RevPAR

A key performance metric in the hospitality industry calculated by multiplying a hotel's average daily room rate by its occupancy rate.

Revenue Per Available Room (RevPAR) is a core performance metric used in the hospitality and lodging industries to evaluate operational health. Unlike simple occupancy rates or average daily rates (ADR) alone, RevPAR combines both variables to show how effectively a property fills its rooms and how much pricing power it commands. It is calculated either by multiplying a hotel's average daily room rate by its occupancy rate, or by dividing total room revenue by the total number of available rooms over a specific period. For investors, tracking RevPAR is essential when evaluating hotel real estate investment trusts (REITs) and global lodging brands. A rising RevPAR indicates either higher occupancy, stronger pricing power, or both, which typically translates directly to improved operating leverage and profitability. Because hotels have high fixed costs, incremental increases in RevPAR often flow directly to the bottom line. However, because RevPAR does not account for additional hotel revenue streams (such as food, beverage, spa services, or conference hosting) or the operational costs associated with running the rooms, it is best analyzed alongside other metrics. Investors often look at gross operating profit per available room (GOPPAR) or average daily rate (ADR) to get a complete financial picture and avoid misinterpreting a high RevPAR that might be offset by high operating expenses.

A hotel has 100 rooms. On a given night, 80 rooms are occupied (an 80% occupancy rate) at an average daily rate of $150. The RevPAR is calculated as $150 0.80 = $120. Alternatively, if the total room revenue for that night is $12,000, RevPAR is $12,000 / 100 rooms = $120.