Articles

How do you calculate RevPAB for student housing?

Revenue per available bed on both bases, the identity with occupancy and achieved rate, and the mixed-basis error that flatters a 51-week scheme.

Julian R. Sterling · from Student Housing Real Estate

RevPAB, revenue per available bed, is the rent actually collected divided by the number of beds times the weeks in the period, and it means nothing until the period is named. On an illustrative 400-bed scheme whose rate card averages £201.75 a week, RevPAB is £182.93 over the 44 academic weeks and £174.43 over the full 52, including summer income. The most common shortcut, all rent divided by beds times 44, gives £193.65 and flatters the scheme by 5.9 per cent.

Worked in full in Student Housing Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →

The case

A purpose-built student scheme lets three room types. Cluster en-suites go on 44-week tenancies covering the academic year; studios go on 51-week tenancies. The operator pays cashback and discounts to fill the last beds and writes off some rent at the end of the year. Over the summer, beds outside a tenancy are let to groups and conferences. All figures are illustrative.

The scheme, £ per bed per week

Room type	Beds	Rate card	Tenancy, weeks	Occupancy
Cluster en-suite	280	180.00	44	97%
Studio	100	245.00	51	95%
Premium studio	20	290.00	51	90%
Scheme	400	201.75		96.1%

Incentives cost 4.0 per cent of rent and bad debt 1.5 per cent, so 94.56 per cent of the rate card on occupied beds is actually collected. Summer income, net, is £220,000.

Step 1: rent actually collected

Occupied beds times rate card times tenancy weeks gives £3,604,317 of contracted rent. After incentives and bad debt, £3,408,242 is collected. Of that, £3,219,628 falls in the 44 academic weeks and £188,614 in the extra weeks of the studio tenancies.

Collected, not invoiced, is the point. A pack built from the booking system shows contracted rent; the bank shows what arrived. The two differ by every cashback cheque, every early-release discount and every guarantor who never paid, and RevPAB should be built from the second.

Step 2: RevPAB on the academic basis

The identity is the useful part. RevPAB moves when either occupancy or achieved rate moves, and the two are traded against each other every letting season: an operator can always buy occupancy with incentives. Note that rate card times occupancy times the collection factor gives 183.43, close but not equal, because the empty beds are disproportionately the expensive studios.

Step 3: RevPAB on the full-year basis

This is the base that ties to the annual accounts: £9,071 of income per bed. It is lower than the academic figure because the cluster beds earn only summer income for eight weeks, and summer income is a small fraction of term-time rent.

The result, and the figure that flatters

Five numbers for the same scheme, £ per bed per week

Measure	Value	Versus rate card
Rate card, bed-weighted	201.75
Rate card × occupancy	193.98	−3.9%
Mixed basis: all rent / (beds × 44)	193.65	−4.0%
RevPAB, academic year	182.93	−9.3%
RevPAB, full year	174.43	−13.5%

The mixed basis is the one to watch for. Dividing all collected rent, including the studios' seven extra weeks, by bed-weeks counted over 44 weeks puts a numerator from one period over a denominator from another. It gives £193.65, 5.9 per cent above the honest academic figure, and it rewards a scheme for selling longer tenancies rather than for letting better.

What moves it

Academic RevPAB, £, by occupancy and incentives

Occupancy	2% incentives	4% incentives	6% incentives
3 points lower	180.90	177.21	173.52
As modelled, 96.1%	186.74	182.93	179.12
2 points higher	190.64	186.75	182.86

On this scheme one point of occupancy and one point of incentives are each worth £1.91 a bed-week. A campaign that buys two points of occupancy with two points of extra incentive leaves RevPAB where it was. That is the point of the measure: occupancy reported on its own says nothing about whether the scheme let well, because it can always be bought.

The common mistake

The mistake is quoting RevPAB without naming the base, then comparing it across schemes. A 44-week cluster scheme and a 51-week studio scheme with identical letting performance will show different full-year figures, and on the mixed basis the studio scheme looks better for the wrong reason. The second mistake is starting from the rate card: £193.98 of rate card times occupancy is 6.0 per cent above what is collected, because incentives and bad debt are real reductions, not presentation.

Ask for three numbers with any student housing pack: RevPAB on the academic basis, RevPAB on the full year, and the incentives paid to reach the reported occupancy. Two of the three are usually missing.

Nomination agreements change the arithmetic again, because the beds they cover are let at a discount for fewer weeks; what a nomination agreement actually costs prices that.

Takeaway

• RevPAB = rent collected / (beds × weeks), with the weeks named: £182.93 over 44, £174.43 over 52.
• It equals occupancy times achieved rate, which is why occupancy alone tells you little.
• Never divide all rent by beds times 44: the mixed basis flatters long tenancies by 5.9 per cent here.

The free workbook for this case computes RevPAB on both bases for the book's scheme, and the student housing model carries it through to net operating income and value.

Questions readers ask

What is RevPAB in student accommodation?

Revenue per available bed: rent actually collected divided by the number of beds times the weeks in the period. It combines occupancy and the achieved rate in one figure, the student housing equivalent of RevPAR in hotels. On the example scheme occupancy of 96.1 per cent times an achieved rate of £190.26 gives an academic-year RevPAB of £182.93.

Should RevPAB be measured over 44 or 52 weeks?

Either, if it is stated. The academic basis, 44 weeks, measures the letting business; the full-year basis, 52 weeks, includes longer tenancies and summer income and is the one that ties to annual net operating income. Here they give £182.93 and £174.43. Comparing one scheme's figure on one basis with another's on the other is the error to avoid.

Why is RevPAB lower than the rate card times occupancy?

Because the rate card is not what is collected. Incentives such as cashback and discounts, and rent that is never paid, come off before RevPAB. In the example the rate card times occupancy gives £193.98, while the collected figure is £182.93, 5.7 per cent lower; 4 per cent incentives and 1.5 per cent bad debt account for most of the gap.

Also on this site

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