Calculating hotel occupancy rate

Hotel occupancy rate, what is it? How do you calculate it? The occupancy rate is an important KPI for accommodation. Read everything about it.

What is occupancy rate?

The occupancy rate is often referred to as Occupancy Rate. This KPI (Key Performance Indicator) expresses the occupancy of rooms as a percentage over a period. A basic KPI and perhaps the best-known and very important for revenue management.

Calculating occupancy rate

The formula for calculating the occupancy rate is as follows:

(Number of occupied rooms / Number of available rooms) x 100 = Occupancy rate in percentage

For example, a hotel with 20 rooms books an average of 16 occupied rooms throughout the year. The occupancy rate is then 16 / 20 * 100 = 80%. To apply the formula, it is first important to have an average occupancy per room over the desired period.

No-shows and occupancy rate

No-shows are not included in the occupancy rate. Free overnight stays, on the other hand, are: the occupancy rate is based on actual stays and is completely independent of revenue or financial data. Typically, the occupancy rate is calculated annually.

Is the hotel partially or fully closed for a certain period? Or is a room out of order due to maintenance, for example? The calculation of the occupancy rate is not affected, so this may somewhat diminish the result. An occupancy rate of 300 is not feasible in practice; rooms need maintenance after all. Additionally, a completely booked hotel is naturally unrealistic for all seasons.

What is a good occupancy rate?

A well-functioning hotel has an average occupancy rate of 76.8%. However, this depends on a vast number of circumstances. Consider location, accessibility, surroundings, price, facilities, target audience, market, local competition, weather conditions, etc.

Average occupancy rate of hotels in Dutch cities

Occupancy rate at bed and breakfasts

Bed and breakfasts in the Netherlands usually have a significantly lower occupancy rate. Usually a mere 30%, which can be less than half compared to a hotel. The primary reason for this is that three-quarters of the B&Bs in the Netherlands are operated as a secondary activity. This contrasts with hotels, which usually have a commercial interest.

Increasing occupancy rate

One of the challenges that hoteliers deal with daily is the question of how to achieve a better occupancy. Here are some tips:

• Come up with an arrangement and test if it works. Make the arrangement exclusive, add an activity (from the surroundings), etc.;
• Encourage long stay bookings by increasing short stay prices or offering discounts on long stays. What also works well is an extra like a free breakfast with long stays;
• On which booking platforms are you active? Work on your findability. This starts with your own website, mailing, social media, reviews, but also look into (new) booking and comparison sites;
• Keep adjusting prices and listen carefully to the market. For example, work with last-minute rates to fill rooms. Raise rates during busy periods and offer cheaper periods as alternatives to stimulate those bookings.

The source of a low occupancy rate is often a seasonal change, trend, or competition. Keep paying attention to continuously appeal to your audience in changing times. A creative mind is your best tool to attempt new ideas. Keep your eyes open, and follow trends to stay up to date. In any case, it holds that attention is rewarded.

Monitoring occupancy

Achieved results do not guarantee the future. However, they can give you confidence in a forecast and expectation profile. As an entrepreneur, it's always comforting to build on results that I've already achieved. This does not mean I will achieve the same again with the same effort, but that expectations are aligned unless extraordinary things happen. Monitoring your KPIs, including the occupancy rate, is therefore very important. It shows whether your results are on the rise and whether you are doing the right things and thinking ahead.

So, keep track of your occupancy rate. Something good hotel software should already automate for you. Get to know your hotel with this KPI and many other insights and try MyTourist for free.