Which metric best reflects the combined effect of occupancy and pricing changes on revenue potential?

• A. Occupancy rate
• B. Average daily rate
• C. Net profit
• D. RevPAR

Answer: (D)

To understand revenue potential, you want a metric that combines how full the inventory is with the price at which it’s sold. RevPAR, or revenue per available room, does exactly that by tying occupancy and rate into one figure. It’s essentially what you get when you consider both how many rooms are sold and at what price, since RevPAR equals the average daily rate times the occupancy percentage (or total room revenue divided by available rooms). When demand increases, you can see revenue potential rise through higher occupancy, higher rates, or both, and RevPAR captures that combined effect. Occupancy rate alone ignores price, the average daily rate alone ignores how many rooms are sold, and net profit reflects costs too, which isn’t the direct measure of revenue potential from occupancy and pricing. So RevPAR best reflects their joint impact on revenue potential.