HotelHinge · Hotel transaction intelligence
RevPAR, ADR & Occupancy: The Hotel Metrics That Move a Deal
Quick answer: RevPAR (revenue per available room) is the single best summary of hotel performance. It equals ADR times occupancy, or equivalently rooms revenue divided by available room nights. ADR is the average daily room rate, occupancy is how full the hotel runs, and together they flow into net operating income, and therefore into value.
A hotel is an operating business wrapped in real estate, so its value follows what it earns. Three operating metrics describe how the rooms business is doing: occupancy, ADR, and RevPAR. They are simple to compute and easy to misread, and they sit directly upstream of every valuation number a buyer cares about. This guide defines each one cleanly, shows the math on a hypothetical property, and connects them to net operating income and value. All figures below are illustrative.
Occupancy: how full the hotel runs
Occupancy is the share of available rooms that were actually sold over a period. The formula is rooms sold divided by rooms available:
Occupancy = rooms sold / rooms available
Take a hypothetical 100-room hotel over a single night. If it sells 75 rooms, occupancy is 75 / 100 = 75 percent. Over a longer period you use room nights: across a 30-night month, that same hotel has 100 × 30 = 3,000 available room nights, and if it sells 2,250 of them, occupancy is again 75 percent. Occupancy tells you about demand and volume, but it says nothing about price, which is where ADR comes in.
ADR: the average daily rate
ADR (average daily rate) is the average price of the rooms that were sold. It is room revenue divided by the number of rooms sold, so unsold rooms are excluded entirely:
ADR = room revenue / rooms sold
Continuing the hypothetical, suppose the hotel sells those 2,250 room nights in the month and collects $337,500 in room revenue. ADR is $337,500 / 2,250 = $150. Note that ADR ignores the empty rooms by design, so a hotel can post a strong ADR while running half empty. That blind spot is exactly why RevPAR exists.
RevPAR: rate and volume in one number
RevPAR (revenue per available room) folds rate and occupancy together. There are two equivalent ways to calculate it:
- RevPAR = ADR × occupancy
- RevPAR = rooms revenue / available room nights
Both give the same answer. Using the hypothetical: ADR × occupancy = $150 × 0.75 = $112.50. The other way: rooms revenue divided by available room nights = $337,500 / 3,000 = $112.50. Same number, $112.50. The difference between ADR ($150) and RevPAR ($112.50) is the cost of the empty rooms, and that gap is what occupancy controls.
Why RevPAR matters
RevPAR is the most-watched hotel metric because it captures both levers at once. A hotel can grow RevPAR by raising rate, by filling more rooms, or by doing both, and RevPAR rewards whichever path actually adds revenue per room of capacity. That makes it far harder to flatter than ADR or occupancy alone: a manager cannot juice ADR by selling only the most expensive rooms, or chase occupancy by discounting, without the tradeoff showing up in RevPAR.
Analysts also compare a hotel's RevPAR to its competitive set, the cluster of nearby hotels it competes with. That comparison, often called a RevPAR index or market penetration, shows whether a property is winning or losing share against its direct peers rather than just moving with the broader market. We do not publish index figures here, because a credible index depends on the specific comp set, but the concept is simple: a property running above its competitive set is taking more than its fair share of the available room revenue.
How the metrics roll up to value
These metrics are not trivia, they are the first link in the valuation chain. RevPAR multiplied by available room nights gives rooms revenue. Add food, beverage, parking, and other departments to reach total revenue. Subtract operating expenses and you arrive at net operating income (NOI). Capitalize NOI at a market cap rate and you have an estimate of value. The full math, with worked examples, is in How to Value a Hotel, and the cap rate step has its own deep dive in Hotel Cap Rates Explained.
A profitability cousin worth knowing is GOPPAR (gross operating profit per available room), which divides gross operating profit by available rooms rather than revenue. Where RevPAR measures top-line room performance, GOPPAR reflects how efficiently the hotel converts that performance into profit, so two hotels with identical RevPAR can post very different GOPPAR.
| Metric | Formula | What it tells you |
|---|---|---|
| Occupancy | Rooms sold / rooms available | How full the hotel runs (volume) |
| ADR | Room revenue / rooms sold | The average price of a sold room (rate) |
| RevPAR | ADR × occupancy, or rooms revenue / available room nights | Rate and volume combined per available room |
| GOPPAR | Gross operating profit / available rooms | How efficiently performance becomes profit |
Reading these three numbers is one step in a larger underwriting process. The full sequence, from sourcing to financing, is laid out in How to Buy a Hotel.
Frequently asked questions
What is RevPAR?
RevPAR stands for revenue per available room. It is the room revenue a hotel earns divided by all of its available room nights, whether those rooms were sold or not. Because it blends rate and occupancy into a single figure, RevPAR is the most common one-number summary of how a hotel is performing.
How is RevPAR calculated?
There are two equivalent ways. You can multiply ADR by occupancy (average daily rate times the share of rooms sold), or you can divide rooms revenue by available room nights (rooms in the hotel multiplied by nights in the period). Both methods give the same number.
What is the difference between ADR and RevPAR?
ADR (average daily rate) measures price alone: it is room revenue divided by the rooms actually sold, so empty rooms are ignored. RevPAR measures price and volume together: it divides room revenue by every available room, so it falls when occupancy falls. A hotel can have a high ADR and still post a weak RevPAR if it runs mostly empty.
Is a higher RevPAR always better?
Higher RevPAR is generally better, but it is not the whole story. Two hotels can reach the same RevPAR with very different mixes of rate and occupancy, and a high-occupancy hotel can carry higher variable costs, so it may convert less of each revenue dollar into profit. RevPAR measures top-line room performance; profitability metrics like GOPPAR and NOI tell you what actually drops to the bottom line.