Key industry terms you should be familiar with when considering the purchase of a lodging property.
- Occupancy Rate. Number of room nights sold divided by total number of room nights available during the period being measured. Often expressed on an annual basis. 365 nights X number of rooms = availability. Number of nights sold / availability = occupancy rate.
- Average Daily Rate(commonly referred to as ADR). A statistical unit often used in the lodging industry. The number represents the average rental income per paid occupied room in a given time period. ADR along with the property’s occupancy are the foundations for the property’s financial performance.
- RevPar. Revenue per available room. (RevPAR) is a performance metric calculated by multiplying an inn’s average daily room rate (ADR) by its occupancy rate. It may also be calculated by dividing an inn’s total room revenue by the total number of available rooms in the period being measured.
- Yield. Refers to a variable pricing strategy, based on understanding, anticipating and influencing guest behavior in order to maximize revenue or profits from a fixed, time-limited resource (such as airline seats, cruise ship cabins or inn room reservations).
- Rack Rate. The standard room rate established by the innkeeper for a certain type of room. Usually the
undiscounted published room rate.
