Revenue per Available Room (RevPAR)

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Revenue per Available Room (RevPAR)

Revenue per available room (RevPAR) is a core performance metric in the hospitality industry. It measures how well a property fills its available rooms at an average rate and is widely used to benchmark performance over time and versus competitors.

Key points

  • RevPAR reflects revenue generated per available room, whether occupied or not.
  • It does not measure profitability or account for expenses.
  • Use RevPAR together with other metrics (GOPPAR, ARPAR, TRevPAR) for a fuller picture.

What RevPAR measures

RevPAR answers: How much revenue does each available room generate on average? An increase in RevPAR indicates higher average room revenue, higher occupancy, or both — but does not guarantee higher profit.

How to calculate RevPAR

There are two equivalent methods:

  1. RevPAR = Total room revenue ÷ Number of available rooms
  2. RevPAR = Average daily rate (ADR) × Occupancy rate

Definitions:
* ADR (Average Daily Rate) = Total room revenue ÷ Number of rooms sold
* Occupancy rate = Number of rooms sold ÷ Number of available rooms

To convert daily RevPAR to longer periods: multiply daily RevPAR by the number of days in the period.

Example:
* ADR = $100, Occupancy = 90% → RevPAR = $100 × 0.90 = $90 per room per day.

Strategies to boost RevPAR

Improving RevPAR typically combines better pricing and higher occupancy:

  • Demand forecasting and dynamic pricing — raise rates during high demand, lower selectively during slow periods.
  • Revenue management systems — use automated yield-management to optimize rates and inventory.
  • Distribution mix optimization — balance direct bookings and OTAs to reduce commission costs while maintaining volume.
  • Minimum length-of-stay or packaging — require or incentivize longer stays to increase revenue per booking.
  • Upselling and ancillary offers — promote room upgrades, late checkout, or paid amenities to increase ADR and TRevPAR.
  • Improve guest experience and loyalty — repeat business and referrals support sustained occupancy and higher rates.
  • Technology and ease of booking — streamlined online booking, central reservations, and targeted email marketing increase conversions.

Alternatives and complementary metrics

RevPAR is valuable but incomplete. Common complementary metrics:

Limitations of RevPAR

  • Does not account for costs or profitability — a rising RevPAR can coincide with rising expenses.
  • Ignores hotel size and mix — two hotels with different sizes or room mixes can have misleading comparisons.
  • Can be influenced by pricing strategy and property positioning — high RevPAR is not always a desirable goal for budget or economy properties.
  • Benchmarking challenges — competitor occupancy and revenue data may not be fully available or comparable.

When to prioritize RevPAR

Aim to increase RevPAR when the goal is to maximize room revenue per available room, but align targets with your property’s strategic positioning (luxury vs. budget) and always interpret RevPAR alongside profitability metrics.

Conclusion

RevPAR is a simple, widely used indicator of room revenue efficiency. It’s most useful for tracking trends and comparing performance across time or locations. For strategic decision-making and accurate assessment of financial health, combine RevPAR with metrics that incorporate ancillary revenue and operating costs (TRevPAR, ARPAR, GOPPAR).