What is RevPAR

What is RevPAR?

RevPAR stands for revenue per available room. It measures how much rooms revenue a hotel earns for every room it has available to sell, whether or not that room is occupied. Because it spreads revenue across all available rooms, not just the occupied ones, it captures both how full the hotel is and how much it charges in a single figure. That dual nature is why RevPAR is the headline performance metric across the hotel industry and the number lenders look at first when assessing trade.

This is a guide to a hotel performance metric, written for owners, buyers and operators. Understanding RevPAR helps you judge a hotel's trading health and, when you borrow against it, how a lender will read the numbers.

The RevPAR formula

There are two equivalent ways to calculate RevPAR, and both give the same answer.

1. Occupancy times ADR. Multiply the occupancy rate, the proportion of available rooms sold, by the average daily rate, the average revenue per occupied room.
2. Rooms revenue divided by available rooms. Divide total rooms revenue for a period by the number of available rooms over that period.

The period you measure over matters. RevPAR can be calculated for a night, a week, a month or a year, and a hotel's RevPAR over a quiet January looks very different from a peak August. To compare meaningfully, always use the same period and, ideally, the same period a year earlier, so you are reading like for like rather than mistaking seasonality for a change in performance. A few common mistakes distort the figure: mixing in non-room revenue, which belongs in TRevPAR not RevPAR; including taxes and fees that are not true room revenue; or blending several properties of different sizes into one number.

RevPAR versus ADR

ADR, the average daily rate, is the average revenue earned per occupied room. It tells you how much you charge but ignores how many rooms you actually sell. RevPAR includes the empty rooms, so it tells you how much you earn across the whole hotel. A hotel can have a high ADR but a poor RevPAR if occupancy is low, and a modest ADR can still produce a healthy RevPAR if the hotel is consistently full. That is why RevPAR is the better single measure of trading health: it stops a hotel from flattering itself on rate alone.

RevPAR versus GOPPAR and TRevPAR

RevPAR only counts rooms revenue. Two related measures widen the lens. TRevPAR, total revenue per available room, adds food, drink, events and other income, which matters for full-service hotels where rooms are only part of the story. GOPPAR, gross operating profit per available room, goes further and measures profit, not revenue, so it reflects how efficiently the hotel converts sales into operating profit. A hotel can grow RevPAR while GOPPAR stagnates if costs rise faster than revenue, which is why investors and lenders read RevPAR alongside GOPPAR and, ultimately, EBITDARM.

Another useful measure is the RevPAR index, sometimes called the revenue generation index, which compares a hotel's RevPAR with that of its competitive set. An index of 100 means the hotel is taking its fair share of the market; above 100 means it is outperforming its rivals, below 100 means it is lagging. The index is valuable because it separates a hotel's own performance from the market backdrop: RevPAR can fall across a whole city in a downturn, but a hotel holding an index above 100 is still winning more than its share, which is exactly what a buyer or lender wants to see.

What is a good RevPAR

There is no universal good RevPAR, because it depends on the market, segment and season. The honest benchmark is the local competitive set and the hotel's own trend. As a UK reference point, Knight Frank and HotStats reported London RevPAR of around 233 pounds, on occupancy of 87.5% and ADR of around 266 pounds, against regional UK RevPAR of around 98 pounds, on occupancy of 82.8% and ADR of around 118 pounds, in Q3 2025. A good RevPAR is one that beats the relevant competitive set and is rising over time.

PwC forecasts London RevPAR up 1.8% and regional RevPAR up 1.5% for 2026, so a hotel growing in line with or ahead of those figures is keeping pace with the market.

Why RevPAR matters to owners and lenders

RevPAR matters because it is the cleanest single signal of whether a hotel is winning. For an owner it shows, at a glance, whether revenue strategy is working: rising RevPAR means the hotel is filling rooms at a healthy rate, falling RevPAR is an early warning to investigate occupancy and pricing before profit suffers. For a lender or buyer it is the first number examined, because the trend in RevPAR over several years signals the resilience of the income that will service a loan. A hotel with steady or rising RevPAR through varied market conditions is a safer bet than one whose RevPAR swings sharply, even at a similar average.

Because RevPAR feeds directly into revenue, and revenue into GOPPAR and EBITDARM, it sits at the head of the chain that ultimately sets a hotel's value and its borrowing capacity. That is why the guides on valuation and on how much you can borrow keep returning to it. Improving RevPAR sustainably, rather than buying occupancy with deep discounts, is the single most effective way an operator can lift both the profit and the value of a hotel, and with them the finance available against it.

How to improve RevPAR

• Use dynamic pricing and yield management to lift ADR when demand is strong
• Drive direct bookings to reduce channel commission and protect net rate
• Reduce cancellations and set sensible minimum-stay policies in peak periods
• Improve the product and reviews to support a higher rate
• Smooth seasonality with events, corporate and group business

Lenders reward a rising RevPAR trend with higher leverage and keener pricing, because it signals a healthier, more resilient business.

What high and low RevPAR tell you

A high RevPAR signals that a hotel is both well occupied and well priced, the combination every operator wants, and usually points to a strong product, a good location and effective revenue management. A low RevPAR is a prompt to diagnose why: is occupancy weak, suggesting a demand or distribution problem, or is the rate weak, suggesting the hotel is discounting to fill rooms it could sell for more? The answer points to different fixes. RevPAR on its own does not tell you which lever to pull, which is why operators read it alongside the occupancy and ADR that make it up.

Neither a high nor a low RevPAR should be read in isolation. A high RevPAR achieved by slashing costs and letting the product slide will not last, and a low RevPAR in a hotel mid-refurbishment may be temporary. The trend over time, the comparison with the competitive set through the RevPAR index, and the flow-through into GOPPAR and EBITDARM together give the real picture of trading health, the picture a lender builds before sizing a loan.