The most important lever in hotel underwriting is RevPAR, but the most powerful sub-lever is usually ADR, not occupancy.
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Why: hotel value is ultimately driven by stabilized NOI / EBITDA, and room revenue is usually the largest and cleanest driver of that NOI. RevPAR captures both occupancy and average daily rate:
RevPAR = Occupancy × ADR. It is widely used because it combines pricing power and demand into one hotel-performance metric.
But when underwriting upside, I would usually care most about ADR growth because it tends to have better flow-through to profit. Raising rate on rooms you are already selling usually adds revenue with limited incremental variable cost. Increasing occupancy often adds labor, housekeeping, breakfast, utilities, OTA commissions, wear-and-tear, and other per-occupied-room costs. HotStats makes a similar distinction: RevPAR alone can miss profitability, while GOPPAR / expense ratios reveal how much revenue actually converts into profit. GOPPAR just means gross operating profit divided by available rooms. Keep in mind gross operating profit sits above NOI and doesn't include all the fixed expenses that NOI does.
So the practical answer is:
Most important lever: stabilized RevPAR
Best upside lever inside RevPAR: ADR
Most important output: stabilized NOI / EBITDA
Most dangerous assumption: exit cap rate, because it magnifies every NOI miss
A simple example: a hotel at 70% occupancy and $150 ADR has $105 RevPAR. If you can push ADR to $165 while holding occupancy, RevPAR becomes $115.50, and much of that extra $10.50 per available room can flow through to profit. But if RevPAR improves only by filling low-rated, high-cost rooms, the NOI impact may be weaker.
In underwriting, I would stress-test the deal in this order: ADR → occupancy → operating margin / labor → PIP / capex → exit cap rate → debt terms. The best hotel deals usually underwrite to a believable story where market positioning or renovation supports higher ADR, not just vague occupancy growth.
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