Occupancy, ADR and RevPAR

The three key numbers hotels use to measure performance - occupancy, average daily rate and revenue per available room - and how they trade off against each other.

Hotels track performance with three key numbers.

Occupancy

The share of rooms sold.

70 rooms sold out of 100 = 70 percent occupancy.

ADR

Average Daily Rate: average price per room sold.

Room revenue of 3.5 lakh rupees ÷ 70 rooms = 5,000 rupees ADR.

RevPAR

Revenue per available room = occupancy × ADR.

70 percent × 5,000 = 3,500 rupees.
Or: room revenue ÷ total rooms = 3.5 lakh ÷ 100 = 3,500.

Why RevPAR matters

It combines volume and price, showing how well a hotel earns from its capacity.

The trade-off

Lower prices can raise occupancy but reduce ADR.
Higher prices raise ADR but may lower occupancy.
Hotels aim to maximise RevPAR (and total profit including food and events).

Perishable inventory

An unsold room tonight can never be sold again, like an empty airline seat. This pushes hotels to use dynamic pricing.

Two strategies

Hotel A sells 90 rooms at 4,000 rupees (RevPAR 3,600). Hotel B sells 60 rooms at 6,500 (RevPAR 3,900). Hotel B earns more per room despite lower occupancy.

Thinking full occupancy always means best performance

RevPAR combines occupancy and price.

Key takeaways

Occupancy is the share of rooms sold.
ADR is the average price per room sold.
RevPAR equals occupancy times ADR.
Unsold rooms are lost forever, driving dynamic pricing.