Hotel KPIs: ADR, RevPAR, Occupancy, and GOP Margin

Introduction

Every hotel conversation runs on four numbers, and the order in which a candidate reaches for them reveals whether they understand the asset. RevPAR is the headline figure the trade press quotes, but it hides as much as it shows. Two hotels can post an identical RevPAR and earn very different profit, because RevPAR does not care whether the revenue came from a high room rate or from cramming the building full at a discount. The metric that exposes the difference is GOPPAR, and the gap between the two is where the real economics of a hotel live. With US occupancy sitting near 62.3% in 2025 and average rates barely growing, the question of how a hotel earns its RevPAR has rarely mattered more.

Room revenue resolves into two drivers, and almost every operating decision a hotel makes is a bet on one or the other. Occupancy is the share of available rooms actually sold over a period: rooms sold divided by rooms available, expressed as a percentage. Average daily rate (ADR) is the average price paid for the rooms that did sell: room revenue divided by rooms sold. Occupancy answers "how full," ADR answers "at what price," and the two move against each other constantly because cutting rate fills rooms while holding rate empties them.

Note the different denominators. Occupancy divides by every room in the building; ADR divides only by the rooms that sold. That distinction is what makes the two metrics incomplete on their own. A hotel can run 95% occupancy on a giveaway rate, or hold a premium rate at 55% occupancy, and you cannot tell which is healthier from either number in isolation.

RevPAR (revenue per available room) is the metric that fuses rate and volume into one figure, which is why it became the industry's headline. It can be calculated two ways that always agree:

Because it divides by available rooms rather than sold rooms, RevPAR penalizes empty rooms in a way ADR does not. A hotel that lifts ADR by 10% but loses 15% of its occupancy will show a lower RevPAR, which correctly flags that the rate push went too far. This is the property of RevPAR that makes it the standard comparison metric across hotels and across time, and it is the number that anchors a lodging REIT's earnings call and a hotel appraisal alike.

RevPAR (Revenue Per Available Room)

A hotel's room revenue divided by the total number of available rooms over a period, equivalently expressed as ADR multiplied by occupancy. It measures how effectively a hotel converts its full room inventory into revenue, capturing both pricing and volume in a single figure.

RevPAR also drives the way performance is benchmarked. Operators track their RevPAR index, the ratio of a hotel's RevPAR to that of its competitive set, where 100 means the hotel is capturing its fair share. An index above 100 signals the property is taking share from its peers; below 100 says it is losing it.

The RevPAR index is actually the third member of a family of three benchmarking ratios, each indexed to 100 against the competitive set. Together they decompose share performance into its rate and volume components, so an operator can see not just whether they are winning share but how. MPI (market penetration index) measures volume share, comparing the hotel's occupancy to the comp set's. ARI (average rate index) measures rate share, comparing ADR to ADR. And RGI (revenue generation index), the same thing as the RevPAR index, combines both by comparing RevPAR to RevPAR.

Read together, the three diagnose the source of any share gap. A hotel can post an RGI above 100 while running a low MPI and a very high ARI, which says it is winning on rate but leaving heads in beds on the table, the classic signature of a property that is priced too aggressively for its market.

Because RGI is mathematically MPI multiplied by ARI divided by 100, the two component indices always reconcile to it, which makes the trio a quick consistency check as well as a diagnostic. Benchmarking data of this kind is what STR (now part of CoStar) sells to almost every branded hotel in the world.

Here is the distinction that separates a candidate who has read about hotels from one who understands them. RevPAR treats a dollar of rate and a dollar of occupancy as identical, but they are not. Every occupied room carries variable cost: housekeeping labor, amenities, utilities, laundry, and credit-card fees, often $30 to $45 per occupied room. An incremental dollar of ADR carries almost none of that. So a hotel that earns its RevPAR through high rate drops far more of it to profit than a hotel that earns the same RevPAR by selling cheap rooms.

This is why operators obsess over flow-through (also called drop-through): the share of an incremental revenue dollar that reaches gross operating profit. Rate-driven revenue flows through at 80% to 90%; occupancy-driven revenue flows through at far less once the variable cost of serving the extra guest is netted out. The same operating leverage that makes hotels so cyclical works in reverse here: because so much of the cost base is fixed, the composition of RevPAR growth matters as much as its size.

The composition is something operators actively manage through demand segmentation. A hotel sells the same rooms to very different guests: transient travelers who book individually at the highest rates, group business that fills blocks of rooms at negotiated rates and brings banquet and meeting revenue, and contract demand such as airline crews booked at low fixed rates to guarantee a base of occupancy. A revenue-management team's job is to mix these segments so that low-rate contract and group business fills the rooms that would otherwise sit empty in soft periods, while high-rate transient demand is protected for peak nights. When you see a hotel pushing occupancy through group blocks at a discount, the right question is whether the associated F&B and meeting revenue makes the lower room rate worthwhile, not whether the rate itself looks low.

A newer metric, ARPAR (adjusted revenue per available room), was built to answer exactly that question inside a single number. It starts from ADR, subtracts the variable cost of serving each occupied room, adds back the ancillary spend that guest generates, and then scales the result by occupancy, so a room sold cheap but rich in F&B and spend can outscore a higher bare rate that brings no add-on revenue.

Because ARPAR bakes both the cost of occupancy and the upside of ancillary spend into the per-available-room frame, it tends to track GOPPAR far more closely than RevPAR does, which is why revenue managers increasingly use it to price segment by segment rather than chasing headline RevPAR.

Rooms are not the whole story, especially in full-service and resort hotels where food, beverage, spa, and meeting revenue can be a third or more of the total. Two metrics widen the lens. TRevPAR (total revenue per available room) divides all property revenue, not just rooms, by available rooms, capturing the non-rooms operation that RevPAR ignores. GOPPAR (gross operating profit per available room) goes one step further and divides gross operating profit, after departmental and undistributed expenses, by available rooms. Both keep the same per-available-room denominator as RevPAR, so they stack cleanly on top of it.

GOPPAR is the metric that closes the loop on the rate-versus-occupancy point, because it is what actually drops to the owner before fixed charges. A hotel can grow RevPAR while GOPPAR falls if the growth came from low-margin occupancy or from F&B revenue that costs nearly as much to produce as it earns. That is precisely what the industry saw in 2025: rising costs, led by food and beverage, pushed gross operating profit per available room down even where RevPAR held, a dynamic the hospitality sector overview ties back to the format's thin margins.

GOPPAR (Gross Operating Profit Per Available Room)

Gross operating profit, calculated after all departmental and undistributed operating expenses but before fixed charges like rent, property taxes, insurance, and debt service, divided by available rooms. It is the truest single measure of a hotel's operating profitability because it reflects cost discipline, not just revenue.

Where GOPPAR scales profit to the room count, GOP margin scales it to revenue, dividing gross operating profit by total revenue to show what share of every revenue dollar survives the operating cost base.

The two profitability measures answer different questions: GOPPAR tells you how much profit the physical asset throws off per room, while GOP margin tells you how efficiently the operation converts revenue to profit regardless of size. A select-service hotel with no restaurant often posts a higher GOP margin than a full-service property earning multiples of its GOPPAR, because food and beverage is a low-margin business that dilutes the percentage even as it adds absolute profit. The choice of which metric to lead with is itself a signal. RevPAR for top-line momentum and benchmarking, GOPPAR for profitability and quality of earnings.

These four numbers are not academic; they are the inputs to every hotel underwriting. A property-level forecast starts by projecting occupancy and ADR to build RevPAR, layers in non-rooms revenue to reach total revenue, then applies the cost structure to arrive at gross operating profit, the figure that a hotel DCF ultimately discounts. Get the RevPAR composition wrong and the whole margin assumption unravels.