What is RevPAR? The formula, a worked example, and what it hides

A hotel's RevPAR can climb on the month-end report and get read out as good news in the ops meeting, when the only thing that actually happened is that more rooms sold through an OTA at a steeper discount, and once that channel takes its commission, the hotel banked less revenue per available room than the month before. Nobody in that meeting is lying. RevPAR is doing exactly what RevPAR does: blending occupancy and rate into one number, and saying nothing about what that revenue cost to bring in.

TL;DR: RevPAR (Revenue Per Available Room) is rooms revenue divided by available rooms, or equally, occupancy multiplied by average daily rate (ADR). Both formulas always agree, worked through here on a fictional 80 room hotel so the arithmetic is checkable. What RevPAR does not tell you is whether occupancy or rate drove the move, what the revenue cost to acquire, or anything a guest spent beyond the room. This piece covers the formula and worked example, a failure mode where discounted OTA occupancy pushes RevPAR up while net revenue per room falls, net RevPAR (the number a marketing conversation should actually be using), TRevPAR briefly, and when RevPAR is the wrong number to reach for.

This is written for the independent hotelier, or the revenue or marketing hire still nodding along when RevPAR comes up in a meeting, who wants the version that goes past the textbook line: what it measures, how to work it out, and where it stops being useful. It is an explainer, not a revenue-management manual.

What RevPAR actually measures, in plain terms

RevPAR stands for Revenue Per Available Room: rooms revenue for a period divided by the rooms available to sell in that period, whether they sold or not. An 80 room hotel open for 30 nights had 2,400 room nights available, full stop, regardless of how many it filled.

The equivalent way to reach the same number is occupancy multiplied by average daily rate (ADR, the average price of a room actually sold). Both routes produce identical results, because one divides total revenue by total room stock and the other multiplies the share of rooms sold by the average price those sold rooms achieved.

RevPAR earns its place because it cannot be improved just by raising the price and watching occupancy collapse, or by dropping the price and filling every room at a rate that barely covers the electricity. It punishes both extremes, which is also why a single RevPAR figure never says which of those situations you are actually in.

The arithmetic, on a fictional 80 room hotel

Take a fictional 80 room hotel (illustration only, not a real property) for a 30 night month: available room nights 80 x 30 = 2,400.

Say occupancy for the month is 75%, meaning 1,800 of those room nights sold, at an average rate of £120.

Rooms revenue: 1,800 x £120 = £216,000. RevPAR by the first formula: £216,000 divided by 2,400 available room nights = £90. RevPAR by the second formula: 75% occupancy multiplied by £120 ADR = £90.

Both routes land on the same £90, as they always will. That figure says the hotel earned an average of £90 for every room it had to sell that month, sold or not. It says nothing about whether that £90 came from a high rate on fewer rooms or a low rate on nearly every room, and that gap is where most of the misreading of RevPAR happens.

Why RevPAR moving does not tell you what actually happened

Because RevPAR is occupancy multiplied by rate, the same figure can come from wildly different pictures. Our fictional hotel's £90 could equally be 90% occupancy at £100 ADR, or 60% occupancy at £150 ADR, or the 75% at £120 it actually was, and each of those is a different business with a different cost base reporting the identical £90.

That is the first thing I would want checked whenever RevPAR is presented as a headline result: whether the movement was an occupancy story or a rate story. A rise built on rate discipline, selling roughly the same number of rooms for more, is a genuinely different outcome to one built on chasing occupancy at a lower rate, and both can be the right call depending on the season. Neither is visible in RevPAR itself, so occupancy and ADR need checking separately before a move is worth celebrating.

The failure mode: an OTA discount dressed up as a RevPAR win

This is the version worth watching for, because it catches out revenue teams precisely by looking like good news: RevPAR goes up on the month, gets reported as a win, and nobody checks what actually drove it until the P&L lands looking worse than the headline suggested.

Stay with the fictional 80 room hotel. Last month: 900 room nights sold direct at £120, no commission, and 900 more through an OTA also at £120, on which the OTA takes an 18% commission for this illustration. That is 1,800 room nights, 75% occupancy, £216,000 gross rooms revenue, RevPAR £90. After the OTA's £19,440 commission, net rooms revenue is £196,560: net RevPAR £81.90.

This month, the team wants occupancy up, so more rooms go onto the OTA at a discount. Direct bookings fall to 600 room nights; some of that demand simply found the cheaper OTA rate instead. Still at £120, that is £72,000. The OTA now sells 1,560 room nights at a discounted £95, for £148,200 gross; at 18% commission that is £26,676 to the OTA, leaving £121,524 net.

Total occupied room nights: 600 plus 1,560 is 2,160, an occupancy jump from 75% to 90%. Total gross rooms revenue is £220,200. RevPAR: £220,200 divided by 2,400 is £91.75, up nearly 2% on last month, exactly the kind of number that gets applauded in a meeting.

But total net revenue is £193,524 (£72,000 plus £121,524), a net RevPAR of £80.64, lower than last month's £81.90. Occupancy jumped fifteen points, RevPAR rose, and the hotel still banked less per available room once the discount and the commission were accounted for. Nobody lied; the report simply had no line for the cost of the channel it arrived through.

What RevPAR ignores, and the net RevPAR number that fixes it

RevPAR is calculated on gross rooms revenue and has no concept of how that revenue arrived, so a hotel selling almost everything direct and a hotel selling almost everything through a commissioned OTA can post an identical RevPAR while keeping very different amounts of it. The number that belongs in a conversation about marketing spend, or about reducing OTA reliance, is net RevPAR: the same calculation run on rooms revenue after distribution costs, divided by the same available rooms. On the illustrative hotel above, that is the difference between £81.90 last month and £80.64 this month, a gap gross RevPAR hides completely.

A guest books through an OTA when the direct site gives them no reason not to and the rate looks the same either way. No guest, at that moment, is thinking about the hotel's RevPAR; the decision goes to whichever channel feels safest and cheapest right then, and it shows up, weeks later, as the gap between gross and net RevPAR. How independent hotels can reduce reliance on OTAs and increase direct bookings covers what actually shifts that mix; marketing spend aimed at direct bookings should be judged against the net RevPAR it protects, not the gross figure. Measuring hotel ad performance is where I would start on tying that spend to an actual number.

TRevPAR, briefly: the number that goes wider still

One step beyond net RevPAR is TRevPAR, Total Revenue Per Available Room: every revenue line the property earns, not just rooms (food and beverage, spa, parking, meeting space, anything tied to the stay) divided by available rooms. HFTP, the association behind the industry's standard accounting reference, defines it as total net revenues divided by total available rooms, and treats it as the figure owners and GMs actually use to judge overall performance, because a room only number can look flat while ancillary spend is doing all the work, or the other way round.

TRevPAR matters more to an owner's P&L conversation than to most marketing decisions; I would only reach for it when the question is genuinely about total property performance, not the booking itself. For a channel or campaign conversation, net RevPAR is almost always the more useful of the two.

When comparing your RevPAR to someone else's tells you nothing

RevPAR benchmarking against a nearby hotel, or a market average, is one of the most common ways this number gets misused. Room mix drives RevPAR before strategy does: a mostly-suites property will outearn a mostly-standard-doubles one on RevPAR alone, regardless of how well either is run. Market position does the same: a resort hotel with strong seasonal demand and a year round business hotel are not comparable on a single RevPAR figure, because the demand curve underneath each is a different shape entirely.

The comparison that means something is your own hotel's RevPAR against its own history, segmented by the same room type and the same period last year, not a same-market average that blends properties with a different room mix, star rating and guest profile into a number that describes none of them accurately.

When a monthly RevPAR hides the number that should set your price

A monthly RevPAR figure is an average, and averages smooth over the pattern that actually matters for pricing. A hotel full and commanding a premium every Friday and Saturday, and half empty midweek, can post a respectable monthly RevPAR that no single night in that month actually experienced. Pricing decisions made off that monthly number end up underpricing the weekend, because the average pulled it down, or overpricing a midweek night the average made look stronger than it was.

The fix: read RevPAR, occupancy and ADR by day of week, not only by month, before setting or reviewing rate strategy. Whichever category of revenue management system a hotel uses will almost certainly hold that daily data; the point is to actually look at it segmented rather than accept the monthly roll-up as the whole picture.

What I would actually watch, and how the numbers fit together

None of this makes RevPAR a bad metric. It is a genuinely useful one-line summary of rooms performance, and every owner, GM and OTA account manager will keep using it, so it is worth understanding properly rather than dismissing. RevPAR is a diagnostic starting point, not a scoreboard: it tells you something moved, and the next question is whether that was occupancy or rate, whether it cost more to acquire than it earned, and whether the period is short enough to mean anything for pricing.

In the marketing conversations I have with hotel clients, the number that actually settles an argument is rarely RevPAR on its own. It is RevPAR read next to net RevPAR and channel mix over the same period, worth building into a regular report rather than working out from scratch each time. Our hotel marketing guide goes into how that reporting fits alongside the rest of a hotel's marketing, not just pricing.

If you want a second set of eyes on what your own RevPAR and net RevPAR are actually telling you, get a free audit and we will walk through it properly.