RevPAR

RevPAR measures how much room revenue each room you could have sold brought in. An empty room still counts in the denominator. That is the whole point: it rewards filling rooms and charging well at the same time.

For a stay business with no rooms in the usual sense, the idea carries over. AirDNA, a vacation rental data provider, uses the same acronym for revenue per available rental.

Four nearby terms are easy to mix up with it:

• Average daily rate (ADR): room revenue divided by rooms sold. It ignores the rooms you did not sell, so it can rise while RevPAR falls.
• Occupancy rate: rooms sold divided by rooms available. It counts nights, not money.
• TRevPAR: total revenue per available room, from every department, rooms included. RevPAR counts the rooms line only.
• GOPPAR: gross operating profit per available room. It is a profit measure; RevPAR is a revenue measure.

The formulas below follow our Tourism Revenue Advisor. Its file states the core one as “RevPAR = room revenue / rooms available for the same period”.

The formulas

• RevPAR = [room revenue in the period] ÷ [rooms available in the period]
• RevPAR = [ADR] × [occupancy, expressed as a decimal], when both come from the same period and the same room count
• Net RevPAR = ([room revenue in the period] minus [identified acquisition costs in the same period]) ÷ [rooms available in the period]

Rooms available means every room you could sell, counted night by night across the period. A room that sat empty still counts.

Reading a change in RevPAR: three steps

A RevPAR figure on its own tells you little. The useful question is why it moved since last time. This page sorts the answer into three steps, built for a small hotel, guest house or vacation rental.

1. Same denominator. Compare periods only when rooms available are counted the same way in both. A room closed for repairs, a new unit or a longer month changes the denominator, not your performance. Compare like seasons too, so seasonality does not pass for progress.
2. Which factor moved. Split the change into ADR and occupancy. Our Tourism Accountant puts the link this way: “so ADR × occupancy reconciles to RevPAR when inputs match.” Name the factor that moved, because each one points to a different next check: – Rate-led rise (ADR up, occupancy flat or down): you earned more per night sold. Check whether nights you used to fill went unsold. – Occupancy-led rise (occupancy up, ADR flat or down): you sold more nights. Go to step three and find out what those nights cost to win. – Both rise (ADR and occupancy up): price and demand moved together. Check in step three what the extra nights cost before you credit the rate. – Flat RevPAR: look anyway. A rate rise and an occupancy fall can cancel out while your business changed.
3. Net of acquisition cost. Recompute with net RevPAR. Our Tourism Revenue Advisor’s rule: “Net RevPAR = (room revenue − identified acquisition costs) / available rooms; state exactly which costs were deducted.” Then weigh the result. The same file adds that “An OTA can add incremental demand”, so judge each channel on what it leaves you, not on its name.

For tours and attractions, our advice is to count seats per departure as available units. The OTA Channel Management Expert’s file adds: “For non-room products, adapt the unit economics to tour capacity and contribution per booking.”

An illustrative example (not a real business)

A family-run guest house compares this spring with last spring. RevPAR is up, and the owner wants to know why before setting next season’s rates.

• Step one, same denominator. The rooms counted are the same in both springs. The comparison holds.
• Step two, which factor moved. The average rate held level. The rise came from occupancy: more nights sold.
• Step three, net of acquisition cost. Most of the extra nights came through an online travel agency. After that commission, net RevPAR rose much less than RevPAR did.
• The decision. The owner keeps the rate and tests a direct-booking offer for returning guests before the next season. The test names its dates, the guests it targets and the point at which to stop it.

RevPAR joins price and occupancy in one figure, which makes it a fair test of a pricing decision. A rate increase that empties rooms shows up. So does a discount that fills rooms but drags the average rate down.

It also has blind spots. It counts revenue before commissions and costs, so a channel that sells many nights at a high fee can lift RevPAR while your margin stays put. Our Tourism Accountant checks “that reported RevPAR is revenue-based rather than profit-based.”

The denominator can mislead as well. Take a room out of the count for a month and RevPAR rises even if sales stay the same. Before you act on a RevPAR change, run the three steps.

1. Fix your period and room count. Write down how you count rooms available, including closed rooms, and keep that rule.
2. Pull three figures per period. Room revenue, rooms sold and rooms available. ADR, occupancy and RevPAR all follow from them.
3. List your acquisition costs by channel. Commission, payment fees and any booking-linked marketing. Say which ones you deduct.
4. Compare like with like. This month against the same month last year, then run the three steps.
5. Review no-shows and cancellations. No-shows and late cancellations change occupancy and revenue, so read them next to RevPAR.

How we help. The Tourism Revenue Advisor lists among its tasks diagnosing “low RevPAR, high commission, occupancy pressure”. The Tourism Accountant reconciles ADR and occupancy to RevPAR. The OTA Channel Management Expert compares channels by net contribution. The Hotels Specialist designs and costs hotel packages and offers, and defines RevPAR with its period and source.

Apply it with your AI assistant. Copy this into the assistant you already use: