Understanding Core Hotel KPIs
Before comparing your hotel to the market, you need to understand internal metrics. Average Daily Rate (ADR) measures the average price paid for rooms sold. Occupancy Rate measures the percentage of available rooms that were actually occupied.
Revenue Per Available Room (RevPAR) combines these two metrics. It evaluates how successfully a hotel is filling its rooms and at what rate. Because it accounts for empty rooms, RevPAR is the most critical metric for evaluating top-line performance.
How to Calculate RevPAR
There are two standard ways to calculate RevPAR, and both yield the exact same result. You can either multiply your ADR by your Occupancy Rate, or divide Total Room Revenue by Total Rooms Available.
The Formula: RevPAR = ADR x Occupancy Rate. (Ensure Occupancy is used as a decimal).
Worked Example: A hotel has an ADR of $150 and an occupancy rate of 80% (0.80) for a given night. The calculation is $150 x 0.80 = $120. The RevPAR for that night is $120.
Benchmarking with Competitive Sets (Comp Sets)
A comp set is a group of competing hotels in your immediate market. By acquiring comp set data (often through reporting services like STR), you can generate indices that show your 'fair share' of the market.
An index score of 100 indicates you are capturing exactly your fair share. A score over 100 means you are outperforming the comp set, while a score under 100 indicates underperformance.
- Market Penetration Index (MPI): Compares your Occupancy to the comp set.
- Average Rate Index (ARI): Compares your ADR to the comp set.
- Revenue Generation Index (RGI): Compares your RevPAR to the comp set.
How to Calculate MPI, ARI, and RGI
The formulas for the three primary competitive indices are structurally identical: divide your hotel's metric by the comp set's average metric, and multiply by 100.
The Formulas: MPI = (Hotel Occupancy / Comp Set Occupancy) x 100. ARI = (Hotel ADR / Comp Set ADR) x 100. RGI = (Hotel RevPAR / Comp Set RevPAR) x 100.
Worked Example: Your hotel's RevPAR is $120. Your comp set's average RevPAR is $105. Your RGI calculation is (120 / 105) x 100 = 114.2. Because the RGI is over 100, your hotel is capturing more than its fair share of market revenue.
Frequently asked questions
What is the difference between ADR and RevPAR?
ADR only looks at rooms that were actually sold. RevPAR looks at all available rooms, penalizing the metric for empty rooms. RevPAR provides a more complete picture of revenue generation.
What does a high ARI but low MPI mean?
An ARI over 100 and MPI under 100 means you are charging higher rates than your competitors, but losing occupancy as a result. Depending on profitability, you may need to lower rates to capture more guests.
How is a hotel comp set chosen?
Comp sets are typically chosen based on proximity, property class (e.g., luxury vs economy), amenities, and target demographic. They usually consist of 4 to 6 direct competitors.
Can RevPAR be higher than ADR?
No. RevPAR can only equal ADR if a hotel operates at 100% occupancy. Because RevPAR factors in unsold rooms, it is almost always lower than ADR.