Which formula is used to calculate RevPAR using ADR?

RevPAR, or Revenue per Available Room, is an essential metric in the hospitality industry used to assess the financial performance of hotel operations. The formula that combines Average Daily Rate (ADR) and occupancy rate effectively calculates RevPAR.

The correct method to derive RevPAR from ADR is by multiplying ADR (the average revenue earned for each occupied room) by the occupancy rate (the percentage of available rooms that are actually sold). This equation provides a clear insight into the revenue generated from room sales relative to the total number of available rooms, allowing for a comprehensive view of performance regardless of occupancy levels.

For example, if a hotel has an ADR of $100 and an occupancy rate of 70%, the calculation for RevPAR would be $100 × 0.70, which equals $70. This means that for every room available, the hotel is able to generate $70 in revenue, indicating both room price and sales performance.

The other choices do not provide the correct method to calculate RevPAR using ADR. For instance, calculating total room revenue directly or involving rooms sold only provides a part of the overall picture without accurately combining the necessary metrics for a complete assessment.