What financial metric is used to measure a hotel's ability to generate profit per available room?

The financial metric that measures a hotel's ability to generate profit per available room is Revenue per Available Room (RevPAR). This metric is crucial in the hospitality industry as it combines occupancy rates and average daily rates into a single figure that reflects the overall financial performance of a hotel.

RevPAR is calculated by multiplying the average daily rate (ADR) by the occupancy rate, or by dividing total room revenue by the total number of available rooms. It effectively provides insight into how well a hotel is filling its available rooms and how well it is managing its pricing strategy to maximize revenue.

A focus on RevPAR allows hotel management to evaluate their performance in relation to industry standards and make data-driven decisions to improve profitability. In this instance, it serves as a useful indicator of a hotel's profitability, reflecting both volume (number of rooms sold) and pricing strategy (rate at which they sell those rooms).

Other metrics such as occupancy rate and average daily rate, while important, do not encapsulate both aspects of revenue generation in the same comprehensive way that RevPAR does. Gross operating profit refers to overall profit and does not specifically measure profitability relative to room availability, hence not serving the same targeted purpose as RevPAR.