Three metrics, three perspectives
Occupancy is the percentage of available rooms sold. ADR is the average room rate achieved on sold rooms. RevPAR measures accommodation revenue per available room. Each answers a different question, and none measures total profitability alone.
The basic formulas
Occupancy = rooms sold / rooms available × 100. ADR = room revenue / rooms sold. RevPAR = room revenue / rooms available, or ADR multiplied by occupancy as a decimal. Use consistent dates and revenue definitions.
A simple example
Suppose a hotel has 20 available rooms and sells 15 at an average of $100. Occupancy is 75%, ADR is $100 and RevPAR is $75. Selling one more room at a discount only improves RevPAR if the additional revenue outweighs any price reductions.
Why occupancy alone can mislead
A full hotel can produce a weaker result than one with fewer rooms sold at stronger rates. Commissions, included services and operating costs are not captured directly by these metrics.
Turn metrics into decisions
Review KPIs by stay date, weekday, room type and channel. Compare similar periods and watch booking pickup. The value of measurement is in better pricing and distribution decisions.
Takeaway: The goal is not a universal formula, but better decisions for each hotel and each stay date.
If you are new to Revenue Management, start with What Is Hotel Revenue Management and How Can It Increase Your Hotel’s Revenue?.