What is revenue per available room (RevPAR)?
Revenue per available room, commonly referred as RevPAR, is a metric used in the hotel industry to evaluate financial or business performance. It indicates how much revenue per room a hotel is generating on a given period of time. A key difference from average daily rate (ADR) is that RevPAR takes into account all rooms available in the hotel (total room capacity) not just the rooms that were sold.
How is revenue per available room (RevPAR) calculated?
There are two ways of calculating revenue per available room:
(1) RevPAR can be calculated by dividing room revenue by total room capacity of a hotel on a given period of time:
Total daily room capacity (size of the hotel): 100 rooms
* Total days available during the month of January: 31
= January´s total room capacity: 3,100 (100 * 31)
Room revenue for the month of January: 260,400
/ January´s total room capacity: 3,100
= RevPAR in January: 84 (260,400 / 3,100)
(2) RevPAR can also be calculated by multiplying the hotel´s occupancy rate by its average daily rate (ADR) on a given period of time:
Hotel occupancy in January: 80%
* Average daily rate (ADR) in January: 105
= RevPAR in January: 84 (0.8 * 105)
Why is revenue per available room (RevPAR) important?
Revenue per available room (RevPAR) is one of the most important revenue management indicators because it has a direct relationship with hotel room revenue. A % increase in RevPAR will result in an equivalent % increase in room revenue. Revenue per available room is a function of a hotel’s average rate and occupancy. On a high level, optimizing RevPAR consist in finding the right balance between price and occupancy rate that will yield the maximum room revenue for a hotel subject to customer demand.
It´s important to note that RevPAR is an indicator focused on revenue and does not provide any information about hotel profitability.