A legacy term from a bygone era of tourism, an American Plan – typically denoted as the acronym AP beside a room type or rate plan – is common parlance for the inclusion of three meals per day in the nightly price. Not to list off too much alphabet soup but AP is distinguished from the Modified American Plan (MAP) which includes breakfast and lunch or dinner as well as the European Plan (EP) for strictly accommodations and no meals bundled in.

As we all start to put the rigmarole of the pandemic behind us, the obvious target for inbound travel to Canada will be from just across the longest border in the world. Hence, the aptly named American Plan should be considered to guide your strategy for maximizing revenues from our large southern neighbor. The summer and peak season ahead for many domestic destinations will not only need a solid marketing plan for the United States put in place relatively quickly, but also a thorough understanding of why APs can help you attain profitability from fewer overall guests.

The core of why APs were so popular back in their day was that meal inclusions gave more perceived value to guests along with the comfort of not having to arrange dining reservations ad hoc. This sense of convenience still applies today, albeit using different terminology. While the average millennial or centennial would say that AP stands for ‘after party’ – another reason not to use this acronym in promotional messaging for your information – the fundamentals for why such packaging worked are critical for rebuilding revenues in the post-pandemic landscape.

Today, we outwardly talk to prospective customers about ‘B&B deals’, ‘bundles’ or any other phrasing from the marketing rolodex, but behind the scenes the lynchpin term for hoteliers to tattoo on their arms is TRevPAR (total revenue per available room). This metric looks beyond heads in beds and aims, through rich data integrations, to decipher which types of guests spend the most at your property so that you can synchronize and maximize all revenue verticals. In this sense, AP, MAP and EP all help with TRevPAR by automatically building a solid base of F&B during the prearrival stage of a guest’s journey.

Hoteliers are classically trained to think about RevPAR as one of a handful of quintessential measurements to gauge a property’s success, particularly for revenue managers who must accurately assess market position and occupancy versus the comp set then adjust rates to steer RevPAR towards a broader objective. Unless your property is limited service with few other income streams besides rooms, optimizing TRevPAR will be of better use for building profit margins in 2022 because revenue per guest is maximized and your property will achieve better customer satisfaction (which is highly correlated with onsite service utilization).

Especially for full-service hotels or resorts, TRevPAR is now critical so that you can target the best possible lookalike demographics and origin markets, as well as figure out loyalty incentives or even CapEx allocations to a given operation. Consider two simple examples to show this.

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

There’s a lot to unpack here. The lower room rate guest (XYZ) ended up spending more overall, giving them a higher TRevPAR, with the B&B package acting a bit like a Trojan Horse for more ancillary spend. At first glance, when you aggregate all the various income streams, it would make sense to start looking for more customers like XYZ ahead of ABC.

If only it were that simple. To play our own devil’s advocate, those ancillary operations – in this case, restaurant, spa and valet – may come with additional OpEx and therefore elicit lower margins than from just rooms. When you factor in labor costs, XYZ puts more on the topline but may still equal out to the same bottom line as ABC. This really depends on how each operation is run and it is indeed a balancing act.

Regardless of cost analysis, now suppose that ABC and XYZ were both planning on booking for a Friday and Saturday night when historical data and current pace are showing this weekend to sell out. In this hypothetical and dynamically yielded situation, who would you prefer to have stay at your hotel: the guests who merely occupy a room or the ones who also utilize a myriad of amenities?

In the post-pandemic environment, it’s becoming quite clear that the group and corporate segments are going to take a long time to bring fully back online and buoy our midweek occupancies with consistent room-only property utilization to drive a healthy topline. The focus has to shift to maximizing revenues from leisure, and largely weekend, visitors. For this, a shrewd TRevPAR analysis becomes paramount.

Where the American Plan comes back into play is namely for those properties that don’t have many other activities or onsite experiences to offer besides F&B. For these and all other hotels, the packaging of three meals per day is an attractive offer to many customers, especially as part of a bundle you sell to those traveling from the United States. And to close on a broader note, planning an AP or MAP helps to get departments working more closely with each other so that every operation acts in unison towards total revenue and holistic cost reductions. Hence, as a GM or other senior executive, think APs and TRevPAR to make the year ahead a success.