How is RevPAR calculated?

RevPAR, which stands for Revenue Per Available Room, is an important metric used in the hotel industry to assess a property’s ability to generate revenue from its available room inventory. The correct calculation for RevPAR is derived by dividing total room revenue by the total number of available rooms. This formula effectively provides insight into how well a hotel is performing in terms of revenue generation relative to its room capacity.

When total room revenue is divided by the total available rooms, it allows hoteliers to understand the average revenue that is generated from each available room, regardless of occupancy levels. This is essential for assessing performance because it incorporates both the factors of occupancy and room rates in a single measure. Higher RevPAR indicates better income generation from the same number of available rooms, making it a critical metric for evaluating hotel performance more comprehensively than either occupancy rate or average daily rate alone.

The other calculations presented do not accurately define RevPAR in accordance with industry standards, as they either misrepresent the variables involved or provide lesser-known metrics that do not directly relate to the calculation of revenue generated per available room. By focusing on the relationship between total room revenue and available rooms, the chosen method gives the clearest picture of hotel performance in a competitive landscape.