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# Lesson 2 · Occupancy, ADR and RevPAR
Lesson 2 — occupancy, ADR, RevPAR, revenue and room nights are not 5 separate numbers. Learn how they move against each other, and which one settles an argument.
{% hint style="info" %}
**In this lesson.** You will be able to calculate all 5 measures from 3 counts, explain why occupancy and ADR pull against each other, and use RevPAR to settle which of 2 rates was the better decision. **About 30 minutes.**
{% endhint %}
## Where the 5 measures come from
Your Dashboard shows occupancy, ADR, RevPAR, revenue and room nights. That looks like 5 things to watch. It is not.
Everything comes from 3 counts: rooms available, rooms sold, and room revenue.
*Count 3 things and you have all 5 measures. RevPAR is the only one that carries rate and occupancy together.*
| Measure | How it is built | What it answers |
| --------------- | ----------------------------------------------------------- | -------------------------------------- |
| **Room nights** | Rooms sold, counted per night | How much did we sell? |
| **Revenue** | Room revenue for the period | What did we take? |
| **Occupancy** | Rooms sold ÷ rooms available × 100 | How full were we? |
| **ADR** | Room revenue ÷ rooms sold | What did the average sold room pay? |
| **RevPAR** | Room revenue ÷ rooms available, the same as ADR × occupancy | What did the average room we own earn? |
A **room night** is 1 room sold for 1 night. ADR counts room revenue only, so food, spa and other spend stay out of it.
## Why occupancy and ADR work against each other
Occupancy and ADR move in opposite directions. Raise your rate and you usually sell fewer rooms. Drop it and you usually sell more.
That means neither number can tell you whether a decision was good. Occupancy went up — was that worth it? ADR went up — did you lose too many rooms to pay for it?
**RevPAR answers both, because it carries rate and occupancy in 1 figure.** It is the most watched measure in revenue management for exactly this reason. It also lets you compare 2 hotels fairly, even when they are priced very differently.
{% hint style="warning" %}
A manager who reports only occupancy is telling you half the story. So is a manager who reports only ADR. Ask for RevPAR, then ask which of the other two moved to produce it.
{% endhint %}
## Worked example
The 50-room hotel, 1 night, priced 3 different ways.
| | Rate sold at | Rooms sold | Occupancy | Revenue | ADR | RevPAR |
| ----- | ------------ | ---------- | --------- | ------- | ---- | ---------- |
| **A** | €120 | 40 | 80% | €4,800 | €120 | **€96.00** |
| **B** | €135 | 36 | 72% | €4,860 | €135 | **€97.20** |
| **C** | €150 | 30 | 60% | €4,500 | €150 | **€90.00** |
Read it row by row.
**B beat A.** You sold 4 fewer rooms and took €60 more. RevPAR rose from €96.00 to €97.20. The higher rate paid for the rooms it cost you.
**C lost.** ADR is the highest on the table, and RevPAR is the lowest. You priced past what the market would take, and 10 empty rooms cost more than the extra €15 earned on each sold room.
Anyone watching ADR alone would call C the best night of the three. It was the worst.
{% hint style="info" %}
**B also costs less to run.** 36 occupied rooms need less cleaning, less laundry and less breakfast than 40. Revhero measures rooms revenue, not profit, so this never appears on the Dashboard — but it is a real reason to prefer rate over volume when RevPAR is close.
{% endhint %}
## Practise the calculations
It sticks far better than reading it. Fill in the blanks for a 50-room hotel.
| Rooms sold | Room revenue | Occupancy | ADR | RevPAR |
| ---------- | ------------ | --------- | --- | ------ |
| 45 | €5,400 | ? | ? | ? |
| 25 | €4,000 | ? | ? | ? |
Answers
**Row 1:** occupancy 45 ÷ 50 = **90%**. ADR €5,400 ÷ 45 = **€120**. RevPAR €5,400 ÷ 50 = **€108**.
**Row 2:** occupancy 25 ÷ 50 = **50%**. ADR €4,000 ÷ 25 = **€160**. RevPAR €4,000 ÷ 50 = **€80**.
Row 2 has the higher ADR and much the weaker night. That is the lesson in one table.
## Try it on your own hotel
1. Open the [Dashboard](/revhero-docs/your-hotels-performance/dashboard.md) and set the period to last month.
2. Write down all 5 figures on paper.
3. Check the arithmetic yourself. Divide revenue by room nights and confirm you get ADR. Divide revenue by your room count times the number of days, and confirm you get RevPAR.
4. Now set the period to the same month last year.
5. Answer 1 question in writing: **did RevPAR rise or fall, and which of occupancy or ADR caused it?**
Step 5 is the whole skill. If RevPAR rose because ADR rose, you priced better. If RevPAR rose because occupancy rose, you sold more. Those are different achievements, and they need different decisions next year.
## Check yourself
**1.** Occupancy fell from 80% to 72%, and RevPAR rose from €96 to €97.20. Did you price well?
Answer
Yes. You gave up 8 points of occupancy and earned more from the rooms you did sell. RevPAR is the measure that settles it, and it went up.
**2.** Your ADR is the highest it has ever been, and your general manager is unhappy. Why might that be?
Answer
A record ADR with low occupancy can produce poor RevPAR, as in row C of the worked example. The hotel is earning less per room it owns, whatever the rate on the sold rooms says.
**3.** Two hotels report the same RevPAR of €96. One is 80% full at €120. What is true of the other?
Answer
It reached €96 with a different mix of rate and occupancy — for example 60% at €160, or 96% at €100. RevPAR lets you compare them fairly, which is exactly why it is the headline measure.
## What you learned
* All 5 measures come from 3 counts: rooms available, rooms sold and room revenue.
* Occupancy and ADR move against each other, so neither can judge a decision alone.
* RevPAR carries both, so it is the number that settles an argument.
* Always ask which of occupancy or ADR moved RevPAR.
## Next
* [Lesson 3 · Pickup and booking pace](/revhero-docs/learn-revhero/learn/03-pickup-and-pace.md) — the same numbers, but over time.
* [ADR](/revhero-docs/your-hotels-performance/dashboard/adr.md) · [RevPAR](/revhero-docs/your-hotels-performance/dashboard/revpar.md) · [Occupancy](/revhero-docs/your-hotels-performance/dashboard/occupancy.md) — the widgets in detail.
***
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