Financial Metrics · Intermediate level · 3 min read ·
What is RevPAR?
RevPAR (revenue per available room) is the room revenue generated, on average, by each available night, sold or not. It is calculated by multiplying ADR by occupancy. It combines price and demand in one number, which is why it is the most widely used indicator for comparing lodging businesses.
In 30 seconds
- RevPAR = ADR × occupancy, or room revenue ÷ nights available.
- Unlike ADR, it does count the empty nights.
- It lets you compare months or assets with different prices and occupancy.
Why should you care?
A high rate is no use if the place is empty, and filling it at giveaway prices isn't either. RevPAR shows the balance between the two.
- You compare two months even if one had more occupancy and the other a better price.
- You see whether a pricing strategy brought in more revenue or just changed the mix.
- You understand why a lodging business doesn't chase 100% occupancy at any price.
Think of it as what each theater seat brings in
If you divide what a showing sold by every seat in the room, filled or not, you know what each seat brought in. A full room at clearance prices and a half-full room at full price can bring in the same per seat. RevPAR does that math with nights.
How does RevPAR work?
- 1
Start from ADR
What was charged on average for each night sold.
- 2
Take occupancy
The percentage of available nights that were sold.
- 3
Multiply
ADR times occupancy gives the average revenue per available night.
- 4
Compare
Across equivalent months or assets, the higher RevPAR generated more revenue for each night it had to sell.
The formula
RevPAR = ADR × Occupancy = Room revenue ÷ Nights available
- ADR
- = average rate per night sold
- Occupancy
- = nights sold ÷ nights available
- Nights available
- = units × nights in the period
An example with numbers
Illustrative figures for 10 short-stay apartments in a 30-night month, unrelated to any project.
| Nights available | 300 |
|---|---|
| Nights sold | 225 |
| Occupancy | 75% |
| Room revenue | 49,500,000 pesos |
| ADR | 220,000 pesos |
| RevPAR | 165,000 pesos |
220,000 × 0.75 = 165,000, the same as 49,500,000 ÷ 300. Each available night, sold or not, generated 165,000 pesos of revenue on average.
Where do you see it at Circular Urban?
On the sheet of each lodging project in operation, the «How the operation is going» section shows average monthly RevPAR next to occupancy and ADR. In your portfolio, each participation's detail shows it month by month. These are figures from the actual operation, subject to the season and the project's performance.
- The sheet of projects in operation, in «How the operation is going»: Average monthly RevPAR.
- Your portfolio, in each participation's detail: Monthly REVPAR.
What changes in your finances once you get it
You see the whole picture
With one number you know whether price and demand moved for or against the operation.
You compare fairly
You can compare months with different pricing strategies without getting confused.
You remember it is revenue
RevPAR comes before costs and expenses; what is left shows up in profit.
Common mistakes
- Myth
RevPAR is the same as ADR.
- In reality
ADR spreads revenue over the nights sold only; RevPAR over every available night. They only match at 100% occupancy.
- Myth
If RevPAR goes up, profit goes up.
- In reality
Revenue per available night goes up. If costs grow faster, profit may not rise.
- Myth
The month with the most occupancy always has the best RevPAR.
- In reality
If it filled up by cutting the rate a lot, another month with less occupancy and a better price can have a higher RevPAR.
Test yourself
Month A had an ADR of 300,000 pesos at 60% occupancy. Month B, an ADR of 240,000 pesos at 80%. Which had the higher RevPAR?
Keep learning
Helps to know first
What comes next
This content is educational. Every participation carries risks inherent to the project, including the possibility of partial or total loss, and results are subject to each project's actual performance.
