RevPAR, ADR and occupancy explained

Three numbers describe how a hotel is trading. They are simple to calculate and easy to misread, and most independent properties look at only one of them — usually the least useful.

Occupancy

Rooms sold ÷ rooms available.

If you have 20 rooms and sell 15 tonight, occupancy is 75%.

Occupancy alone tells you very little. You can fill a hotel every night by pricing badly, and a full hotel at the wrong rate makes less money than a three-quarters-full one at the right rate — while costing more in housekeeping, laundry and breakfast.

Use occupancy to understand demand patterns, not performance.

ADR — average daily rate

Rooms revenue ÷ rooms sold.

£1,425 of room revenue across 15 rooms sold gives an ADR of £95.

ADR measures what you achieved on the rooms you actually sold. It excludes empty rooms entirely, which is what makes it useful — and also what makes it dangerous on its own. A hotel selling three rooms at £200 has an excellent ADR and a bad night.

Note what belongs in it: room revenue only. Not breakfast, not the bar, not the car park. Mixing those in makes the number meaningless and incomparable.

RevPAR — revenue per available room

Rooms revenue ÷ rooms available. Or equivalently, ADR × occupancy.

£1,425 across 20 available rooms gives a RevPAR of £71.25. The same number from the other direction: £95 × 75% = £71.25.

RevPAR is the one to watch, because it is the only one of the three that cannot be improved by sacrificing the other. Raise rates and lose too much occupancy, RevPAR falls. Fill the hotel by discounting too hard, RevPAR falls. It rewards the balance rather than either extreme.

Reading them together

The first row is the trap most independents fall into, because occupancy is the number people feel. A full car park looks like success.

Where independents get the calculation wrong

Counting rooms you cannot sell. If two rooms are out for refurbishment for a month, most operators leave them in "rooms available", which depresses both occupancy and RevPAR. Decide a convention — usually exclude genuinely out-of-order rooms — and keep it consistent, because the comparison to last year is the whole point.

Including non-room revenue. Breakfast and bar takings belong in total revenue, not in ADR. Keep them separate or you cannot compare anything.

Ignoring commission. A £95 OTA booking at 15% nets £80.75. If you want to know what you actually earned, track net ADR alongside gross. For many independents that gap is the single largest item on the P&L after payroll — see what OTA commission really costs.

Averaging over the wrong period. A monthly figure hides everything. A hotel can have a fine month built from excellent weekends and dead midweeks — and the fix for dead midweeks is different from the fix for a generally weak month.

Two extra numbers worth having

TRevPAR — total revenue per available room, including food, beverage and everything else. For a property with a busy restaurant, RevPAR alone understates the business badly.

Net RevPAR — after commission and distribution costs. This is the number that tells you whether a channel is worth having, and it is the one most systems will not show you without some work.

How often to look

Weekly for the coming 30 days, so you can still act on it. Monthly against the same month last year, because hotel demand is seasonal and month-on-month comparisons are mostly noise.

If producing these takes more than a few seconds, that is a system problem rather than an analysis problem. The figures live in your PMS; assembling them in a spreadsheet means the report is stale before it is finished.

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