Understanding Hospitality Metrics
Context (2020–present): The hospitality industry has faced unprecedented challenges — closed borders, suspended travel, mass quarantines, and a sharp decline in tourists. Survival now depends on data-driven decisions rather than intuition. Optimizing key performance indicators (KPIs) is essential for increasing revenue, controlling costs, and maintaining healthy profit margins.
In this guide, we’ll cover the most important hospitality metrics and KPIs, explain how to calculate them, and show why they matter for your hotel’s success.
ADR – Average Daily Rate
Average Daily Rate (ADR) is the most widely used performance metric in the hotel industry.
It gives you a single number to compare your hotel’s pricing against competitors with similar room types, sizes, and amenities.
ADR = Total Room Revenue ÷ Number of Rooms Sold
Example: If you sold 56 rooms yesterday and generated $6,500 in room revenue:
ADR = $6,500 ÷ 56 = $116 per room
Use ADR over any period (day, week, month, quarter, year) by adjusting the denominator to total rooms sold during that time. A higher ADR than competitors usually means you’re extracting more value from your property.
ARI – Average Rate Index
ARI compares your hotel’s ADR to the average ADR of your competitive set or market segment.
ARI = (Your Hotel ADR ÷ Market/Competitor ADR) × 100%
Interpretation:
- 100% = You’re in line with the market
- >100% = You’re outperforming competitors on rate
- <100% = You’re pricing below the market average
Important: ADR alone doesn’t tell the full story. You could have a high ADR with very low occupancy (e.g., only 30% rooms sold) and still generate less total revenue than competitors filling twice as many rooms.
Occupancy Rate
Occupancy Rate measures the percentage of available rooms that are actually sold.
Occupancy Rate = (Rooms Booked ÷ Total Available Rooms) × 100%
Higher occupancy drives direct room revenue and increases ancillary spending (restaurants, bars, spa, etc.). However, pushing for 100% occupancy at very low rates can reduce profitability due to higher operating costs.
MPI – Market Penetration Index
MPI compares your hotel’s occupancy rate to the average occupancy of your competitive set or market.
MPI = (Your Hotel Occupancy Rate ÷ Market Occupancy Rate) × 100%
Interpretation: 100% = average market performance; >100% = gaining more than your fair share of bookings.
RevPAR – Revenue Per Available Room
Revenue Per Available Room (RevPAR) combines ADR and occupancy to show how effectively you’re generating revenue from all available rooms (not just sold ones).
RevPAR = ADR × Occupancy Rate
Example: ADR = $116, Occupancy = 85%
RevPAR = $116 × 0.85 = $98.60 per available room
RevPAR is one of the most important hotel KPIs because it reflects both pricing power and room utilization. Only room revenue is included — not food, beverage, or other ancillary income.
RGI – Revenue Generation Index
RGI compares your hotel’s RevPAR to the market or competitive set average.
RGI = (Your Hotel RevPAR ÷ Market RevPAR) × 100%
Aim for >100% to show you’re capturing more than your fair share of revenue.
TRevPAR – Total Revenue Per Available Room
Total Revenue Per Available Room (TRevPAR) includes all revenue streams — rooms, restaurants, bars, spa, gym, events, etc.
TRevPAR = Total Hotel Revenue ÷ Total Available Rooms
Example: Total revenue = $26,000, 240 rooms
TRevPAR = $26,000 ÷ 240 = $108.33 per available room
GOPPAR – Gross Operating Profit Per Available Room
Gross Operating Profit Per Available Room (GOPPAR) shows true bottom-line profitability per room after operating expenses (labor, utilities, supplies, maintenance, etc.).
GOPPAR = Gross Operating Profit ÷ (Total Rooms × Days in Period)
Example: Annual gross profit = $3.6 million, 130 rooms, 365 days
Total room-nights = 130 × 365 = 47,450
GOPPAR = $3,600,000 ÷ 47,450 ≈ $75.87 per room per year
Key Takeaways – Hospitality Metrics Summary
- ADR — Average price per sold room
- Occupancy Rate — % of rooms sold
- RevPAR — Revenue per available room (ADR × Occupancy)
- TRevPAR — Total revenue (all sources) per available room
- GOPPAR — Gross operating profit per available room
- ARI / MPI / RGI — Comparative indexes vs. market/competitors (aim >100%)
These KPIs are foundational — but not exhaustive. The most successful hotels continuously collect, analyze, and benchmark data against the market. If your hotel isn’t tracking these metrics rigorously, you’re already falling behind.
Make data your top priority.