RevPAR (or “revenue per available room”) is one measure of operating performance of a hotel real estate asset. RevPAR is calculated by a simple formula:
Where the Average Daily Rate is the average per-room income per period of time; in other words the total room revenue divided by number of rented rooms for a given period.
For example, a hotel has a total of 150 rooms, of which the average occupancy rate is 90%. The average daily rate for a room is $200 a night. A hotel investor wants to know its RevPAR so it can accurately assess its performance. The hotel manager can calculate the RevPAR as follows:
($200 per night x 90% occupancy rate) = $180.00
For more on hotels and special considerations for hospitality real estate investments, please review this article.