# Revenue per Available Room (RevPAR)

## What it is:

**Revenue per available room**, or **RevPAR** for short, is a ratio commonly used to measure financial performance in the hospitality industry. The metric, which is a function of both room rates and occupancy, is one of the most important gauges of health among hotel operators.

There are two ways to calculate RevPAR. The first formula is:

**Total Room Revenue in a Given Period, Net of Discounts, Sales Tax, and Meals---------------------------------------------# of Available Rooms in Same Period**

Alternately, the same figure can be arrived by calculating the following:

**Average Daily Room Rate x Occupancy Rate**

## How it works (Example):

Consider the following results from Company XYZ's latest quarter:

**Number of Rooms: 1000 Average Room Rate: $90 Average Occupancy Rate: 75% Total Room Revenue ((1000 rooms x $90/room x 75% occupancy) x 90 nights in the quarter): $6,075,000 **

Using the first formula and the information above, we can calculate that Company XYZ's RevPAR was:

**($6,075,000/90,000) = $67.50**

Using the second formula, we can arrive at the same answer:

**$90 per night x 0.75 = $67.50**

Therefore, we can conclude that Company XYZ generated approximately $67.50 in revenue per day from each of its hotel rooms.

## Why it Matters:

**RevPAR **is arguably the most important of all ratios used in the hotel industry. Because the measure incorporates both room rates and occupancy, it provides a convenient snapshot of a how well a company is filling its rooms, as well as how much it is able to charge.

It should be noted that RevPAR, by definition, is calculated on a per-room basis. Therefore, one company can have a higher RevPAR than another, but still have lower total revenues if the second firm manages more rooms.