00

Room Achievement Factor = 123.00 / 183.00

                                             = 0.67  or 67% 

E.g. Where Actual Average Rate Taken as Occupied Rooms:

Actual Average Rate                 = 158.00

Potential Average Rate (PAR)    = 197.00

Room Achievement Factor = 158.00 / 197.00

                                             = 0.80  or 80%