What is RevPAR? Hotel metric explained with examples

RevPAR to EBITDAR: the complete guide to hotel profitability metrics 

Picture this: You're preparing for the monthly meeting and looking forward to sharing the good news that revenue per available room (RevPAR) is up 15%. But then your accountant calls to say profit is down 3 percentage points. So much for feeling confident about your strategy. 

Welcome to the hotel management paradox: revenue growth doesn't always equal profitability. While your rooms were generating more revenue per available unit, operational costs, commission fees, and staffing expenses were eating into your bottom line faster than revenue could grow. This is why understanding both your revenue story and your profitability story is essential if you want to make decisions that improve your property's financial health. 

We’ll give you a head start by explaining the metrics and outlining eight practical strategies to get you back on the profitable path.  

Finances are overflowing with acronyms, so let’s deal with them first. 

Key hotel financial metrics

Revenue per available room | RevPAR

• Measures revenue generated per available room, regardless of occupancy.  
• Formula: Total Room Revenue ÷ Total Rooms Available.  
• Best for: Comparing properties, tracking performance trends, and evaluating pricing strategy.

Average daily rate | ADR 

• Average price per occupied room.  
• Formula: Total Room Revenue ÷ Rooms Sold.  
• Best for: Understanding pricing power, evaluating rate strategy effectiveness. 

Cost per occupied room | CPOR 

• Cost to service each room that’s occupied  
• Formula: Total Rooms Department Expenses ÷ Number of Occupied Rooms  
• Best for: Understanding how efficiently you’re running your rooms 

Total revenue per available room | TRevPAR  

• Includes all revenue sources: rooms, food and beverage (F&B), spa, parking  
• Formula: Total Hotel Revenue ÷ Total Rooms Available  
• Best for: Understanding overall property performance, evaluating amenity contribution 

Gross operating profit per available room | GOPPAR  

• Gross operating profit divided by available rooms  
• Formula: (Total Revenue - Operating Expenses) ÷ Total Rooms Available  
• Best for: Measuring operational efficiency, understanding true profitability 

Earnings before interest, taxes, depreciation, amortization and rent | EBITDAR  

• Core operational profitability excluding financing, and rent costs  
• Formula: Net Income + Interest + Taxes + Depreciation + Amortization + Rent 
• Best for: Comparing properties with different ownership structures, evaluating operational performance independent of financing decisions 

Understanding RevPAR: beyond the formula 

RevPAR tells you how effectively you're filling your rooms and at what price. It's the intersection of occupancy and rate—your property's ability to maximize both simultaneously.  

This performance metric has been the hospitality industry's gold standard for decades. But if you're only using it as a calculation you report monthly, you're missing its real power. 

How to calculate RevPAR: two methods explained 

There are two standard calculation methods, and while both produce identical results, each serves different purposes depending on the data you have available. 

Total Revenue Formula is the most straightforward method and the one most commonly used for reporting periods (daily, monthly, or annually). It answers the simple question: How much room revenue did we generate per available room during this period? 

The ADR x Occupancy Formula reveals the components driving your RevPAR, making it invaluable for strategic decision-making. It shows whether you're succeeding on the rate side, the occupancy side, or both—and where you might need to adjust. 

The examples below are for a period of thirty days. Of the 4,500 room nights available, 3,300 were sold. Total revenue for the period was $495,000. 

Critical calculation notes 

• Room revenue only: RevPAR calculations should include only accommodation revenue—not taxes, resort fees, F&B, parking, or other ancillary charges. These muddy the metric and make competitive comparisons meaningless. 
• Available rooms definition: Use your total room inventory for the period. If you have 200 rooms and you're calculating monthly RevPAR, that's 200 rooms × number of days. Don't subtract rooms under renovation or out-of-service unless they're permanently removed from inventory. 
• Time period consistency: Always compare RevPAR across like time periods. Compare January to January, not January to July. Compare weekdays to weekdays, weekends to weekends. Seasonal variations make cross-period comparisons misleading without context. 
• Express as currency: RevPAR is always expressed in currency (dollars, euros, pounds) per available room. Unlike occupancy (a percentage) or ADR (price per sold room), RevPAR represents actual revenue generation capacity per available unit. 

Real hotel example 

The Downtown Grand is an 180-room business hotel. Period is 30 days. 

• Total rooms available: 5,400 room nights 
• Rooms sold: 3,780 (70% occupancy) 
• Room revenue: $623,700 
• ADR: $165 

RevPAR: $623,700 ÷ 5,400 = $115.50 (or $165 × 0.70 = $115.50) 

RevPAR is a starting point 

The RevPAR-EBITDAR connection nobody mentions 

There’s an essential concept that many hotel management articles skip: you can improve RevPAR and still go bankrupt. Why? Because RevPAR only tells you about revenue, not profit. 

EBITDAR measures your hotel's core operational profitability. It strips away financing decisions, accounting treatments, and rent structures to answer one question: How well are you running this hotel? 

For hotel managers, EBITDAR is critical because: 

• It reveals true operational efficiency beyond revenue numbers 
• It enables fair comparisons between owned and leased properties 
• It shows whether revenue growth is sustainable or comes at too high a cost 
• It focuses on what you can control as an operator 

How RevPAR growth impacts EBITDAR 

The relationship between RevPAR and EBITDAR isn't linear. Increasing RevPAR by 10% doesn't automatically increase EBITDAR by 10%. Here's why: 

Variable costs rise with occupancy: Higher occupancy means more housekeeping, utilities, amenities, and labor. If you boost RevPAR through heavy discounting that drives occupancy from 65% to 85%, your additional revenue might be consumed by the cost of servicing 20% more rooms. 

Channel costs matter: A $150 ADR booked through an OTA at 18% commission nets you $123. The same room booked direct nets you $150. Your RevPAR looks identical, but your EBITDAR tells the truth. 

Rent is fixed regardless of RevPAR: If you're leasing your property, a $50,000 monthly rent payment doesn't change whether your RevPAR is $100 or $150. This is why EBITDAR excludes rent—it isolates operational performance from real estate financing decisions. 

Comparison: two hotels, same RevPAR, different profitability 

The Harbor Hotel (owned property) 

• 120 rooms, 75% occupancy, $160 ADR = $120 RevPAR 
• Total monthly room revenue: $432,000 
• Operating expenses: $280,000 
• No rent (owned property) 
• EBITDAR: $152,000 (35% margin) 

The Metro Inn (leased property) 

• 120 rooms, 80% occupancy, $150 ADR = $120 RevPAR 
• Total monthly room revenue: $432,000 (same as Harbor) 
• Operating expenses: $295,000 (higher due to more occupancy) 
• Rent: $65,000/month 
• EBITDAR: $202,000 (47% margin) 

Insight: Both properties have identical RevPAR, but Metro Inn's EBITDAR margin is 12 percentage points higher. Why? More efficient operations despite leasing the property. This is what EBITDAR reveals that RevPAR conceals. 

When you add rent back into Metro Inn's calculation, you see the property generates $202,000 in operational earnings before paying its $65,000 rent—demonstrating strong operational performance even with the lease obligation. 

The manager's decision framework 

Theory is helpful. Real decisions are harder. Here are three common scenarios hotel managers face, with the RevPAR-EBITDAR framework to guide your choices. 

Scenario 1: low occupancy, high ADR 

Situation 

• Current: 55% occupancy, $185 ADR, $101.75 RevPAR 
• Market RevPAR: $115 
• Problem: You're losing to competitors despite premium positioning 

Analysis 

Low occupancy with high ADR usually means you're overpriced for your market position, or your value proposition doesn't match your rate. However, don't immediately discount. First, calculate your CPOR. If your fixed costs are covered and each occupied room generates a positive contribution margin, you may be better off maintaining rates and investing in marketing to drive the right occupancy. 

Decision framework 

• If CPOR is below $60: Maintain rate, improve distribution 
• If CPOR is $60-$90: Strategic 5-8% rate reduction to test demand elasticity 
• If CPOR is above $90: Focus on increasing value (free breakfast, room upgrades) before dropping rates 

Scenario 2: high occupancy, low ADR 

Situation 

• Current: 88% occupancy, $95 ADR, $83.60 RevPAR 
• Market RevPAR: $92 
• Question: Should you raise rates and risk losing occupancy? 

Analysis 

High occupancy at low rates often indicates you're leaving money on the table—but not always. Calculate your EBITDAR margin first. If you're at 25-30% margins, your pricing may be optimal for your service level. If you're above 35% margins, you likely have pricing power. 

Decision framework 

• EBITDAR margin >35%: Test 8-12% rate increase on best available rate (BAR)  
• EBITDAR margin 25-35%: Gradual 3-5% increases, segmented by channel 
• EBITDAR margin <25%: Focus on cost reduction before rate increases 

Critical caveat: High occupancy stresses operations. If housekeeping quality is declining or the team is burning out, increasing rates and reducing occupancy to 78-82% often improves both guest satisfaction and EBITDAR. 

Scenario 3: shoulder season strategy 

Situation 

Shoulder season occupancy drops from 75% to 48%. Peak season RevPAR is $145; shoulder period drops to $85. 

Decision framework 

• Month 1 (Early shoulder): Maintain base rate ($125), implement 3-night minimum stay to capture weekend bleed from peak season
• Month 2 (Deep shoulder): Reduce rate 15-20% but add value bundles (breakfast, parking) to protect ADR perception 
• Cost management: Reduce variable labor by 15%, schedule maintenance, negotiate better supplier terms 

EBITDAR Protection: Your goal isn't to maintain peak RevPAR—it's to optimize EBITDAR. Sometimes accepting 52% occupancy at $110 ADR (RevPAR $57.20) with reduced costs generates better EBITDAR than pushing for 65% occupancy at $90 ADR (RevPAR $58.50) with peak staffing levels. 

RevPAR alternatives: when to look beyond the standard 

While RevPAR remains the industry standard, it has significant limitations—particularly its failure to account for non-room revenue and operational costs. Alternative or complementary metrics to RevPAR, such as TRevPAR, GOPPAR, and ARPAR address those gaps. Understanding their respective uses and benefits can transform your decision-making from reactive to strategic. 

TRevPAR 

Hotels increasingly depend on non-room revenue. A resort with a high-performing spa or a business hotel with significant F&B income needs to track total property revenue, not just room sales. TRevPAR reveals whether your amenities and services are pulling their weight. 

Calculated as: all revenue sources divided by available rooms—including F&B, spa, parking, meeting space, retail, and ancillary services. 

Best use cases:  

• Evaluating whether to invest in amenity upgrades (will a new spa increase total property revenue enough to justify the investment?)
• Comparing full-service properties against select-service competitors 
• Measuring impact of package deals that bundle rooms with F&B or activities 
• Understanding true per-room revenue contribution across all departments 

Real-world example: A 200-room resort has $120 RevPAR but $195 TRevPAR. The additional $75 comes from spa ($22 per available room), F&B ($38), activities ($10), and retail ($5). This reveals that nearly 40% of per-room revenue comes from non-accommodation sources. This is crucial information when planning renovations or marketing strategies. 

GOPPAR 

GOPPAR is the bridge between revenue metrics (RevPAR, TRevPAR) and true profitability. It accounts for the cost of generating revenue, revealing operational efficiency. You can have stellar RevPAR but disastrous GOPPAR if your cost structure is bloated. 

Calculated as: operating profit (revenue minus all operating expenses) divided by available rooms. This is where we finally start seeing the profit picture, not just revenue. 

Best use cases:  

• Measuring overall operational efficiency and management effectiveness 
• Setting department budgets based on profit contribution 
• Comparing your property to market-wide profitability benchmarks 
• Evaluating whether revenue growth is profitable growth or just expensive growth 

The limitation: GOPPAR includes fixed costs you can't easily control (property insurance, management fees, certain utilities). It's comprehensive but can mask operational performance if you're comparing properties with very different cost structures. 

ARPAR 

ARPAR answers the crucial question: How much money do we actually make on each occupied room after accounting for the direct costs of servicing that room? This is essential for pricing decisions and understanding true profitability drivers. 

Calculated as: revenue minus variable costs per occupied room, multiplied by occupancy rate. This metric isolates contribution margin—the actual profit each occupied room generates after variable costs. 

Best use cases:  

• Evaluating whether discounted rate strategies actually improve bottom-line profit 
• Measuring revenue management effectiveness net of costs 
• Understanding optimal occupancy levels (when does adding more guests cost more than they contribute?) 
• Comparing high-rate/low-occupancy strategies against low-rate/high-occupancy approaches 

Practical insight: If your ADR is $140 but your COPR (housekeeping, amenities, utilities, labor) is $45, your contribution per room is $95. At 70% occupancy, ARPAR is $66.50. This tells you far more about profitability than RevPAR ($98) alone. 

Choosing the right metric mix 

The challenge isn't understanding metrics—it's knowing which ones to track when, and what they tell you about your decisions. Think of your hotel's financial metrics as layers, each revealing something different. 

• ADR: pricing power (but not if you're filling rooms) 
• RevPAR: revenue efficiency (but not total revenue or costs) 
• TRevPAR: total property revenue (but not profitability) 
• GOPPAR: operating profit (includes controllable and uncontrollable costs) 
• EBITDAR: core operational performance (independent of financing) 

Savvy hotel operators don't choose one metric—they use them in combination. Important metrics are typically included in the monthly performance review. 

• RevPAR for competitive benchmarking and market positioning 
• TRevPAR for understanding total property revenue generation 
• GOPPAR for overall operational efficiency 
• EBITDAR for a picture of core operational performance 

Together, these metrics tell the complete story: Are we competitive? Are we maximizing total revenue? Are we operationally efficient? Are we fundamentally profitable? Each metric alone provides a snapshot.  

Which metric for which decision 

RevPAR 

• Benchmarking against competitors (RevPAR Index) 
• Making daily rate adjustments 
• Reporting on top-line performance to owners 

TRevPAR 

• Evaluating F&B contribution to overall property performance 
• Deciding whether to invest in amenities (spa, restaurant upgrades) 
• Understanding per-room revenue beyond just accommodation 

EBITDAR 

• Comparing owned vs leased properties 
• Evaluating management team performance independent of capital structure 
• Discussions with investors or lenders 
• Assessing core operational health during renovations or transitions 

GOPPAR 

• Measuring overall operational efficiency 
• Comparing your property to market averages 
• Setting department budgets based on profit contribution 

Combined, these metrics provide a comprehensive picture of your hotel's financial health so that your team knows where to focus improvement efforts. 

Eight practical strategies to improve performance 

These strategies come from hotel managers who've successfully grown both RevPAR and EBITDAR simultaneously—the real measure of sustainable performance.

1. Length-of-stay strategies that actually work

Minimum length of stay (minLOS) requirements during high-demand periods force longer bookings that improve occupancy in adjacent low-demand days. A 3-night minimum over a peak weekend means guests arrive Friday and stay through Monday—filling your Sunday night at full rate instead of dropping rates to fill it later. 

EBITDAR Impact: Reduces turnover costs (housekeeping, amenities), improves labor efficiency, and captures revenue you'd otherwise discount.

2. Dynamic pricing without losing occupancy

Real dynamic pricing isn't changing rates randomly—it's systematic adjustment based on pickup pace, market demand, and historical data. Set 3-4 price points and move between them based on triggers: 60+ days out (lowest), 30-60 days (moderate), 14-30 days (higher), 0-14 days (highest or lowest depending on occupancy). 

EBITDAR Impact: Captures maximum rate for each booking window without sacrificing occupancy, optimizing the revenue-cost balance. 

3. The breakfast decision: bundle or separate?

Including breakfast increases ADR perception and attracts families, but it adds $8-12 per occupied room in cost. The key is understanding your guest mix. Business travelers Monday-Thursday often skip breakfast. Leisure guests Friday-Sunday use it heavily. 

The hybrid solution: Offer free breakfast Friday-Sunday, charge $12/person Monday-Thursday. Your RevPAR looks consistent, but your EBITDAR improves by reducing waste and cost during low-utilization periods. 

EBITDAR Impact: Reduces variable food costs by 30-40% while maintaining perceived value. 

4. The OTA balance formula 

OTAs should fill gaps, not drive your occupancy. Target 25-30% of your total bookings through OTAs. Above 40%, you're overpaying in commissions. Below 15%, you're likely to miss bookings. 

The math: A $150 direct booking at 70% occupancy generates more EBITDAR than a $150 OTA booking at 75% occupancy, once you factor in the 18% commission and increased servicing costs. 

EBITDAR Impact: Every 5% shift from OTA to direct bookings improves EBITDAR margin by 1-1.5 percentage points.

5. Upselling that doesn't feel pushy 

Train front desk to offer room upgrades at check-in, not during booking. 'We have a premium room available for just $25 more per night—it includes a king bed and city view.' Conversion rates run 15-20% when presented as an immediate value-add. 

EBITDAR Impact: Pure margin. Upgrade revenue has minimal cost (the room exists whether sold as standard or premium), directly flowing to EBITDAR.

6. Event-driven pricing strategy

When major events hit your market (conventions, concerts, sports), don't just raise rates—implement graduated pricing. Rooms closest to the event date should be priced highest. This captures maximum yield from last-minute bookers while still filling inventory early at moderate premiums. 

EBITDAR Impact: Event weekends can generate 200-300% of normal EBITDAR, offsetting shoulder periods without adding permanent costs.

7. Managing renovations without killing performance

Room renovations are inevitable. The key is timing and transparency. Renovate during shoulder seasons, discount affected rooms by 20-25% and be upfront about construction. Guests appreciate honesty and many will accept minor inconvenience for savings. 

EBITDAR Impact: Reduces renovation period revenue loss from 50% to 25%, and the new rooms command 15-20% rate premiums post-renovation. 

8. Cost control moves that protect EBITDAR

Small operational changes: 

• Motion-sensor lighting in back-of-house areas (3-5% utility savings) 
• Opt-in daily housekeeping with $5 credit incentive (reduces labor 12-15%) 
• Bulk amenity dispensers vs individual bottles (saves $2-3 per occupied room) 
• Linen reuse programs (reduces laundry costs by 20-25%) 

EBITDAR Impact: Combined, these moves can improve EBITDAR margin by 2-3 percentage points without affecting guest satisfaction scores. 

Your 90-Day RevPAR improvement plan 

Sustainable improvement requires systematic action. We recommend this framework to get started. 

Step 1: Baseline and audit 

• Calculate current occupancy, ADR, RevPAR, and EBITDAR 
• Identify your RevPAR Index vs competitive set 
• Audit channel distribution (OTA vs direct percentage) 
• Map variable costs per occupied room by segment 

Step 2: Quick wins and testing 

• Implement check-in upselling program 
• Test 5-8% rate increase on one room category 
• Add 2-3 night minLOS on peak weekends 
• Reduce one variable cost category by 10% (choose easiest) 

Step 3: Optimization and scaling 

• Roll out successful pricing tests property-wide 
• Launch direct booking incentive campaign 
• Measure and compare Month 3 EBITDAR to Month 1 baseline 
• Document what worked, what didn't, and refine strategy 

Two metrics, one story—the path to profitability 

RevPAR tells you if you're filling rooms efficiently. EBITDAR tells you if you're running a profitable hotel. You need both metrics working together, not competing against each other. 

 It takes time for a profitability improvement strategy to work. Plan for what you want to achieve and monitor the metrics regularly. Objectives when implementing a combined RevPAR-EBITDAR strategy should include improvements to a range of metrics. 

• RevPAR: +9% (sustainable growth) 
• Occupancy: maintain at 72% (no longer chasing every booking) 
• ADR: +12% (focus on rate over volume) 
• Direct bookings: +23% (reduce OTA dependence) 
• EBITDAR margin: +5.2 percentage points  

Every decision you make as a hotel manager should pass the dual test: Does this improve RevPAR? Does this protect or improve EBITDAR? When the answer to both is yes, you're not just managing a hotel—you're building sustainable, profitable performance that you can be proud of. 

Start with your baseline. Measure both metrics. Make one change at a time. Track the results. Compound the wins. 

That's how you turn a good hotel into a great one.