Full Definition
RevPAR = Average Daily Rate × Occupancy Rate (or Total Room Revenue ÷ Total Available Rooms). It is the primary metric hotel operators and investors use to measure revenue efficiency. A hotel with a $150 ADR and 75% occupancy has RevPAR of $112.50. Two hotels with the same ADR but different occupancy rates have very different RevPAR — and very different NOI.
Example
Hotel A: $200 ADR × 80% occupancy = $160 RevPAR. Hotel B: $200 ADR × 60% occupancy = $120 RevPAR. Hotel A generates 33% more revenue per available room despite identical pricing.
Why It Matters
RevPAR normalizes performance across different-sized hotels and allows investors to compare efficiency. A value-add motel that lifts RevPAR from $45 to $95 has roughly doubled its NOI — the core driver of cap rate compression at exit.