Take the total revenue over a set period of time, divide that by the number of rooms available and you’ve created the universal metric that the entire hotel industry lives and dies by, RevPAR-or Revenue Per Available Room. Can and should the apartment industry create a similar, standard benchmark?
“I’m telling you, you want this. This is something we want. Waterton is fully supportive of this,” said Mark Zettl, COO of Waterton, at the 2015 NMHC OPTECH Conference & Exposition. Waterton has 14 hotel properties in addition to its multifamily portfolio.
“It’s not a lot of brain damage, and that’s the beauty and simplicity of this model,” said Jan Freitag, SVP of lodging insights with Smith Travel Research (STR), the organization that created RevPAR.
The lack of a standard benchmark within the apartment industry makes it challenging to gauge actual performance against the closest competitors. Donna Summers, SVP of operations for Gables Residential, outlined efforts to “triangulate” performance in a sea of inconsistent numbers-an issue for numerous apartment firms.
“We’re dealing with the same problem a lot of you all are,” she said.
STR only collects three numbers to create RevPAR: available rooms, rooms sold and total revenue. To some in the apartment industry, the lack of unit mix or building class would seem like a gross oversimplification. Hotel operators get around this problem by looking at highly specific sets of comparable data for each property.
For example, one set of comps might be a hyper local, like within a two-mile radius of a particular property. Another set could be properties in a wider area that specifically target the same market tranche, such as hotels with suites that cater to long-term business travelers. By looking at these data sets, operators, lenders, asset managers and investors can easily gauge the performance of a property.
“I grew up in the hotel industry and the report is like crack,” said Zettl. David Schwartz, Waterton’s CEO, admitted that he looks at the RevPAR numbers late at night in bed when the weekly data comes out. “It’s that critical,” said Schwartz at the 2015 Spring NMHC Board of Directors Meeting-which first broached the topic within the multifamily industry.
Other industries are in various stages of discussion with STR to develop similar performance metrics. For the apartment industry, Freitag is simply a cheerleader. “The reason I’m here is that we’re not going into your space next year. I’m just here to say this is a good idea. You will all make more money,” he said.