RevPAR

RevPAR stands for Revenue Per Available Room, a key metric in the hospitality sector that measures hotel performance by blending occupancy and rate. It is calculated as the hotel’s average daily room rate (ADR) multiplied by its occupancy rate, or equivalently, total room revenue divided by the number of available rooms over a given period. For example, if a hotel has an ADR of $150 and an occupancy of 70%, its RevPAR is $105 (meaning, on average, each room – whether occupied or not – yields $105 in revenue per day). RevPAR encapsulates how well a hotel is filling rooms at what rate – an increasing RevPAR implies either higher occupancy, higher room rates, or both. High-net-worth investors evaluating hotel investments (or hospitality-focused funds) pay close attention to RevPAR as it drives the property’s Gross Operating Income. Importantly, RevPAR helps compare hotels of different sizes: it normalizes revenue by rooms available. However, it doesn’t account for cost differences, so two hotels with similar RevPAR may have different profit margins (depending on expense control). Lightstone has experience in hospitality, and when presenting a hotel deal, it would likely highlight RevPAR trends in that hotel’s market and the specific property’s ability to drive RevPAR growth through renovations, brand affiliation, or management improvements. A growing RevPAR is often a sign of a well-executed strategy – either through superior marketing (driving occupancy) or pricing power (higher ADR). In summary, RevPAR is to hotels what same- store sales are to retail – a crucial indicator of health. Investors can use it to gauge how a hotel investment is performing relative to its peers and to underwriting assumptions, aligning with Lightstone’s emphasis on key data-driven metrics to track success.