Hotel occupancy rate is a fundamental metric in the hospitality industry. This is because it provides a clear view of the effective use of space. In addition, it helps to maximize revenue and bookings, as well as to make informed decisions on resource management.
Here we will tell you how to calculate the occupancy rate in your hotel so you can make your booking and revenue projections. This will help you improve your finances and get more return on your investment.
Table of Contents
How to calculate the hotel occupancy rate step by step
Step 1: Determine the calculation time period
The first step in calculating the hotel’s occupancy rate is to determine the time period over which the calculation will be made. This period may vary depending on your hotel business plan, for example, for newly opened hotels these projections are made for 1 year or more.
Within the hotel industry, calculations are usually made according to the season of the year: high season, low season, vacations, etc. You can even use 2 time periods, a long-term projection and a seasonal one.
Step 2: Identify how many hotel rooms you own
The next step in how to calculate occupancy rate is to identify the total capacity of the space. In a hotel, this would be the total number of total rooms available, i.e. the maximum capacity of your accommodation.
Imagine you are trying to figure out how to calculate the occupancy rate for a summer vacation. Then your starting point should be the number of rooms you can rent out to your guests, e.g. 20, 100, 8,000, etc. Including standard rooms as well as Junior Suites, Presidential Suites, bungalow, etc.
Step 3: Gather market occupancy data
An important key in how to calculate the hotel occupancy rate is to gather information and occupancy data from the hotel market. In the context of a hotel, this means counting how many rooms were occupied in similar periods within your hotel, for example, in peak seasons in previous years.
But that’s not all, in how to calculate the occupancy rate it is also important to know how the occupancy of other hotels and the destination has been. For example, if where your hotel is located there are 24,000 hotel rooms and in high season 90% of them are occupied, you already have good data that can help you estimate your potential occupancy.
Step 4: Calculate the total occupancy
The next step is, with all the data at hand, to calculate the total occupancy for the selected time period. One way to do this is to average the historical occupancy. If your hotel has been in operation for 5 years, for example, you can take an average occupancy and use it as an estimate.
If your hotel is new, you can use the market average occupancy. First determine how many rooms are occupied in that time period. Then divide the total number of occupied rooms by the number of hotels, this will give you an average that you can use as a starting point.
Step 5: Get the percentage
Finally, to calculate the occupancy rate, divide the total occupancy obtained in step 4 by the total capacity of your hotel (or you can do the same with market data). Then multiply the result obtained by 100 to determine the percentage as such.
Let’s say your hotel has 120 rooms and in high season 78 rooms are occupied. Then divide 78 by 120 and then multiply by 100: 78/120 = 0.65 * 100 = 65%. As you can see, the hotel occupancy will be 65%.
Benefits of knowing how to calculate your hotel occupancy rate
Increase your bookings
Knowing the occupancy rate allows management to adjust pricing and marketing strategies to maximize revenue. For example, in low seasons, they can implement promotions to increase bookings and in high seasons, adjust rates to obtain more revenue by taking advantage of high demand.
More efficient management of resources
Knowing how to calculate occupancy rates helps to identify shrinkage, areas that require more resources or where budgets can be cut. In this way, strategies can be implemented and hotel KPIS can be tracked more accurately.
More informed decision making
With accurate occupancy data, managers can make informed decisions about the need to increase hotel capacity, close booking channels, or raise or lower rates. For example, if occupancy is consistently low, the current rate may need to be reevaluated.
Anticipating demand
Many hotels see their bookings eroded because they fail to prepare for and anticipate changes in room demand. By knowing how to calculate occupancy rates you can anticipate these changes by adjusting your offer, promotions and communication ad hoc to the market situation.
What if you don’t know how to calculate the hotel occupancy rate?
Not knowing how to calculate hotel occupancy rates can affect your hotel’s planning, as well as your finances. First of all, your rate planning will not be as accurate, which can cause you to find yourself above or below the average cost of the competition, losing money!
But that’s not all, they will lack information that will help you make the right decisions. For example, scheduling remodeling or room work. As well as not taking advantage of changes in demand such as increased occupancy in high season.
At IHCS we help you to improve the strategic planning of your hotel.
If you want to improve the strategic planning of your hotel and increase both occupancy and profits, it is necessary to have a precise and clear vision, as well as the right tools!
At IHCS you will have all our experience, knowledge and trajectory at your disposal to help you improve the planning and structure of your hotel. We will guide and advise you so that each area and each person in your company work in the same harmony, thus achieving more and better results.
