A hotel economics exercise, made visual

Same room revenue.
Different economics.

Four illustrative hotels. The same number of rooms and the same €66 RevPAR, one of the industry's most familiar measures of rooms performance. Yet identical RevPAR can come from very different combinations of occupancy and rate, with different operating consequences. Choose the hotel that looks strongest, then see what changes when incremental cost and ancillary contribution enter the calculation.

Inspired by an exercise from Sherri Kimes, revenue management & pricing professor.

The four hotels and their figures are illustrative. They do not represent specific properties or market averages.

1 Step one
Which hotel looks strongest from RevPAR alone?

Each square is one room. Gold = booked tonight, empty = vacant. Click the hotel you'd bet on.

RevPAR = occupancy × room rate. It's the same €66 for all four, no matter how they get there.
2 Step two
Does your answer change once cost and ancillary contribution enter the picture?

Every booked room costs something incremental to service. An occupied room may also generate contribution beyond rooms revenue through F&B, spa, minibar or parking, once the direct cost of delivering that spend is taken out. Drag both sliders.

Incremental cost to service each occupied room, per night €35
€0, costs nothing€70, expensive to serve
Ancillary contribution per occupied room, after direct costs €0
€0, room-only guests€60, strong on-site margin

To isolate the effect, the same incremental cost and ancillary-contribution assumptions are applied to all four hotels.

Room contribution shown here is a simplified figure: (rate + ancillary contribution − incremental cost) × occupancy. It is not profit. It excludes fixed payroll, distribution costs, utilities, maintenance, taxes and other operating categories. It's built to make one point visually, not to replace a P&L: a metric that averages two things together can make very different businesses look identical.
3 Step three
Test it on your own numbers

Enter your own occupancy, rate, incremental cost, and ancillary contribution. See where you'd land next to Sibiu, Constanța, Brașov and București.

%
€
€
€
RevPAR
…
Room contribution / available room
…

For comparison, your cost and ancillary assumptions are applied to each illustrative hotel.

The model is deliberately simplified. A full assessment would also consider channel costs, fixed expenses, the cost and margin structure of ancillary revenue, and capital requirements.

Concept and interactive interpretation by Elena Oana Barza

I use this type of analysis to examine how pricing, operating structure and guest behaviour affect the performance of a hospitality asset.

Connect on LinkedIn →