What is RevPAR in Real Estate?

RevPAR, short for Revenue Per Available Room, is a key performance metric commonly used in the hospitality sector of real estate—particularly for hotels. It measures how effectively a hotel (or lodging property) generates revenue based on the number of rooms it has available.

How It’s Calculated

There are two primary ways to calculate RevPAR:

RevPAR = Total Room Revenue ÷ Total Number of Available Rooms
RevPAR = Average Daily Rate (ADR) × Occupancy Rate

Where:

Total Room Revenue is the total income from room sales (excluding other services like food, beverage, or spa services).
Average Daily Rate (ADR) is the average amount of money paid per occupied room per day.
Occupancy Rate is the percentage of rooms occupied over a given period.

Why It Matters

Performance Indicator: RevPAR offers a clear snapshot of how well a hotel is performing in terms of revenue generation relative to its capacity.
Benchmarking: Hotel owners, operators, and investors use RevPAR to compare properties across a market or within a portfolio, helping them understand whether a specific hotel is underperforming or outperforming its competitive set.
Profitability Insights: While RevPAR doesn’t directly account for costs, a rising RevPAR often signals increased demand and/or an ability to charge higher room rates—both of which can lead to improved profitability.

Practical Example

Suppose a hotel has 100 rooms, and 80 of them are occupied at an ADR of $150 per night.
The occupancy rate is 80%, and the ADR is $150.

Alternatively, if the hotel collected $12,000 in total room revenue that night:

Either way, the hotel’s RevPAR for that day is $120.

Summary

RevPAR is a straightforward yet powerful metric for hotel owners, operators, and investors within the real estate sphere. By focusing on the revenue earned relative to all available rooms, RevPAR helps stakeholders evaluate how well a property is leveraging its capacity and room rates to maximize overall performance.

What is RevPAR in Real Estate?