Tourism Economics
What Is RevPAR and Why Does It Matter?
RevPAR combines hotel room rates and occupancy into one performance metric, helping hotels measure how effectively their available rooms generate revenue—even when some remain empty.
Visitor Spending & Economic Impact • Tourism Economics Explained.
The Quick Answer
RevPAR, or revenue per available room, shows how much room revenue a hotel generates for every room it could have sold during a given period.
It can be calculated by dividing room revenue by available rooms or by multiplying the average daily rate by the occupancy rate. RevPAR is useful because it reflects both pricing and demand, but it does not measure total revenue, operating costs or profit.
How RevPAR Measures Hotel Room Performance
RevPAR stands for revenue per available room. It measures the room revenue a hotel generates relative to every room it had available—not merely the rooms guests actually booked. That distinction allows RevPAR to reflect both the price of sold rooms and the effect of empty inventory.
According to Cornell University’s hotel revenue-management program, hotels operate with relatively fixed capacity, perishable inventory and demand that changes over time. A room that remains empty tonight cannot be stored and sold twice tomorrow. RevPAR helps hotels evaluate how effectively they balance room prices with occupancy under those conditions.
There are two equivalent ways to calculate it. A hotel can divide its room revenue by the number of available room-nights, or it can multiply its average daily rate, known as ADR, by its occupancy rate. If a 100-room hotel sells 80 rooms for an average of $200, it earns $16,000 in room revenue. Dividing that by all 100 available rooms produces RevPAR of $160. Multiplying the $200 ADR by 80% occupancy produces the same result.
RevPAR matters because neither price nor occupancy tells the complete story alone. A hotel could charge high rates but leave many rooms empty, or fill almost every room only by offering heavy discounts. RevPAR combines both outcomes into one figure that can be tracked over time or compared with similar hotels. This is also why tourism forecasts sometimes use RevPAR to assess whether major events or changes in visitor demand are improving hotel performance.
However, RevPAR is a revenue metric—not a profit metric. It does not subtract wages, utilities, booking commissions or other operating expenses, and it normally excludes restaurant, parking, spa and event revenue. Cornell’s Nolan School of Hotel Administration has noted that an intense focus on RevPAR can sometimes conflict with an owner’s goal of maximizing profit. The metric is most useful when it is interpreted alongside costs, total revenue and comparisons with similar properties.
Tourism Economics in Practice
Imagine This…
Two 100-room hotels each charge an average of $200 per occupied room. Hotel A sells 80 rooms, while Hotel B sells only 50. Their advertised room prices look identical, but their revenue performance is not. Hotel A has RevPAR of $160, while Hotel B has RevPAR of $100. RevPAR exposes the difference created by occupancy.
The Formula
Two Ways to Calculate RevPAR
Both formulas produce the same result. The first begins with total room revenue; the second combines pricing and occupancy.
Formula One
Room Revenue ÷ Available Rooms
$16,000 in room revenue divided by 100 available rooms equals $160 RevPAR.
Formula Two
ADR × Occupancy Rate
A $200 average daily rate multiplied by 80% occupancy also equals $160 RevPAR.
Follow the Connections
Price, Occupancy and Revenue Move Together
RevPAR rises when hotels increase room rates without losing too much occupancy, increase occupancy without discounting too heavily, or improve both simultaneously. It can fall when demand weakens, when new hotel supply enters a market or when higher prices cause too many rooms to remain empty.
A Useful Distinction
RevPAR Is Not the Same as Profit
RevPAR Includes
Room revenue, room availability, average room rates and occupancy.
RevPAR Excludes
Operating expenses, booking commissions, restaurant revenue, parking, spa spending and most other hotel income.
Essential Points
Key Takeaways
RevPAR means revenue per available room.
It combines average room prices with occupancy performance.
Empty rooms affect RevPAR because the calculation includes all available rooms.
RevPAR measures room-revenue performance, not total hotel profitability.
Frequently Asked Questions
RevPAR FAQ
What does RevPAR stand for?
RevPAR stands for revenue per available room. It measures room revenue relative to all rooms available for sale during a particular period.
How do you calculate RevPAR?
Divide total room revenue by available room-nights, or multiply the hotel’s average daily rate by its occupancy rate.
What is the difference between ADR and RevPAR?
ADR measures the average room revenue earned from occupied rooms. RevPAR spreads room revenue across every available room, including those that remain empty.
Does higher RevPAR always mean higher profit?
No. RevPAR does not account for operating expenses, distribution costs or revenue from other hotel departments. Profit can fall even when RevPAR rises.
Why does RevPAR matter to destinations?
Changes in RevPAR can reveal how shifts in visitor demand, room supply and hotel pricing are affecting the lodging market, especially during major events or seasonal peaks.
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