RevPAR, ADR, TrevPAR: which one tells you what?
What each hotel performance metric actually measures, how they relate, and which one to look at for which decision — including the three most common misreadings.
Hotel finance is full of three-letter metrics. The problem is not the acronyms themselves but the confusion over which question each one answers.
ADR — Average Daily Rate
ADR = Room Revenue ÷ Rooms Sold
Measures: the average price of a room you sold. It is the outcome of your pricing policy.
Does not measure: how many rooms you sold. A hotel can sell one room and post an impressive ADR.
Targeting ADR alone is dangerous. Raise rates and lose occupancy and your ADR improves while your revenue falls. Making ADR a standalone bonus criterion pushes the sales team toward the wrong behaviour.
Occupancy
Occupancy = Rooms Sold ÷ Rooms Available
It carries the opposite risk: target occupancy alone and you will fill the hotel by discounting. Ninety-five per cent occupancy achieved by cutting ADR by thirty per cent is not a success.
RevPAR — Revenue Per Available Room
RevPAR = Room Revenue ÷ Rooms Available
= ADR × Occupancy
RevPAR resolves the tension between the two. Because it contains both rate and occupancy, it shows the net effect of discounting to fill, or holding rate and losing volume.
If you need one number to compare room-side performance, RevPAR is the right one.
Watch the denominator: it is rooms available, not rooms sold. If twenty rooms under renovation are not removed from availability, RevPAR comes out understated. In seasonal properties, how the closed period is treated also moves RevPAR substantially — when benchmarking, know which definition the other side uses.
TrevPAR — Total Revenue Per Available Room
TrevPAR = Total Revenue ÷ Rooms Available
RevPAR only looks at room revenue. In a resort, more than half of total revenue can come from food and beverage, spa and other lines. RevPAR systematically undervalues that property.
TrevPAR is interesting in a city hotel and essential in a resort. In an all-inclusive property, looking only at RevPAR means ignoring half the business.
GOPPAR — Gross Operating Profit Per Available Room
GOPPAR = GOP ÷ Rooms Available
Everything above is a revenue metric; none of them measures profitability. Grow TrevPAR by letting costs run and the metric improves while the hotel gets worse.
GOPPAR closes that gap: it measures what remains after operating expenses. For an owner or investor it is the single most meaningful figure.
Which question, which metric?
| Question | Metric |
|---|---|
| Is my pricing policy working? | ADR |
| Am I filling the hotel? | Occupancy |
| Where do I stand on the room side? | RevPAR |
| What is the property’s revenue power? | TrevPAR |
| Is the hotel making money? | GOPPAR |
| Is my department head managing well? | Departmental profit |
Three common misreadings
1. Treating a RevPAR increase as success. RevPAR moves with the market. If every hotel in the city is up 12% and you are up 8%, you lost ground. This is why RGI (RevPAR Generation Index) exists: your RevPAR over your competitive set’s RevPAR. Above 1.00 means you are gaining share.
2. Ignoring inflation. In a high-inflation environment, a nominal ADR increase may not be a real pricing win. Look at ADR in hard currency too: up 40% in local terms can be down in EUR.
3. Comparing against an annual average. In a seasonal property the annual average RevPAR represents neither high nor low season. Compare monthly, or at least by season.
When budgeting
None of these metrics should be typed into a budget. They all derive from volume and revenue assumptions:
Room nights → volume assumption
Room revenue → volume × rate
ADR → room revenue ÷ room nights
RevPAR → room revenue ÷ rooms available
Type ADR into the budget by hand and it will quietly go stale the moment someone changes the occupancy assumption — and nobody will notice. Derive the metrics; do not enter them.