Finin2min two-minute summary
Hotels have finite room inventory that expires each night. Occupancy indicates the share of rooms sold; average daily rate (ADR) shows room revenue per sold room night; and revenue per available room (RevPAR) combines the two by dividing room revenue by sellable room nights. An operating-profit scenario further considers booking-channel commissions, room-level variable cost, ancillary contribution and period fixed costs.
Calculate room-night supply correctly
Start with the property room count multiplied by analysis days. Subtract rooms genuinely out of service for the applicable nights. This example excludes 60 unavailable room nights from 2,400 physical room nights, leaving 2,340 available. Sold room nights cannot exceed this amount. Some reporting standards may use alternative treatment for temporarily closed rooms; use a consistent definition before benchmarking.
ADR, occupancy and RevPAR are different measures
Occupancy equals room nights sold divided by room nights available. ADR equals room revenue divided by room nights sold; when no room nights are sold, ADR is not applicable rather than zero. RevPAR equals room revenue divided by available room nights. If a property has no available nights, RevPAR and occupancy are not applicable. Keep room taxes and unrelated services outside the room-revenue numerator unless the chosen reporting standard says otherwise.
Worked example with the sample property
The illustration has 80 rooms over 30 days and 60 room nights out of service. Available room nights are 2,340, of which 1,700 are sold. Occupancy is about 72.65%. With a net ADR of ₹5,000, room revenue is ₹85,00,000 and RevPAR is approximately ₹3,632.48. The average OTA share is 40%, and the OTA commission on that share is 15%, making this period’s OTA cost ₹5,10,000.
From room revenue to contribution and period result
Room-related variable expense is 1,700 × ₹1,100 = ₹18,70,000. Ancillary guest sales are 1,700 × ₹400 = ₹6,80,000, with a 35% contribution of ₹2,38,000. Contribution after OTA fee and room costs is therefore ₹63,58,000. After ₹31,00,000 fixed operating cost, the simplified operating result is ₹32,58,000 before additional nonmodelled items.
Break-even occupancy derives from marginal contribution
The contribution earned from one additional paid room night is ₹5,000 × (1−0.40×0.15) − ₹1,100 + ₹400×0.35 = ₹3,740. Break-even sold nights are ceiling(₹31,00,000 / ₹3,740), or 829 nights. This assumes stable room rate, channel mix and variable costs as occupancy changes. If unit contribution is zero or negative, occupancy growth by itself cannot cover fixed costs; if the required nights exceed capacity, break-even is infeasible under the assumptions.
OTA and direct-booking sensitivity
A direct booking often has a different acquisition cost from a marketplace or OTA booking. Use the actual effective OTA revenue share and commission rate instead of applying an OTA percentage to all rooms. Credit card MDR, rewards, taxes, brand loyalty costs, refunds, cancellation risk and travel-agent commissions may require separate input or analysis. Do not mistake higher RevPAR for a guaranteed higher profit.
Scope of ancillary sales and profitability
This scenario assumes per-occupied-night ancillary revenue and a contribution margin after ancillary variable expense. The result is not a standardised GOPPAR: depreciation, interest, corporate expenses, owner charges, payroll splits, room-service allocations, GST, property taxes and other costs may not be included. A financial controller should map the model to the hotel’s management accounts.
Frequently asked questions
Does an unsold room reduce ADR?
Not directly: unsold nights affect occupancy and RevPAR but ADR is revenue per sold room.
Is RevPAR the same as profit per room?
No, it ignores expense.
Can break-even nights exceed room supply?
Yes, which signals assumptions that cannot deliver the fixed-cost target within the stated capacity.
Are complimentary or staff stays sold?
The illustrated model counts paid room nights only.
Official sources and further reading
Sources explain the calculation conventions and rules referred to above. Notifications and standards change; confirm on the official site before you file, book or advise.
Educational working tool. Results follow the scope and assumptions described on this page and the figures you enter; they are not accounting, audit, tax, legal, investment or financing advice. Treatment depends on facts, contracts and the law or standard in force for the relevant period, so reconcile to your records and consult a qualified professional before you rely on a result.