RevPASH stands for “Revenue Per Available Seat Hour” and measures the income/benefit of each seat available per hour. With RevPASH, you can determine which seat to assign to each guest during a specific time period that benefits the restaurant best.
It’s a relatively new formula, created by Cornell University in 1998, and as explained: “This metric is useful, because it states revenue based on both time (hour) and capacity (seats). By tracking the RevPASH-by-daypart, or even within dayparts, the restaurant manager has a useful tool by which to measure performance and to guide his or her decisions to enhance revenue.”
When is the ideal time to calculate RevPASH?
In the management of restaurants, it is always advisable to calculate RevPASH. The times when it’s indispensable, though, are when the restaurant has a steady flow of customers and is at high occupancy. This would describe a restaurant that has passed the initial stage and is ready to get the most out of each customer.
How to Calculate RevPASH
To calculate RevPASH for your restaurant, use the following formula:
- RevPASH = Sales per Hour / Number of Seats by the Hours
- To get the Number of Seats by the Hours for more than one hour, calculate:
- (Total Number of Seats x Number of Hours x Number of Day(s))
Your RevPASH is directly impacted by the cashflow of your restaurant, and using an integrated POS system can help analyze and calculate this figure. Boston University published this RevPASH calculator to help restaurant owners understand their earning potential.
An Example of RevPASH
A restaurant has an income of $700 between 8 p.m. and 9 p.m. and has a total of 35 seats on the floor. Following the RevPASH formula, the average income of each diner during that hour is $20.
How to Calculate RevPASH of a Restaurant for Longer than One Hour
To get a complete understanding of your restaurant’s income, you need to follow the patterns of sale. Some hours, days, weeks, and months of the year perform better than others in reality. To make the appropriate business decisions, calculate the RevPASH for many time intervals, including shifts, days, weeks, and months. Then, you can establish a target number for increased profitability.
An Example of Using RevPASH to See a Difference Between Shifts
The same restaurant earns $2,000 during its lunch shift, between 12 p.m. and 3 p.m. Considering it has 35 seats, the RevPASH is $19.04 per person.
$2,000 / (35 seats x 3 hours x 1 day) = $19.04
Later that day, the restaurant earns $3,500 during its dinner shift, between 5 p.m. and 9 p.m. The RevPASH is $25.
$3,500 / (35 seats x 4 hours x 1 day) = $25
As the manager of this restaurant, the RevPASH calculations show that more money is earned during the dinner shift than the lunch shift. By showing the difference in the sales per seat averages, RevPASH allows you to investigate why there are differences and to start making educated decisions to improve the lunch service.
If one shift has significantly lower profits per seats, train your staff on best practices to increase profitability.
In this way, the metric becomes essential to your revenue management, as it exactly pinpoints patterns in sales.
Lavu Pro Tip: As you get accustomed to calculating the RevPASH, you may find that with more restaurant data, you can earn more and perform better.
Floor Design is Crucial for Optimizing RevPASH
In order to optimize the RevPASH metrics, it’s ideal to have a floor plan that strategically takes advantage of the space. Compare your restaurant layout to that of a factory—it should maximize the potential opportunity in every way, without being uncomfortable for your staff or guests. (Consider that if you add more tables to your restaurant, the kitchen might need more equipment to manage increasing orders.)
If your restaurant has been operating for one year, you have the three points of information needed to design an optimized floorplan from your restaurant POS system:
- Party sizes
- Dining duration
- Table numbers
These points present a wealth of information. Together, they show a snapshot of your FOH’s activities, the type of customers that come, and how customers use the space, and give you the guidance to make a new floorplan that makes sense.
If you are operating a new restaurant, then you must intuitively answer the following questions:
- What type of guests are attracted to your restaurant? Is it couples, families with children, or singles?
- Is this the kind of place where people drop in spontaneously, or will they make reservations in advance?
- Can you have huge sharing tables, or is this a more intimate space for private conversations?
- Where is the focal point of the room, as customers will prefer sitting closest to this spot?
Additionally, the dining space must be roomy enough that the FOH team can move easily between the tables. In time, you will see how your restaurant operates and can make changes accordingly.
You might even find that a change in floorplan improves your profitability without much stress or investment — track sales trends after making a floorplan upgrade to see how your restaurant profitability changes.
How to Use RevPASH in Your Restaurant to Get Results
As you know now, RevPASH helps you get the most out of each seat at any time. Additionally, RevPASH informs decisions on the following:
- The correct menu prices.
- The optimal duration of meals.
- The correct process to receive, seat, and serve customers.
- Perfecting your menu according to consumption habits.
- Understand the best protocol to serve clients without reservations.
- Correct processes that produce losses.
- Host special events without cutting down your profit.
- Calculate the ideal amount of staff members for payroll costs during different shift blocks.
- Whether a certain new dining trend can help increase the income per guest.
RevPASH is a valuable metric for restaurant management. It allows you to know the real income of the business, to improve schedules or procedures that are producing losses, and to make business decisions in the short, medium, and long term. Start calculating the RevPASH to stay in control of your restaurant’s present and future profitability.
Track other key metrics that help boost profitability, like these four sales KPIs.