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While filling every room is a major objective for most hosts and hoteliers, occupancy alone does not provide a complete picture of a business's financial health. To truly understand performance, industry professionals look to one specific metric: RevPAR.
Whether you are managing a boutique hotel in the Cotswolds or a portfolio of short-term rentals in London, RevPAR provides the most accurate snapshot of your operational health. It bridges the gap between how many guests you have and how much they are paying.
In this handy guide, we’ll cover:
- What is RevPAR?
- How RevPAR is calculated
- RevPAR, ADR and occupancy rate
- The importance of RevPAR for hoteliers
- Limitations of the metric
- RevPAR in vacation rentals and STRs
- How to improve RevPAR
- RevPAR benchmarks
- Conclusion
- Frequently asked questions
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What is RevPAR?
RevPAR stands for revenue per available room. It is a performance metric used across the hospitality and short-term rental (STR) industries to assess a property’s ability to fill its available rooms at a specific average rate.
Definition
At its simplest, RevPAR tells you how much money you make for every room you have available to sell, regardless of whether that room is occupied or empty. Unlike simple revenue figures, it accounts for the inventory you failed to sell, providing a more honest view of your performance.
Why the metric matters
In hospitality, your inventory is ‘perishable’. If a room stays empty on a Tuesday night, you can never sell that Tuesday night again. RevPAR captures this reality. It is the most effective way to measure the success of your revenue management strategy because it prevents you from being distracted by high occupancy at low prices, or high prices with no guests.
Combines occupancy and pricing into one KPI
The power of RevPAR lies in its duality. It combines two competing forces: occupancy (how many rooms are full) and pricing (the average rate paid).
If you have 100% occupancy but your RevPAR is low, it suggests you are leaving money on the table by pricing too low. Conversely, if your ADR (Average Daily Rate) is high but your occupancy is low, your RevPAR will suffer, suggesting your pricing is too aggressive for the current market.
How RevPAR is calculated
There are two primary ways to calculate RevPAR. Both lead to the same result, but they offer different perspectives on the data.
Formula 1: Total revenue ÷ total available rooms
This is the most direct method. You take the total room revenue generated in a specific period and divide it by the total number of rooms that were available to be booked during that same period.
Total Room Revenue / Total Available Rooms = RevPAR
Note: ‘Total revenue’ in this context usually refers specifically to the room rate, excluding extras like breakfast, spa treatments or parking.
Formula 2: ADR × occupancy rate
This formula is often preferred by revenue managers because it highlights the relationship between your price and your volume.
Average Daily Rate (ADR) x Occupancy Rate = RevPAR
To use this, you first need to know your ADR (total revenue divided by rooms sold) and your occupancy percentage.
Example of RevPAR
Let’s imagine you own a 20-unit short-term rental apartment block.
- Scenario A: You have 15 units occupied (75% occupancy). Your ADR is £150.
- Calculation: £150 (ADR) x 0.75 (Occupancy) = £112.50 RevPAR.
- Calculation: £150 (ADR) x 0.75 (Occupancy) = £112.50 RevPAR.
- Scenario B: You drop your price to £120 to attract more guests, and you fill 19 units (95% occupancy).
- Calculation: £120 (ADR) x 0.95 (Occupancy) = £114.00 RevPAR.
In this example, even though you lowered your price, your RevPAR increased. This indicates that the second strategy was more effective for generating total revenue from your available inventory.
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RevPAR, ADR and occupancy rate
To understand RevPAR, you must understand the two metrics that feed into it.
What is ADR (average daily rate)?
ADR measures the average rental income earned per occupied room per day. It does not account for empty rooms. It is a measure of your pricing power and the perceived value of your property.
What is occupancy rate?
Occupancy rate is the percentage of your total available rooms that are occupied during a specific timeframe. It is a measure of your market reach and the effectiveness of your marketing and distribution.
Why RevPAR gives a fuller picture
Looking at ADR or occupancy in isolation can be misleading. A 90% occupancy rate looks great on a spreadsheet, but if your ADR is so low that you aren't covering your variable costs, the business is failing. Similarly, a high ADR is a vanity metric if only one room is booked. RevPAR forces these two metrics to work together, giving you the ‘true north’ of your revenue performance.
Importance of RevPAR for hoteliers
For hotel owners and general managers, RevPAR is the benchmark used to justify investments, report to stakeholders, and adjust daily operations.
Evaluates pricing strategy
RevPAR helps you identify if your pricing is aligned with market demand. If your RevPAR is consistently lower than your competitors despite having similar facilities, it is a clear signal that your pricing or distribution strategy needs a rethink.
Benchmarks performance vs. competitors
In the hotel industry, tools like STR (Smith Travel Research, not short-term rentals!) reports allow hotels to compare their RevPAR against a ‘competitive set’ (comp set) of similar local properties. This allows you to see if a dip in revenue is a market-wide trend or a problem specific to your property.
Guides revenue management decisions
Should you offer a "stay 3 nights, pay for 2" discount? Should you increase your rates for an upcoming bank holiday? By tracking RevPAR, you can see the historical impact of these decisions and make data-driven choices for the future.
Limitations of RevPAR
While RevPAR is an essential metric, it is not perfect. Relying on it exclusively can lead to a narrow view of your business's financial health.
Excludes non-room revenue (F&B)
RevPAR only looks at the ‘sleep’ side of the business. For hotels with busy bars, restaurants, or conference facilities, RevPAR ignores a massive portion of the income. In these cases, managers often look at TrevPAR (Total Revenue Per Available Room).
Does not measure profitability
This is the most significant drawback. RevPAR does not account for the costs associated with running a room. It costs more to clean and service a room for a one-night stay than a seven-night stay. A property could have a high RevPAR but still be losing money due to high overheads or acquisition costs (like high commissions paid to Booking.com or Airbnb). To solve this, some use GOPPAR (Gross Operating Profit Per Available Room).
Varies by property size
RevPAR doesn't tell you the scale of the operation. A 10-room boutique hotel and a 500-room resort might have the same RevPAR, but their business models and total revenue are vastly different.
RevPAR in vacation rentals & STRs
While RevPAR originated in the hotel industry, it has become increasingly vital for short-term rental hosts and property managers.
Applies to available rental nights
In the STR world, you might not have 365 available nights. You might block out dates for maintenance or personal use. When calculating RevPAR for an STR, you must only use the nights the property was actually available for rent to get an accurate reflection of your performance.
Role of cleaning fees and dynamic pricing
In hotels, cleaning is an internal cost. In STRs, cleaning fees are often charged to the guest. When calculating RevPAR, most professionals exclude cleaning fees to ensure the metric reflects only the ‘rent’. Furthermore, the rise of dynamic pricing tools (like PriceLabs or Wheelhouse) has made RevPAR tracking essential for STR hosts to see if their automated price fluctuations are actually delivering better results.
Benchmarking STR performance
Platforms like AirDNA now provide RevPAR data for specific postcodes and property types. This allows hosts to see how their ‘revenue per night available’ compares to the Airbnb next door.
How to improve RevPAR
Improving RevPAR is the primary goal of any revenue manager. There are three main levers you can pull:
Increase ADR (pricing strategy)
If your occupancy is consistently above 85-90%, you have a problem with too much demand. This is the perfect time to increase your ADR. By raising your prices, your occupancy might drop slightly, but your RevPAR will likely increase because you are making more money from fewer guests (which also reduces wear and tear).
Boost occupancy (marketing, discounts)
If you have plenty of empty rooms, focus on occupancy. This might involve:
- Expanding your reach to more OTAs (Online Travel Agencies)
- Running targeted social media ads
- Implementing ‘length of stay’ discounts to encourage longer bookings
💡 Pro tip: Discover 101 ideas to promote your vacation rental property on social media
Enhance guest experience
This is the ‘long game’ for RevPAR – a better guest experience leads to better reviews; better reviews lead to a higher ranking on platforms like Google and Airbnb; a higher ranking allows you to charge a premium (higher ADR) while maintaining high demand (occupancy).
One of the most effective ways to enhance the guest experience is to eliminate friction. This is where Touch Stay comes in. By providing guests with a comprehensive, easy-to-use digital guidebook, you reduce the number of repeat questions your team has to answer. This doesn't just save you time; it makes the guest feel looked after and informed from the moment they book.
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Balanced revenue management
True RevPAR growth comes from finding the sweet spot. It is a constant cycle of monitoring market trends, adjusting prices, and ensuring your guest experience justifies those prices.
RevPAR benchmarks
What is a ‘good’ RevPAR? The answer is: well, it depends…
Why ‘good’ RevPAR varies
RevPAR is highly seasonal and location-dependent. A £150 RevPAR might be incredible for a rural B&B in January but disappointing for a central London hotel in June.
Interpreting performance relative to market
Instead of looking for a universal ‘good’ number, look at your RevPAR Index. This compares your RevPAR to the average RevPAR of your market.
- An index of 100 means you are performing exactly in line with the market.
- An index above 100 means you are "stealing" market share from your competitors.
Using comp sets (competitive sets)
To get an accurate benchmark, you must compare yourself to similar properties. If you manage a 3-bedroom luxury villa, your RevPAR should not be compared to a 1-bedroom budget flat. Select 5-10 properties that are your direct competitors and track your performance against them.
Key takeaways & summary
RevPAR is the most vital metric for any hospitality or short-term rental business because it provides a balanced view of both pricing and occupancy.
- It measures efficiency: it tells you how well you are using your available inventory.
- It guides strategy: it helps you decide when to raise prices and when to focus on marketing.
- It has limits: it doesn't include other revenue streams or operational costs, so it should be used alongside other KPIs like GOPPAR.
- Guest experience is the foundation: you cannot maintain a high RevPAR without a high-quality guest experience that drives positive reviews and repeat bookings.
By mastering RevPAR, you move away from guesswork and towards a data-driven approach to running your property. Whether you are looking to increase your nightly rates or fill those awkward mid-week gaps, RevPAR is the compass that will point you in the right direction.
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Frequently asked questions
