How to Calculate and Improve 12 Hotel Performance Metrics

Revenue management is full of metrics, but we’ve narrowed it down to the ones that truly matter. Focus on these, and you’ll have a solid foundation for driving growth and steering the conversation with confidence.

Your quarterly strategy call is coming up, and you need the right figures to back your plan. The pressure isn’t just about having the numbers, it’s about what they say and how you’ll improve them.

Revenue management is full of metrics, but we’ve narrowed it down to the ones that truly matter. Focus on these, and you’ll have a solid foundation for driving growth and steering the conversation with confidence.

Let’s dive in.

1. Occupancy rate

One of the fundamental performance metrics or key performance indicators (KPIs) in hotel revenue management, occupancy rate measures the percentage of available rooms occupied over a given time period, offering a direct indicator of demand.

While high occupancy signals strong guest interest and effective sales strategies, you should analyze it alongside other key hotel metrics to ensure you don’t sacrifice your profitability for booking volume.

Occupancy provides insights into both market demand and your ability to convert this into bookings.

A consistently high occupancy rate suggests strong market positioning, effective pricing strategies and successful distribution management, while a low figure may indicate pricing inefficiencies, weak demand or poor marketing strategies.

Consider these key takeaways:

• Benchmarking: Comparing occupancy against competitors and historical performance helps assess market positioning.

• Seasonality: Hotels in seasonal markets may experience fluctuating occupancy rates, requiring dynamic pricing strategies.

• Profitability: A high occupancy with low average daily rate (ADR) can signal that discounts or promotions are eroding profitability.

How to calculate occupancy rate

Occupancy = rooms used / total rooms available

To turn it into a percentage, just multiply by 100.

To effectively track occupancy, you should calculate it daily, weekly and monthly to capture both short-term fluctuations and long-term trends. The necessary data – total available rooms and rooms sold – can be sourced from your property management system (PMS) or central reservations system (CRS).

Comparing current occupancy to historical data and market trends helps identify patterns and areas for improvement.

For more actionable insights, you should segment occupancy data by room type, booking channel and market segment to understand where demand is strongest and where adjustments are needed.

How to improve occupancy rate

While high occupancy is desirable, optimization requires a balance between volume and revenue generation. To improve your occupancy without compromising profitability, try to:

• Optimize your pricing strategy: Use dynamic pricing to adjust rates based on demand, competitor pricing and booking trends.

• Manage distribution channels: Diversify booking sources by leveraging online travel agencies (OTAs), direct booking incentives and corporate contracts.

• Leverage demand forecasting: Use historical data and market trends to anticipate demand shifts and adjust strategies accordingly.

• Implement targeted promotions: Offer discounts and packages tailored to specific guest segments during low-demand periods.

• Improve conversion rates: Streamline the booking process and optimize direct booking channels to capture more reservations.

• Focus on guest retention: Encourage repeat bookings with loyalty programs and personalized marketing campaigns.

By actively monitoring and adjusting these strategies, you can ensure you’re maximizing both room sales and overall profitability.

This advice feeds into many of the other metrics we discuss, which brings us to ADR.

2. Average daily rate (ADR)

Another fundamental metric, ADR represents the average room revenue earned per sold room over a given period.

It reflects pricing effectiveness and revenue generation from occupied rooms, making it a key benchmark for assessing your financial performance. While ADR is often calculated daily, it can also be tracked weekly, monthly or seasonally to monitor trends and fluctuations.

ADR offers valuable insight into how well you’re capitalizing on demand and positioning yourself in the market, helping you answer critical questions, such as:

• Are we pricing our rooms optimally relative to demand? A stagnant or declining ADR could indicate underpricing, missed revenue opportunities or an overreliance on discounting.

• How does our pricing compare to competitors? Comparing ADR with the MPI and RGI (see below) helps determine if you’re commanding a competitive rate.

• Are we attracting the right guest segments? A high ADR may suggest strong pricing power and demand from high-value segments, while a low ADR could indicate over-reliance on more budget-conscious travelers.

Tracking ADR alongside RevPAR and GOPPAR (see below) provides a more complete picture of financial health; higher ADR doesn’t always mean higher profitability if occupancy or operating margins are weak.

How to calculate ADR

ADR (over any given time period, often a day) = (gross) room revenue / number of hotel rooms sold

To effectively use ADR, hoteliers should calculate it frequently (at least daily, but ideally in real-time via a tech solution) and analyze it in different contexts:

• Compare ADR to previous periods (e.g., year-on-year and month-on-month) to identify trends and seasonality.

• Segment ADR by channel, market and room type to understand revenue performance across different booking sources and offerings.

• Benchmark ADR against competitors using hotel industry reports and STR data to assess market positioning.

The required data – gross room revenue and the number of rooms sold – is typically sourced from your PMS reports or revenue management platforms.

Advanced hoteliers integrate ADR tracking with demand forecasting tools to optimize pricing dynamically.

How to improve ADR

Improving ADR requires a strategic balance between pricing optimization, product value and targeted sales efforts. Beyond dynamic pricing and demand forecasting, consider:

• Upselling and cross-selling: Train staff and optimize digital touchpoints to promote premium room types, add-ons and extended stays.

• Enhancing perceived value: Improve room features, amenities and service levels to justify higher rates without sacrificing demand.

• Strategic partnerships: Collaborate with high-value corporate clients, travel agencies and luxury concierge services to attract guests willing to pay premium rates.

• Effective rate fencing: Structure pricing tiers with non-refundable rates, minimum stay requirements and exclusive perks to maximize ADR without discouraging bookings.

• Optimized segmentation: Focus marketing on high-spend guests, such as business travelers and special event attendees, who prioritize convenience and experience over price.

Since ADR is closely tied to your hotel’s occupancy rate, RevPAR and TRevPAR, efforts to improve it should align with an overall revenue strategy that considers total guest spend, operational efficiency and market positioning.

3. Average room rate

Average room rate (ARR) represents the average price guests pay per room over a given period.

Closely related to ADR, it can sometimes be used interchangeably or with slight contextual differences, depending on regional or operational preferences. ARR provides a snapshot of pricing efficiency, helping you understand how well you’re monetizing available rooms.

ARR is a direct reflection of pricing strategy, demand patterns and market positioning. A well-optimized ARR indicates effective rate management, while a declining ARR may signal pricing inefficiencies or excessive discounting.

Key insights overlap heavily with those of ADR, so pay attention to revenue optimization, market positioning and demand patterns.

How to calculate average room rate

The formula for ARR is exactly the same as for ADR – see above. Simply select a period of time that you’re interested in analyzing.

ARR should be assessed daily, weekly and monthly, depending on your revenue management goals.

To calculate it, you need total room revenue and the number of rooms sold – both available from PMS and financial reports. Tracking ARR alongside occupancy rate and RevPAR provides a clearer picture of revenue efficiency.

How to improve average room rate

To increase ARR without sacrificing occupancy, focus on value-driven pricing and strategic upselling. Alongside the tips outlined for improving your ADR, you can:

• Minimize discounting: Avoid excessive rate reductions by using targeted promotions instead of blanket discounts.

• Optimize your inventory management: Use length-of-stay restrictions and dynamic pricing to drive higher-yield bookings.

4. Revenue per available room (RevPAR)

RevPAR is one of the most critical performance metrics in hotel revenue management, measuring your ability to generate room revenue relative to its total available rooms.

By incorporating both occupancy and ADR, RevPAR provides a balanced view of pricing strategy and demand efficiency. While a high ADR might seem favorable, if occupancy is low, overall revenue potential may still be underutilized; your hotel’s RevPAR bridges this gap by evaluating both factors together.

RevPAR is a direct indicator of how well a hotel is converting its room inventory into revenue. By tracking it, you can understand your pricing effectiveness, demand management and market competitiveness, with key insights including:

• Revenue efficiency: Poor RevPAR suggests you may not be maximizing revenue due to low occupancy, poor rate management or external market pressures.

• Competitive positioning: See guidance in the ADR section.

• The effectiveness of your hotel operations: Since RevPAR focuses only on room revenue, it should be evaluated alongside TRevPAR (see below) for a more holistic view of financial performance.

How to calculate RevPAR

There are two key formulae used to calculate RevPAR:

Our advice is to assess RevPAR daily, weekly and monthly to monitor trends and adjust strategies in real-time.

The two common methods require data from your PMS and financial reports. Segmenting RevPAR by room type, booking channel or guest segment can also uncover revenue optimization opportunities.

How to improve RevPAR

Since RevPAR is influenced by both pricing and occupancy, improving this metric requires a dual approach – increasing ADR while maintaining or enhancing occupancy. Here are some strategies:

• Strategic overbooking: To mitigate cancellations and no-shows, controlled overbooking based on historical data can help maintain occupancy without excessive discounting.

• Rate fencing: See above.

• Optimized distribution mix: Shift away from over reliance on high-commission OTAs by strengthening direct booking incentives, reducing acquisition costs and boosting net revenue.

• Day-of-week pricing adjustments: Adjust rates dynamically based on historical occupancy trends, ensuring stronger revenue capture on peak demand days.

• Group and corporate sales optimization: Balance group and transient bookings by setting appropriate allocation limits, ensuring that higher-paying segments aren’t displaced by lower-yield contracts.

• Upselling and cross-selling: See above. This can be incentivized for front-desk staff.

5. Revenue per occupied room (RevPOR)

RevPOR measures the average revenue generated per occupied room, considering all revenue streams, including room rates, food and beverage sales and other ancillary services.

Unlike RevPAR, which accounts for all available rooms, RevPOR focuses only on rooms that were actually sold, offering deeper insights into guest spending behavior.

RevPOR is a key indicator your hotel’s ability to maximize revenue from each guest, providing insights into:

• Guest spending habits: A higher RevPOR suggests guests are spending more on additional services.

• Effectiveness of ancillary services: Strong RevPOR signals that upselling and cross-selling strategies are working.

• Revenue efficiency per guest: If your hotel has a high RevPOR, it may not need full occupancy to achieve strong financial results.

How to calculate RevPOR

RevPOR = total revenue / number of rooms actually sold to guests

RevPOR should be monitored daily, weekly and monthly. You’ll need total revenue data (including non-room revenue) and the number of occupied rooms, both of which can be sourced from PMS and financial reports.

Tracking RevPOR by guest segment and booking channel can reveal areas for revenue enhancement.

How to improve RevPOR

To improve this metric at your hotel, consider:

• Upselling premium rooms and services: Train staff to promote room upgrades, dining and wellness services.

• Enhancing in-room experiences: Offer premium in-room dining and paid entertainment options.

• Creating bundled packages: Combine accommodations with dining, spa or experience-based offerings.

• Optimizing pricing for additional services: Adjust pricing strategies for high-margin amenities like parking and late check-outs.

6. Total revenue per available room (TRevPAR)

TRevPAR expands upon RevPAR by incorporating all revenue sources, including food and beverage, events and ancillary services. This metric provides a holistic view of a hotel’s revenue performance and bottom line beyond just room sales.

From analyzing your TRevPAR, you can gain insights into your hotel’s:

• Overall financial health: A strong TRevPAR indicates that your revenue performance is strong across multiple departments within the hotel.

• Guest spending trends: Tracking how and where guests spend in your hotel reveals the success of your revenue diversification efforts and highlights areas for improvement.

• Competition: How well are you monetizing guests compared to your market rivals?

How to calculate TRevPAR

TRevPAR = total revenue / total number of available room nights

You should track TRevPAR at least monthly to assess revenue diversification strategies. Total revenue figures can be sourced from PMS and accounting software, while total available rooms come from operational data.

How to improve TRevPAR

To up your TRevPAR, these techniques might help:

• Expanding ancillary revenue streams: Introduce paid experiences, premium Wi-Fi and late checkout fees.

• Maximizing F&B opportunities: Encourage in-house dining through exclusive guest offers.

• Enhancing event and meeting space utilization: Promote the likes of conference and wedding bookings.

• Offering value-added packages: Include spa, dining or local experiences in booking bundles.

7. Average length of stay (ALOS)

ALOS measures the average number of nights a guest stays at a hotel, influencing occupancy, operational efficiency and revenue stability, and revealing two crucial insights, among others:

• Guest booking behavior: A higher ALOS often signals success in attracting business travelers and vacationers.

• Revenue stability: Longer stays reduce room turnover costs and contribute to consistent revenue.

How to calculate ALOS

ALOS (over any given time period, often a day) = total number of nights booked / number of individual room reservations

As a hotelier, you should assess ALOS weekly and monthly to identify useful trends, with data being sourced from your PMS and guest booking reports.

How to improve ALOS

Strategies to improve your hotel’s ALOS include:

• Introducing stay-based discounts: Offer discounts for extended stays.

• Creating long-stay packages: Tailor promotions for business travelers and digital nomads.

• Improving direct booking incentives: Encourage longer bookings through exclusive website offers.

8. Gross operating profit

GOP represents a hotel’s earnings before fixed costs, the main insight it brings being evidence of how efficiently revenue is converted into profit, specifically on your:

How to calculate GOP

GOP = gross profit − operational costs

We’d recommend you evaluate your GOP on a monthly and quarterly basis, with data being gathered from financial statements and cost reports.

How to improve GOP

Our three top tips for improving this metric at your hotel are:

• Optimizing labor costs: Adjust staffing based on occupancy forecasts.

• Improving procurement strategies: Negotiate better supplier contracts.

• Enhancing energy efficiency: Reduce utility costs through sustainability initiatives.

9. Gross operating profit per available room (GOPPAR)

GOPPAR refines GOP by linking it to available rooms, offering you a clearer view of your hotel’s profitability relative to inventory.

Two important facets it reveals about your hotel performance are:

How to calculate GOPPAR

GOPPAR = gross operating profit (GOP) / total available rooms (TAR)

Again, using data gathered from your PMS and financial reports, GOPPAR should be analyzed monthly and quarterly.

How to improve GOPPAR

To improve GOPPAR at your property, try to:

• Reduce unnecessary expenditures: Audit your costs and eliminate inefficiencies.

• Boost non-room revenue: Increase profitability through high-margin services.

• Improve rate strategy: Ensure pricing aligns with demand and market conditions.

10. Market penetration index (MPI)

A vital statistic for anyone keeping their eye on the local hospitality industry, MPI measures a hotel’s occupancy performance relative to competitors, indicating market share effectiveness.

Its two big insights are those on:

• Competitive positioning: A higher MPI means stronger market demand capture.

• Demand management efficiency: With this, you can identify if you need to make pricing or marketing adjustments.

How to calculate MPI

MPI = (number of occupied rooms / total number of available rooms) x 100

Try to track your MPIU monthly and during key demand periods, sourcing your data from STR reports and competitor benchmarking tools.

How to improve MPI

Let’s outline three techniques for improving MPI:

• Refining competitive pricing: Adjust rates based on competitor trends.

• Strengthening brand differentiation: Highlight unique selling points in marketing.

• Enhancing direct booking strategies: Reduce dependency on OTAs.

11. Revenue generation index (RGI)

RGI measures RevPAR performance against competitors, showing whether a hotel is capturing its fair share of market revenue.

As with MPI, it delivers two important insights:

• Rate positioning effectiveness: If your RGI is low, this suggests underpricing or weak demand capture.

• Competitive revenue performance: Use this to identify if your hotel is outperforming or lagging behind market trends.

How to calculate RGI

RGI = RevPAR / aggregate RevPar of comparable hotels in your local market

Again, as with MPI, RGI should be reviewed monthly and during peak demand seasons, using benchmarking reports from STR and market analytics tools.

How to improve RGI

Three ways to improve your RGI include:

• Optimizing your revenue management strategies: Adjust pricing dynamically based on demand.

• Improving guest satisfaction: Enhance offerings to justify higher rates.

• Strengthening your loyalty programs: Retain high-value customers and drive direct bookings.

12. Conversion rate

Conversion rate measures the percentage of website visitors or inquiries that result in actual bookings, reflecting the effectiveness of digital marketing and booking processes, and revealing such insights as:

How to calculate conversion rates

Conversion rate = (number of Inquiries or website visitors / number of bookings) × 100

Working with your marketing colleagues, your conversion rates should be monitored continually using Google Analytics, your PMS and booking engine reports.

How to improve conversion rates

To improve this metric at your hotel, you can:

• Simplify the booking process: Reduce friction in the online booking journey.

• Optimize website speed and design: Ensure a seamless user experience.

• Leverage retargeting campaigns: Re-engage potential guests with targeted ads.

• Enhance direct booking incentives: Offer exclusive perks for booking through the hotel’s website, as well as your social media channels.

Your metrics are only as good as your data

Even the best revenue management strategies will fall short without accurate, reliable data.

Without a clear picture of demand, pricing trends, and market shifts, you’re making decisions in the dark. That’s where Lighthouse comes in – providing real-time, granular insights that transform raw data into actionable intelligence.

By integrating high-quality, always-fresh data into your strategy, you can move beyond guesswork and make confident, data-driven decisions when calculating your revenue management metrics for that all important strategy call.

Ready to transform your hotel metrics into actionable strategy? Lighthouse’s commercial platform delivers the real-time data and market intelligence you need to make confident decisions.

Our comprehensive solution helps you track, analyze and improve every metric that matters to your business. Get started today.

About Lighthouse

Lighthouse (formerly OTA Insight) is the leading commercial platform for the travel & hospitality industry. We transform complexity into confidence by providing actionable market insights, business intelligence, and pricing tools that maximize revenue growth. We continually innovate to deliver the best platform for hospitality professionals to price more effectively, measure performance more efficiently, and understand the market in new ways.

Trusted by over 65,000 hotels in 185 countries, Lighthouse is the only solution that provides real-time hotel and short-term rental data in a single platform. We strive to deliver the best possible experience with unmatched customer service. We consider our clients as true partners – their success is our success.