What RevPAR means
Hotels can fill every room by cutting prices, or charge high rates and leave rooms empty. Neither number alone shows how well the property is earning from its inventory. RevPAR combines both by spreading room revenue across every room the hotel could have sold, not just the ones it did sell.
CoStar, which runs the STR hotel benchmarking business, describes RevPAR as the main measure of top-line room performance and calculates it as room revenue divided by total rooms available. The same result comes from multiplying ADR by the occupancy rate, because occupancy is rooms sold divided by rooms available.
RevPAR is used to compare a hotel with its own past results and with a competitive set. CoStar's RevPAR Index (often called RGI) divides a hotel's RevPAR by the RevPAR of its chosen comparison group and multiplies by 100, so a score of 100 means the hotel is earning its fair share.
The metric has clear boundaries. It counts room revenue only, so food, beverage, parking and spa income are excluded, and it says nothing about costs. Related measures fill those gaps: TRevPAR spreads total revenue across available rooms, and GOPPAR uses gross operating profit instead of revenue. Revenue management teams usually read all three together.
How RevPAR works
RevPAR is worked out from three figures that every property management system already holds for a given night, week or month.
- Count rooms availableMultiply the number of rooms that could be sold by the number of nights in the period. Rooms taken out of service are usually excluded.
- Total the room revenueAdd up revenue from guestroom rentals only, leaving out restaurant, spa and other income.
- Divide revenue by rooms availableThe result is RevPAR for the period. Alternatively, multiply ADR by occupancy to reach the same figure.
- Compare over timeTrack the percentage change against the same period last year to see whether performance is improving.
- Benchmark against a comp setDivide the hotel's RevPAR by the comp set's RevPAR and multiply by 100 to get a RevPAR index.
RevPAR in practice
Illustrative example: a 200-room hotel in Dubai sells 160 rooms on a Tuesday night and earns AED 96,000 in room revenue.
- Occupancy = 160 ÷ 200 = 80%
- ADR = 96,000 ÷ 160 = AED 600
- RevPAR = 96,000 ÷ 200 = AED 480, which is also 600 × 0.80
Now suppose a nearby competitor with the same room count runs at 95% occupancy but discounts to an ADR of AED 450. Its RevPAR is AED 427.50. Despite selling more rooms, it earns less per available room than the first hotel. If the first hotel's comp set averages AED 450 RevPAR that night, its RevPAR index is 480 ÷ 450 × 100, or about 107. The figures are invented to show the arithmetic, not real market data.
Who uses it
Advantages and limitations
Advantages
- Combines price and occupancy in one number, so discounting that fills rooms but cuts revenue is easy to spot.
- Works in any currency and for any hotel size, which makes year-on-year and portfolio comparisons simple.
- Widely used across the industry, so benchmark data and comp-set reports use the same definition.
- Can be calculated daily from data already held in the property management system.
Limitations
- Ignores non-room revenue such as food, beverage, meetings and parking.
- Says nothing about costs, so a RevPAR gain driven by expensive distribution channels may not raise profit.
- There is no universal good RevPAR, because levels vary widely by market, class of hotel and season.
- Small differences in how rooms available are counted, for example rooms out of order, can distort comparisons.
Frequently asked questions about RevPAR
Is RevPAR or ADR more important for a hotel?
Neither tells the full story alone. ADR shows the average price paid for rooms that were sold, while RevPAR also reflects how many rooms stayed empty. Most revenue managers treat RevPAR as the headline measure and look at ADR and occupancy to understand what drove a change in it.
What is the difference between RevPAR and TRevPAR?
RevPAR uses room revenue only. TRevPAR (total revenue per available room) divides all hotel revenue, including food, beverage, spa and parking, by the same number of available rooms. TRevPAR suits resorts and full-service hotels where a large share of income comes from outside the rooms.
What does a RevPAR index of 100 mean?
A RevPAR index of 100 means a hotel's RevPAR equals the average of its competitive set, so it is earning its fair share of room revenue. Above 100 means it is outperforming those competitors, and below 100 means it is underperforming. The meaning depends on choosing a fair comp set.
Can RevPAR be higher than ADR?
No. Because RevPAR equals ADR multiplied by occupancy, and occupancy cannot exceed 100%, RevPAR can at most equal ADR. It only reaches ADR on a night when every available room is sold.
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