Occupancy Rate

Occupancy rate is a ratio of inhabited vs total available rooms used to help hotels understand the demand for their property across time.

What Is Occupancy Rate?

Occupancy rate is the ratio of occupied rental space in a property to the total number of units available in that area. Every hotelier should. A hotel’s occupancy rate in a given period of time is calculated by dividing the total units rented in said period by the total available spaces to rent out. When multiplying this proportion by 100, one can also calculate the occupancy rate percentage associated with their inputted values.

Occupancy rate % = (Total rooms occupied / Total rooms available) * 100

Why Is Occupancy Rate Important?

A hotel’s occupancy rate can tell us if the business is experiencing success or not. If the occupancy rate of the location is high, that means that business is booming. There is not necessarily a specific threshold for a good occupancy rate; the best occupancy rate for a hotel is the one that generates the most revenue for it. An 80% occupancy rate might be more profitable than a 100% occupancy rate for a property, so ideal occupancy rate should be determined on a case-by-case basis. 

On the other hand, when a hotel suspects that it is financially dragging during a certain period of time, it can confirm or deny this by observing its occupancy rate and how it compares to other hotels’ rates. Should hotel management notice that their occupancy rate is lower than those of other hotels in their area, they should work to raise the number of rooms they are able to occupy on a regular basis.

Ways To Increase a Low Occupancy Rate

Increasing occupancy rate, just like calculating the ideal value it should sit at, is determined differently for every hotel. Some situations in which occupancy rates experience a temporary drop are seemingly inevitable; airport properties, for example, often experience high occupancy rates during weekdays only because of their locations’ convenience to travelers. How, then, might they raise their occupancy rates when they are affected by a separate industry? In other situations, a low occupancy rate might be caused by a strategy that simply is not working for a hotel.

The general advice given for increasing a hotel’s occupancy rate is to adjust marketing techniques for its period of slow business. Using the same example of airport properties, these locations can market more heavily on weekends to offset the low demand for them during those periods of time.

Packages and specials might also entice customers to occupy rooms that they feel have more value than before. Amenities also accomplish the same goal; occupants often choose the hotel they wish to stay at based on how its amenities compare to those of nearby hotels.

What most affects the choices of potential customers, though, is reviews. The more impressed an occupant is, the more likely they will recommend the hotel to others or come back themself. If demand and seasonality are not the reason for a hotel’s low occupancy rate, its managers might want to invest in better quality staff training and services to ensure that their occupants are happy staying at their property.