ADR, occupancy and RevPAR, without the jargon
Three numbers run most hotel revenue conversations, and two of them can look fine while the business gets worse. This is what each one measures, how they relate, and what to look at when the third moves.
8 min read·
The three numbers
| Metric | What it measures | How it is calculated |
|---|---|---|
| Occupancy | How full you were | Rooms sold ÷ rooms available |
| ADR | What you charged for the rooms you sold | Room revenue ÷ rooms sold |
| RevPAR | What you earned per room you had | Room revenue ÷ rooms available |
The distinction that matters is the denominator. ADR divides by rooms you sold; RevPAR divides by rooms you had. A hotel that sells four rooms at a very high rate has a superb ADR and a poor RevPAR, and only one of those describes the business.
When RevPAR falls, ask which half moved
A RevPAR decline is either a rate problem or a volume problem, and they have opposite fixes. Discounting into a volume problem sometimes works. Discounting into a rate problem makes it worse and takes months to unwind, because the channels remember.
- 1Compare occupancy against the same period last year. If it held, the loss is rate.
- 2Compare ADR the same way. If it held, the loss is volume.
- 3If both fell, look at whether a segment disappeared — one corporate account or one tour operator can account for the whole gap.
- 4If neither fell but RevPAR did, check rooms available. Rooms out of order shrink the denominator, which flatters occupancy and ADR while RevPAR tells the truth.
That fourth case is the one people miss. Twelve rooms out for refurbishment will make your occupancy look like the best month you have had.
Why ADR alone is a poor target
ADR rewards refusing business. A revenue manager held to ADR can improve it by declining every discounted booking, and will hand you a record ADR and an empty hotel.
It also ignores everything the guest spends after check-in. A room sold at a lower rate to a guest who eats in the restaurant and books the spa can be worth more than a higher-rated room-only booking. If your F&B is a real business rather than a breakfast obligation, ADR is measuring a fraction of the decision.
Total revenue per available room
TRevPAR divides total revenue — rooms, food, beverage, spa, meeting space — by rooms available. It is harder to calculate and harder to compare with other properties, and for a hotel with meaningful non-room revenue it is the more honest number.
The practical use is not benchmarking against anyone else. It is comparing a segment against itself: the group that fills your banquet space at a low room rate may be your most profitable business, and a rooms-only view will show you the opposite.
Comparing against the right thing
- Same period last year, not last month. Hotel demand is seasonal and day-of-week patterned, so month-on-month mostly measures the calendar.
- Same day of week. A Tuesday compared against a Saturday tells you nothing.
- Adjust for anything that moved — a festival that shifted date, a conference that came or went, a competitor that opened or closed.
- Watch the pace, not just the outcome: how much of next month is already on the books compared with the same point last year.
What this does not tell you
None of these three is a profit measure. A RevPAR gain bought with a channel that charges twenty per cent commission can lose money against a lower rate booked direct. Before treating a RevPAR movement as good news, check what it cost to acquire — which means knowing your commission terms and where the booking came from.