RevPAR is the Hallmark index of hotel revenue management because it is all encompassing; RevPAR incorporates both occupancy and ADR into one, easily digestible number. The RevPAR, or Revenue Per Available Room equation is as follows:
Room Revenue / Rooms Available for Sale = RevPAR
or
Occupancy % * ADR = RevPAR
RevPAR is so useful because it factors in the performance of both rooms sold and unsold, and is therefore a good measure of the hotel’s holistic performance. A way to think about RevPAR is to ask the question: ‘How much money is each room in the hotel making, regardless of whether it is occupied’?
There is no single number that indicates a good or bad RevPAR. An $80 RevPAR for an entire year may be stellar in certain markets, but terrible in others. RevPAR can be assessed and measured for any period of time; a hotel may average a $50 RevPAR on Sundays, have a Year-to-Date RevPAR of $75 and have a running 365 day RevPAR of $68. RevPAR is usually compared against a hotel’s Cost Per Occupied as a measure of profitability.
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