Challenging the Reign of Hospitality’s Favourite Metric

For decades, Revenue per Available Room (RevPAR) has been the hospitality industry’s gold standard metric, revered for its simplicity and universality. By blending occupancy and average rate into one number, it offers a quick snapshot of room revenue performance regardless of a property's size or segment. It's no surprise that in one industry survey, a whopping 77% of hoteliers named RevPAR as their preferred performance measure, placing it well ahead of any other metric. From budget hotels to five-star palaces, RevPAR has become the common language of success.

Yet as I’ve learned in my years in the industry, blind faith in RevPAR can be misleading. Is RevPAR truly the best indicator of hotel performance across all segments? Or have we been clinging to a legacy metric that doesn’t tell the whole story?

The Ubiquitous KPI and Its Blind Spots

It’s hard to overstate how deeply RevPAR is ingrained in hotel management. Thanks to benchmarking firms like STR and MKG, daily and monthly RevPAR figures are treated as a report card for hotels worldwide. STR’s popular competitive index (RGI) literally ranks hotels by RevPAR relative to their compset. Reinforcing that RevPAR is the number to beat each morning. Industry news releases routinely trumpet RevPAR movements as indicators of market health. For example, a European report noted occupancy up with RevPAR up 6.4% year-on-year. Owners, hotel managers, and analysts all have long used RevPAR as a shorthand for how well a hotel is doing.

And it is understandable. RevPAR conveniently rolls up occupancy and rate into one tidy metric. Unlike rooms revenue or occupancy alone, RevPAR normalises performance for hotel size and demand, enabling quick apples-to-apples comparisons across different properties and markets. It’s been the “efficient and simple” yardstick that everyone from GMs to investors can grasp.

But RevPAR’s very simplicity is also its downfall. By focusing only on rooms revenue, RevPAR inherently has blind spots. It ignores any ancillary revenues. A hotel that aggressively drives restaurant sales or upsells spa packages won’t see any of that effort reflected in RevPAR. Conversely, a property can inflate RevPAR by hiking room rates or occupancy even if it means slashing other revenue opportunities. Or worse, eroding guest satisfaction. RevPAR is also utterly indifferent to costs. A high RevPAR might impress on paper, but if it was achieved by costly promotions or labor overtime, the bottom line may tell a different story. Metrics such as GOPPAR (Gross Operating Profit per Available Room) can begin to fill that gap.

The Budget Hotel Reality

Coming from the budget segment, I’ve seen firsthand where RevPAR can lead you astray. In many budget hotels, rooms are all you sell. There’s no spa, no upscale restaurant, sometimes not even a meeting room to rent out. Ancillary revenue is minimal by design. So one might think RevPAR is perfectly sufficient for budget properties. After all, if rooms drive 90%+ of revenue, what else do you need to measure?

The catch is that even for a lean budget hotel, RevPAR can mask crucial differences in cost structure and space utilisation. Consider two competing budget hotels on the same street, each with a £50 RevPAR. On paper they’re equals. But what if Hotel A includes a free continental breakfast in that rate, while Hotel B charges extra for breakfast or has none at all? Hotel A’s RevPAR triumph comes at the expense of higher food cost and labor – cutting into profit. Whereas Hotel B keeps more of each pound of room revenue as profit. RevPAR alone won’t reveal that Hotel B likely has the better margins.

Space is the other critical factor for budget hotels. These properties live and die by efficient use of every square meter. A vacant corner that could house another room, or an oversized lobby that could have been smaller, represents revenue left on the table. RevPAR, however, doesn’t account for physical footprint. Whether your 100-room hotel sits in a 5,000 m² building or squeezed those rooms into 3,000 m², the RevPAR formula treats them the same. In the budget world, that difference matters hugely to profitability. I’ve seen budget operators obsess over profit per square meter. Investors coming from real estate view hotels through a per-square-meter lens. For them, the focus is on profitability and efficiency of space. How much return each meter of the asset delivers. Here, RevPAR offers no insight at all.

Metrics like Total Revenue per Square Meter (REPSM) or Gross Operating Profit per Square Meter (GOP/m²) can therefore be far more telling in a budget context. A limited-service hotel might sacrifice a breakfast room and the modest F&B revenue that comes with it to add three more guest rooms. RevPAR might stay flat or even drop, if ADR is lower for those new rooms, but profit per m² would tell the real story of improved productivity. As hotel investor guidance points out, investors are increasingly adopting a “highest and best use” mindset, viewing every square meter as something to be monetised at the highest level. Especially in budget hotels, GOP per m² can reveal whether you’re truly squeezing the most profit out of your property’s footprint.

The RevPAR Paradox

To see how RevPAR’s dominance spans all segments, I recently spoke with an industry insider who works for a luxury hotel brand. I asked if, given all their focus on guest experience and total guest spend, they still live by RevPAR. Her answer was a resound positive. Despite operating full-service hotels with multiple outlets, she admitted that RevPAR remains the golden standard. Owners and asset managers expect to see that number, and STR comp set rankings revolve around it.

This highlights a paradox in the luxury segment. Luxury hotels pride themselves on providing expansive services (fine dining, spas, concierge experiences) and optimising total revenue per guest rather than just room rate. Many luxury operators track TRevPAR (Total RevPAR) internally or even a variant like RevPAC (Revenue per Available Customer) to gauge how well they’re capturing each guest’s wallet share. In fact, at some iconic luxury properties, ancillary services can account for 30–40% of total revenue. A pure rooms-only metric overlooks a huge slice of the pie.

Yet when these same luxury teams benchmark success, they still largely fall back to the old reliables: occupancy, ADR, and RevPAR. It’s the metric their corporate office reports up to investors because it’s industry-standard and readily comparable. Guest satisfaction scores and total spend metrics are treated as important-but-separate data points, not the “score” of the game. The result is a kind of split personality: publicly, RevPAR rules; privately, luxury hoteliers know it’s incomplete.

This conversation reinforced that even at the high end, RevPAR’s reign continues. They face the same dilemma as budget folks: focus too much on RevPAR, and you might ignore youur other strategic goals. A glossy RevPAR can hide deep cracks in profitability or service quality, whether you’re running a roadside motel or a resort paradise.

STR, MKG and the Reinforcement of RevPAR Culture

Why does the industry keep clinging to RevPAR? A big reason is the ecosystem of tools and benchmarks built around it. Companies like STR and MKG have, for years, published the scorecards by which hotels compare themselves. Open any STR report and you’ll see the holy trinity: Occupancy, ADR, RevPAR. With RevPAR often treated as the bottom-line indicator of market share and performance. When an owner gets a monthly STR report, the first number they likely check is their RGI to see if the hotel is winning or losing versus the comp set. This institutionalises RevPAR as the primary gauge of competitive success.

MKG’s city reports and other industry analyses do the same. The health of a hotel market is summarised with lines like “ADR up 3.5% and RevPAR up 6.4%”. If all the headlines and peer rankings centre on RevPAR, it reinforces to every GM and revenue manager that their worth will be judged on that metric. Unsurprisingly, they then optimise for it, even if it does not make strategic sense.

There’s also a data availability aspect. RevPAR is easy to calculate and universally reported. Until recently, getting accurate data on competitors’ total revenue or profits was impossible. Hotels guard those closely. But everyone willingly submits rooms data to STR because it’s anonymous and mutually beneficial. Thus, the only common ground for benchmarking remained rooms metrics. Even as some progressive hotels track total revenue per guest or profit margins internally, they had no industry-wide yardstick to compare those. RevPAR became the de facto standard partly because it was the only way to benchmark externally. This status quo persisted far longer than it should have.

The good news is that we are finally starting to see a change. STR itself has introduced a Monthly P&L benchmarking program to collect and compare profitability metrics across hotels. In early 2020, STR launched new reports allowing hotels to benchmark GOPPAR and other bottom-line figures. The uptake has been slow but signals an acknowledgment: owners and operators want to "truly evaluate a hotel’s returns,” looking beyond RevPAR for a fuller picture of performance. Industry leaders are openly talking about moving off the RevPAR-only diet. Joseph Rael of STR observed that “everyone in the industry is moving toward profitability as a new measurement”.

Likewise, more voices are questioning RevPAR’s adequacy in today’s market. One analysis from HotStats bluntly stated that “focusing on RevPAR as the main indicator of performance only leads to biased analyses and missed opportunities to maximize profitability.” In other words, if we keep worshipping RevPAR uncritically, we risk making dumb decisions.

Toward Better Benchmarks: GOPPAR, TRevPAR, and GOP/m²

So what metrics should we embrace? I’m not advocating to throw RevPAR in the trash. It still has its place as a handy rooms revenue index. But it must be contextualized with broader success measures. Two key metrics in particular can realign focus where it belongs:

• GOPPAR (Gross Operating Profit Per Available Room): Instead of top-line rooms revenue, GOPPAR shows how much profit (after operating expenses) is generated per room. This directly addresses the profitability blind spot. A hotel with a high RevPAR but poor cost control will have an unimpressive GOPPAR. Industry push for GOPPAR is growing; many call it the new gold standard that truly “captures total revenue and expenses” for benchmarking. By tracking GOPPAR, hotels ensure that revenue growth isn’t coming at the expense of even faster-growing costs. It forces a conversation about efficiency, not just volume.

• TRevPAR (Total Revenue Per Available Room): This expands the numerator of RevPAR to include all revenue streams (rooms, F&B, spa, events, etc.). TRevPAR acknowledges that hotels are more than just rooms. It’s a gauge of how well a property is monetizing each room through all guest spending. A resort might have a modest RevPAR but an excellent TRevPAR if guests splurge on dining and activities. Using TRevPAR alongside RevPAR adds important context: are we growing ancillary revenues or leaving money on the table? Think of TRevPAR as a broader revenue scope; a step toward measuring guest value delivered and captured. As hotels push for more revenue from each guest through upselling and extra services, TRevPAR shines a light on that success.

• Profit per Square Meter (or its cousin Revenue per m²): This metric marries the hotel’s financial performance with its physical footprint. Crucial for owners concerned with real estate returns. Monitoring GOP/m² helps answer questions like: Is that banquet hall pulling its weight? Could the gift shop space be repurposed more profitably? It brings the “highest and best use” concept from real estate into day-to-day hotel ops. In an era where every square foot is scrutinised, a low profit per m² is a red flag to rethink space allocation. For budget hotels particularly, profit per m² can validate the efficiency of their compact designs (or conversely, expose hidden inefficiencies even when RevPAR looks fine).

Ultimately, the goal of adopting these metrics is to push the industry toward a more holistic, guest-centric definition of success. These metrics discourage the tunnel vision of filling rooms at any cost, instead promoting strategies that increase overall spend and loyalty (after all, happy guests spend more) while yielding healthy profits.

Embracing a New Scorecard

Change is hard in hospitality. We’ve been quoting RevPAR for generations and it remains ingrained in owner reports, analyst forecasts, and weekly commercial meetings. But as the industry emerges from unprecedented challenges (a pandemic, labor shortages, rising costs) the old one-dimensional KPIs just don’t cut it anymore. The hotels that thrive in this new era will be those willing to look beyond RevPAR and embrace a richer set of metrics.

This means challenging our teams and even our owners to stop fixating on a single number. It means educating stakeholders that a slight dip in RevPAR is not alarming if GOPPAR is strong. It means celebrating improvements in guest satisfaction or total revenue per customer, even if they don’t show up in the RevPAR figure. And practically, it means incorporating new measurements into monthly reports and competitive benchmarking. Dragging those alternative KPIs out of the back pages and onto the first page next to RevPAR.

The reward for doing so is a more accurate, accountable, and ultimately profitable business model. We avoid the trap of chasing volume for volume’s sake. We can make decisions that might initially sacrifice a bit of RevPAR glory but deliver more value to guests and more profit to the bottom line. For an industry supposedly all about hospitality and service, it’s ironic that we’ve let a cold revenue ratio dictate success for so long. It’s time to change that.

RevPAR won’t disappear overnight, and it shouldn’t, but it’s high time we knock it down a peg. By all means, track it and benchmark it, but don’t worship it.