Financial, Industry, Sector

ADR, RevPAR and Occupancy

Hotels, or if we want to use a more confusing term: the lodging industry, use 3 key performance indicators to measure their performance: ADR, RevPAR and Occupancy rate. However, unlike other holy trinities in business, this is really a duality as RevPAR is a product of the other two: RevPAR = ADR x Occupancy rate.

Let’s explain each of these metrics. ADR stands for Average Daily Rate, the price for an occupied room on a given day. Occupancy indicates the percentage of available rooms that are occupied on that day.  RevPAR, which stand for Revenue Per Available Room, is calculated by multiplying ADR and Occupancy in the period measured.

Occupancy rate can be influenced, but not controlled by the hotel operator, i.e. they cannot force customers to come to their hotel. They can try to persuade them by implementing dynamic pricing strategies that adapt room rates to current or expected demand.

As a point of reference, during the economic depression between 2008 and 2012,  occupancy rates barely moved, but ADR decreased by nearly 25%. There were travelers, but there was no money. A world impacted by COVID, and uncertainty of the state of economy that lies ahead, present an entirely different scenario. Perhaps for the first time ever, there are neither travelers nor money, leaving the hospitality industry gasping for a brand-new way of managing their revenue.

Since this is a health crisis, at LossLess Group we believe that health measures will bring back customers, and we have a solution to assist you realize that goal. Contact us to find out.