Revenue per available room (RevPAR) is the central performance metric in hospitality real estate, calculated as the average daily rate (ADR) multiplied by occupancy rate, or equivalently as total room revenue divided by total available room nights. RevPAR captures both pricing power and demand in a single figure: a hotel can increase RevPAR by raising rates (higher ADR), by filling more rooms (higher occupancy), or by finding the optimal balance between the two.
A 300-room hotel operating at 75% occupancy with a $200 ADR produces $150 RevPAR, the same result as 60% occupancy at $250 ADR, though the operational and strategic implications differ significantly.
ADR and occupancy individually are incomplete metrics. A hotel achieving 95% occupancy may be pricing too low and leaving revenue on the table; a hotel with a $400 ADR but 40% occupancy may be overpricing its market.
RevPAR resolves this tension. GOPPAR (gross operating profit per available room) extends the analysis to profitability by subtracting departmental expenses and undistributed operating expenses from total revenue before dividing by available rooms.
GOPPAR is the metric that asset managers and operators focus on because it captures both revenue management effectiveness and cost control, and it is the basis for incentive management fee calculations in most hotel management contracts.
STR (formerly Smith Travel Research) competitive set reports are the industry-standard benchmarking tool for hotel performance. Each hotel defines a competitive set of five to ten comparable properties against which its performance is measured.
The STR report produces three penetration indices: occupancy index (the hotel's occupancy relative to its comp set average), ADR index, and RevPAR index. An index above 100 means the hotel is outperforming its competitive set on that metric.
Institutional investors use STR data to assess whether a hotel's underperformance is property-specific (poor management, deferred maintenance) or market-wide (oversupply, demand decline), and whether the gap to comp set performance represents achievable upside under new ownership or management.
Hotel valuation is conducted on a going-concern basis, where the appraised value reflects the real estate, the furniture, fixtures, and equipment (FF&E), and the intangible business value of the operating enterprise as a single economic unit. This differs from most commercial property types, where the real estate is valued independently.
Trailing twelve-month RevPAR establishes current performance, but acquisition pricing typically relies on forward-looking RevPAR projections that account for supply pipeline (new hotel openings in the competitive set), demand drivers (convention centre expansions, airport passenger growth, corporate relocations), and the buyer's planned capital improvements. The gap between trailing and projected RevPAR is the most contested assumption in any hotel acquisition underwriting.