RevPAR

RevPAR, or revenue per available room, is a standard metric in the hospitality industry used to assess how effectively a hotel is generating revenue from its entire room inventory. It reflects the combined impact of occupancy and pricing on room revenue and serves as a concise indicator of overall room performance.

Calculation can be done in two equivalent ways. One is to divide total room revenue for a given period by the number of available rooms in the same period. The other is to multiply the average daily rate (ADR) by the occupancy rate. For example, a 100-room hotel with an occupancy rate of 80% and an ADR of $150 would have a RevPAR of $120 (0.80 × 150 = 120). Equivalently, total room revenue would be 100 rooms × 0.80 × 150 = $12,000, and divided by 100 available rooms yields $120.

Interpretation and use: RevPAR provides a single measure of how well a hotel converts its capacity into room revenue, facilitating comparisons across properties and time periods. It is widely used by hoteliers, investors, and analysts to benchmark performance, monitor trends, and inform pricing and forecasting decisions. RevPAR does not, by itself, measure profitability, as it excludes non-room revenue and operating costs.

Limitations: RevPAR focuses on room revenue only and may be affected by changes in room mix, temporary closures, distribution channel strategies, or seasonal demand. It should be interpreted alongside other metrics such as ADR, occupancy, and gross operating profit per available room (GOPPAR) for a fuller picture of performance.