A 200-room hotel sells 150 rooms one night. What is its occupancy rate?
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Hospitality & Tourism · Foundations
Pricing and Occupancy
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In 30 seconds
Hotels measure rooms performance with three numbers. Occupancy is rooms sold divided by rooms available. ADR, the average daily rate, is Rooms revenue The total income from selling guest rooms in a period, before subtracting any operating expenses. Full entry → divided by rooms sold. RevPAR, revenue per available room, is rooms revenue divided by rooms available, and it equals ADR multiplied by occupancy. Because RevPAR counts empty rooms, it exposes the core pricing tension: cutting rates to fill the house raises occupancy but can lower RevPAR.
Why this matters
Occupancy, ADR, and RevPAR are the shared language of lodging performance. A front-desk supervisor, a general manager, an owner, and a lender all read the same three numbers to judge whether a hotel is priced well and selling enough rooms. Because RevPAR is stated per available room, it lets a 90-room boutique be compared fairly against a 900-room convention hotel and against last year's results. Understanding the arithmetic, and especially the occupancy-versus-rate trade-off, is the foundation for every later course in revenue management, asset management, and hotel finance, and it turns pricing from guesswork into a decision you can defend with a calculation.
The college version
Three metrics built from three quantities
Almost every rooms-performance conversation reduces to three raw quantities measured over a period, usually one night: the number of rooms available for sale, the number of rooms actually sold, and the total rooms revenue those sales produced. From these, the industry derives three ratios. Occupancy rate The share of a hotel's sellable rooms that were sold in a period: rooms sold divided by rooms available, shown as a percentage. Full entry → is rooms sold divided by rooms available, expressed as a percentage; it answers 'how much of my capacity did I use?' Average Daily Rate, or ADR, is rooms revenue divided by rooms sold; it answers 'on average, what did each occupied room bring in?' By convention, complimentary and house-use rooms are left out of ADR so the figure reflects paid business. Revenue Per Available Room, or RevPAR, is rooms revenue divided by rooms available; it answers 'how much revenue did each room I could have sold actually generate?' Occupancy is a volume measure, ADR is a price measure, and RevPAR fuses the two into a single yield figure. Because RevPAR and ADR are stated per room, they normalize away hotel size, so a small inn and a large resort can be compared on the same scale.
The RevPAR identity
The most useful fact about these metrics is that RevPAR can be reached two ways that always agree. The direct route divides rooms revenue by rooms available. The decomposed route multiplies ADR by occupancy. They are algebraically identical: ADR times occupancy is (revenue / rooms sold) times (rooms sold / rooms available); the rooms-sold terms cancel, leaving revenue / rooms available, which is RevPAR. Take a 100-room hotel that sells 80 rooms one night for $12,000 in rooms revenue. Occupancy is 80/100 = 80%. ADR is $12,000/80 = $150. RevPAR is $12,000/100 = $120, and ADR times occupancy is $150 x 0.80 = $120 as well. The identity matters because it shows RevPAR moves only when price or volume moves, and it lets managers diagnose a weak RevPAR: if RevPAR fell, either occupancy slipped, ADR slipped, or both. GOPPAR Gross operating profit per available room; like RevPAR but subtracting operating expenses before dividing by available rooms, so it reflects profitability rather than revenue. Full entry → (gross operating profit per available room) and TRevPAR (total revenue per available room) extend the same per-available-room logic to profit and to all revenue including food, beverage, and other services; RevPAR covers rooms only and ignores expenses.
The rate structure: rack, BAR, and discounts
Hotels do not sell every room at one price. The Rack rate A room type's officially published, highest standard rate; used as a benchmark and rarely charged in practice. Full entry → is the officially published, highest standard rate for a room type. It is a benchmark and a reference point more than a working price; hotels rarely charge it except in extreme demand, and it makes discounts look like a deal. The best available rate, or BAR, is the lowest unrestricted rate a hotel publicly offers for a given date, available to anyone with the standard cancellation policy attached. Below BAR sit discounted and negotiated rates that come from Segmented pricing Selling the same room at different rates to different market segments, such as government, corporate, or loyalty guests. Full entry →: the same physical room is sold at different rates to different market segments, such as government per-diem travelers, contracted corporate accounts, and loyalty-program members. Because a hotel would lose revenue if any guest could simply pick the cheapest rate, it attaches rate fences to the lower rates. A Rate fence A condition a guest must meet to qualify for a discounted rate, such as advance purchase, non-refundable payment, or a minimum length of stay. Full entry → is a condition a guest must satisfy to qualify for a discount, for example booking a set number of days in advance, paying up front on a non-refundable basis, or committing to a minimum or maximum length of stay. Fences separate price-sensitive guests, who will accept restrictions to save money, from flexible guests, who will pay more for a refundable, book-anytime rate.
The occupancy-versus-ADR trade-off
The single most important lesson these metrics teach is that occupancy and ADR pull against each other, and RevPAR is the referee. It is tempting to treat a full hotel as a successful hotel, but 100% occupancy achieved by deep discounting can leave a property worse off than a half-empty one at a strong rate. Return to the 100-room hotel with a baseline RevPAR of $120 (80% occupancy at a $150 ADR). Suppose the manager slashes rates to push occupancy to 95%, but the discount drops ADR to $110. Rooms revenue is 95 x $110 = $10,450, so RevPAR is $104.50 - lower than the $120 baseline even though far more rooms were sold. Fill the last rooms too, reaching 100% at a $95 ADR, and RevPAR falls further to $95. Now run it the other way: raise the rate to $180 and accept that only 70 rooms sell. Rooms revenue is 70 x $180 = $12,600, and RevPAR climbs to $126, beating the baseline with fewer guests, less wear on the property, and lower variable cost. The point is not that higher rates always win, but that occupancy alone is a misleading scoreboard. RevPAR is the figure that tells you whether a pricing move actually helped, because it captures both the rooms you sold and the rooms you gave away cheaply. (Deciding which rate to set when, using demand forecasts and segmentation, is the separate discipline of revenue management; this lesson covers only the metrics that discipline optimizes.)
Eli explains
The same idea, in plain words
Explain it like I’m 10
A hotel has a fixed number of rooms every night. Occupancy is what fraction of them you filled. ADR is the average price of the rooms you did fill. RevPAR spreads the money you earned over every room, even the empty ones, so it tells you the whole story at once. Here is the trick worth remembering: RevPAR is just ADR times occupancy. That is why a totally full hotel is not automatically a winning hotel. If you filled every room only by making the price really cheap, the RevPAR number can end up lower than if you had kept prices higher and left a few rooms empty.
Picture it like this
Think of a movie theater with 100 seats for one showing. Occupancy is how many seats had someone in them. ADR is the average ticket price of the seats you sold. RevPAR is the total ticket money divided by all 100 seats, whether or not they were filled. You could pack every seat by selling $2 tickets, or sell 70 seats at $15 each. Divide the takings across all 100 seats both ways, and the pricier, emptier show can actually make more per seat.
Where the picture stops working
The theater sells the whole show at once and empty seats vanish when the lights go down, but a hotel room is sold again the next night, so a night's empty room is lost forever while the room itself keeps earning. Real hotels also juggle many room types and change prices continuously, which a single ticket price hides.
Worked example
A 100-room hotel, one night. It sells 80 rooms and takes in $12,000 in rooms revenue. Occupancy = 80 / 100 = 80%. ADR = $12,000 / 80 = $150. RevPAR = $12,000 / 100 = $120, and the identity checks out: ADR x occupancy = $150 x 0.80 = $120. Now test the trade-off. Discount to fill more rooms: sell 95 rooms but ADR falls to $110. Revenue = 95 x $110 = $10,450, so RevPAR = $104.50 - below the $120 baseline despite higher occupancy. Push to a full house (100 rooms) at a $95 ADR and RevPAR drops again to $95. Reverse course: raise the rate to $180 and sell only 70 rooms. Revenue = 70 x $180 = $12,600, and RevPAR rises to $126. Fewer guests, more revenue per available room.
Key takeaway
Occupancy is volume, ADR is price, and RevPAR (= ADR x occupancy = rooms revenue / rooms available) fuses them into one yield figure. Because RevPAR counts empty rooms, it, not occupancy, tells you whether a pricing decision actually paid off.
Quick check
3 questions here, of 5 in this lesson’s practice set. Answers stay hidden until you check.
Why is ADR calculated by dividing rooms revenue by rooms sold rather than by rooms available?
Choose an answer, then check it.
A hotel reports an ADR of $200 and an occupancy rate of 60% for a night. What is its RevPAR?
Choose an answer, then check it.
Study tools & related lessonsYou’ll learn to · Common mistakes · Easily confused · Key vocabulary · Related
You’ll learn to
- Define occupancy rate, ADR, and RevPAR and state each formula.
- Compute all three metrics from rooms sold, rooms available, and rooms revenue.
- Demonstrate the identity RevPAR = ADR x occupancy with worked numbers.
- Distinguish rack rate, best available rate, and discounted rates, and explain how rate fences protect them.
- Analyze the occupancy-versus-ADR trade-off and judge when discounting to fill rooms lowers RevPAR.
Common mistakes
Treating 100% occupancy as the goal and a full hotel as automatically successful.
A full house built on deep discounts can produce a lower RevPAR than a partly empty hotel at a strong rate. Optimize RevPAR, not occupancy alone.
Confusing ADR with RevPAR, or thinking they should be equal.
ADR divides revenue by rooms sold; RevPAR divides by rooms available. They are equal only at 100% occupancy; below that, RevPAR is always lower because it counts empty rooms.
Dividing revenue by rooms sold when computing RevPAR.
RevPAR uses rooms available in the denominator. Dividing by rooms sold just gives ADR back. The whole point of RevPAR is to include the rooms you did not sell.
Assuming raising rates always increases revenue, or that discounting always increases it.
The result depends on how much volume moves in response. Only computing RevPAR under each price shows whether a rate change actually helped.
Thinking rack rate is what guests normally pay.
Rack rate is the published maximum and is rarely charged; most guests book at BAR or a fenced discount below it.
Easily confused
ADR vs. RevPAR
ADR is revenue per sold room (a pure price measure); RevPAR is revenue per available room (price and volume combined). RevPAR <= ADR always, and they meet only at full occupancy.
Occupancy rate vs. RevPAR
Occupancy is a volume percentage that ignores price; RevPAR blends volume with price, so occupancy can rise while RevPAR falls if the gain came from discounting.
Rack rate vs. Best Available Rate (BAR)
Rack rate is the published ceiling and a benchmark; BAR is the lowest unrestricted rate actually on sale for a date. Guests pay near BAR, not rack.
RevPAR vs. GOPPAR
RevPAR measures rooms revenue per available room and ignores costs; GOPPAR subtracts operating expenses first, so it measures profitability rather than top-line revenue.
Key vocabulary
- Occupancy rate
- The share of a hotel's sellable rooms that were sold in a period: rooms sold divided by rooms available, shown as a percentage.
- Average Daily Rate (ADR)
- The average price earned per occupied room: total rooms revenue divided by the number of rooms sold, excluding complimentary and house-use rooms.
- RevPAR (Revenue Per Available Room)
- Rooms revenue divided by the number of rooms available; equivalently, ADR multiplied by occupancy. It counts unsold rooms, unlike ADR.
- Rooms revenue
- The total income from selling guest rooms in a period, before subtracting any operating expenses.
- Rack rate
- A room type's officially published, highest standard rate; used as a benchmark and rarely charged in practice.
- Best Available Rate (BAR)
- The lowest unrestricted rate a hotel publicly offers for a given date, carrying the standard cancellation policy and open to any guest.
- Rate fence
- A condition a guest must meet to qualify for a discounted rate, such as advance purchase, non-refundable payment, or a minimum length of stay.
- Segmented pricing
- Selling the same room at different rates to different market segments, such as government, corporate, or loyalty guests.
- GOPPAR
- Gross operating profit per available room; like RevPAR but subtracting operating expenses before dividing by available rooms, so it reflects profitability rather than revenue.
Sources & references
- Revenue Management Illustrated, Chapter 2: Revenue Management Measurement — University of West Florida Pressbooks (Melih Madanoglu)
- Introduction to Hospitality, 5.3 Economics and Revenue Management — Washington State Board / Open WA Pressbooks (Angela Senter)
- Lodging Managers: Occupational Outlook Handbook — U.S. Bureau of Labor Statistics
- Rack Rates, BAR, Discounts, and More: A Guide to Hotel Prices — AltexSoft
- Rate Fences: Definition / Meaning — Xotels (glossary)
EliExplains lessons are original prose written from the open, credible references above. See Copyright & Licensing.
Researched 2026-08-19
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