Hotel Industry Fundamentals and Performance Metrics
Structure and core metrics
Hotel performance analysis starts with the asset's structure and segmentation. Properties are commonly grouped by chain scale, from luxury through economy, and by service model: full-service, select-service, limited-service, and extended-stay. Ownership, management, and franchise are separate roles. An owner holds the asset, a management company operates it under contract, and a franchisor licenses brand and systems. Analysts must keep these roles distinct because fees, risk, and comparability differ.
The core rooms metrics rest on two denominators. Occupancy = rooms sold ÷ rooms available. ADR = rooms revenue ÷ rooms sold. RevPAR = rooms revenue ÷ rooms available, or occupancy × ADR. TRevPAR broadens the numerator to total revenue, capturing F&B and ancillary income. GOPPAR divides gross operating profit by available rooms and reflects cost control as well as revenue.
Traps include using rooms occupied rather than rooms available for RevPAR; including complimentary or house-use rooms in one metric but not another; treating RevPAR as total profitability; comparing full-service and select-service hotels without normalizing for F&B; and confusing ADR changes caused by mix shifts with true pricing changes.
Worked example: a 200-room hotel sells 150 rooms and earns $22,500 in rooms revenue. Occupancy = 150 ÷ 200 = 75%; ADR = $22,500 ÷ 150 = $150; RevPAR = $22,500 ÷ 200 = $112.50, or 0.75 × $150. If 5 of the 150 rooms are complimentary, paid occupancy is 72.5% and paid ADR is $155.17, so state the convention. Rule of thumb: RevPAR percentage change is approximately the sum of occupancy and ADR percentage changes, but use the multiplicative form for exact work.