RevPAR (Revenue Per Available Room)

RevPAR is the metric the hotel industry standardized on because it solves a problem that occupancy and ADR alone cannot. A hotel can run 90 percent occupancy at a discounted ADR and look strong on one metric; another hotel can run 65 percent occupancy at premium ADR and look strong on the other. RevPAR collapses both into a single number that captures total rooms-revenue productivity per unit of inventory. Two hotels with the same RevPAR are extracting the same revenue from each available room, regardless of how they got there.

The formula is straightforward. RevPAR equals total rooms revenue divided by total available room nights. A 100-key hotel with 30 days in the month has 3,000 available room nights. If rooms revenue for the month is $450,000, RevPAR is $150. The same number arrives by multiplying occupancy by ADR. If the hotel ran 75 percent occupancy at $200 ADR, RevPAR is 0.75 times $200, or $150.

STR is the industry standard for RevPAR reporting in the United States. Owners subscribe to STR competitive sets to benchmark their RevPAR against direct competitors. The RevPAR index, sometimes called the MPI, ARI, or RGI depending on which STR product is referenced, tells an owner whether they are gaining or losing share of the market RevPAR. A RevPAR index of 110 means the property is producing 10 percent more RevPAR than the competitive set average. An index below 100 means the property is underperforming the comp set.

Underwriters lean on RevPAR because it is the cleanest top-line growth assumption. Forward NOI starts with forward rooms revenue, and forward rooms revenue starts with forward RevPAR. A hotel investment underwriting model typically projects RevPAR growth year by year, then applies a flow-through assumption to translate each dollar of incremental rooms revenue into a dollar of incremental NOI. Flow-through is the lever; RevPAR is the input.

RevPAR mix matters as much as the absolute number. Two hotels with identical $150 RevPAR can have very different cash flow profiles. A property running 70 percent occupancy at $214 ADR carries different cost behavior than one running 90 percent occupancy at $167 ADR. The first has more pricing power and lower variable cost per occupied room; the second has more wear-and-tear, more housekeeping labor, and more food-and-beverage cover counts if the hotel has a restaurant. Underwriters look at the components, not just the headline.

RevPAR is a rooms-only metric. It does not capture food and beverage, parking, spa, resort fees, or ancillary revenue. For full-service and resort hotels where ancillary revenue can be 30 to 50 percent of the top line, TRevPAR (total revenue per available room) is the better full-picture metric. Most public REITs and STR reports lead with RevPAR because rooms is the largest and most comparable line, but full-service operators internally watch TRevPAR alongside RevPAR.