What is occupancy rate?
Occupancy rate is the percentage of occupied rooms in your property at a given time. It is one of the most high-level indicators of success and is calculated by dividing the total number of rooms occupied, by the total number of rooms available, times 100, creating a percentage such as 75% occupancy.
You can look at this figure by day, week, month, or even longer. The rate will be different depending on the length of time you consider.
For example, your average hotel occupancy rate may be near 100% on Saturday nights, but it may be closer to 30% on Tuesdays.
Taking a careful look at your occupancy rates can give you a lot of insight and information regarding your hotel. If the occupancy rate isn’t what you think it should be, some changes may be in order.
Think of your hotel occupancy rate as a percentage of rooms booked for that night. When you have a lot of booked rooms you have a high rate of hotel occupancy. A lot of empty rooms means a lower rate. This is not always bad, and happens to nearly every hotel at some point, but you want to have as high of a rate as possible, as often as possible.
Occupancy rate formula: How to calculate hotel occupancy
While knowing the occupancy rate definition is crucial, improving it is where strategic actions come into play. One effective strategy is the application of Length of Stay (LOS) restrictions. By setting a minimum or maximum number of nights a guest can book, hoteliers can better manage room turnover and optimise occupancy, especially during peak seasons or major events.
For example, during a major conference in the city, setting a minimum LOS can ensure that rooms are occupied for the duration of the event, preventing gaps that might arise from one-night stays. Conversely, during quieter periods, setting a maximum LOS can free up rooms for potential longer-staying guests.
Minimum length of stay:
Accept longer duration stays and reject shorter duration stays for arrival when you anticipate a period of high demand followed by low demand. This helps you increase occupancy during the slow period afterwards.
Maximum length of stay:
Don’t accept reservations at specific rates for multiple night stays extending into your high demand period (when you expect to sell rooms at higher rates). Guests who want to stay beyond the maximum length of stay period can be charged rack rate for subsequent nights.
Closed to arrival dates:
When you have very high demand, and you expect to reach maximum occupancy through stay overs as opposed to new arrivals, don’t accept reservations for arrivals on the day in question, and only allow guests staying through from previous nights.
Hotel occupancy rate calculator example
To determine the percentage of rooms occupied during a specific period, you can use the following formula for the occupancy rate:
Take the number of occupied rooms, divide it by the total number of rooms, and then multiply by 100.
For a clearer understanding, let’s delve into a practical scenario. Imagine your hotel has a capacity of 50 rooms, and on a particular night, 15 rooms were booked:
15 divided by 50, multiplied by 100 equals 30%.
This means your hotel had an occupancy rate of 30% for that night. By many industry standards, this could be viewed as a relatively quiet evening. This percentage indicates potential areas of growth, as the number of unoccupied rooms exceeded the occupied ones. It’s essential not to mix up the occupancy rate with the vacancy rate, which is a distinct metric offering different insights. The vacancy rate is determined by taking the number of unoccupied rooms, multiplying by 100, and then dividing by the total room count.
Using the same example, with 15 out of 50 rooms booked, you have 35 rooms unoccupied. Plugging these numbers into the vacancy rate formula:
35 multiplied by 100 equals 3500.
3500 divided by 50 results in 70.
This means your hotel had a vacancy rate of 70% and an occupancy rate of 30%. Ideally, a hotel would aim for the opposite, with a higher occupancy rate and a lower vacancy rate.
How and when to calculate hotel occupancy rate
Hotel occupancy rate can give you a good marker for occupancy levels for a given night, letting you know what days of the week and times of the year are best for your hotel, and which seasonal periods need work.
You can also calculate the average occupancy rate for more than just one night, if you want it as an average for a week, a month, or even longer. To do this, determine the number of total rooms you have, and the number of rooms that were filled every night.
If you want the average rate for the week, you would add together the number of rooms that were filled every night, divide that number by seven days, and then divide the resulting number by the number of total rooms you have for rent.
Optimal Times to Calculate Hotel Occupancy Rate
- Daily: A day-to-day assessment offers insights into the daily performance, highlighting patterns like weekday versus weekend occupancy or the impact of local events.
- Weekly: For areas with weekly attractions or events, a weekly review can shed light on broader occupancy trends.
- Monthly: This timeframe is crucial for strategic planning. It allows hoteliers to discern seasonal patterns and compare monthly performances across years.
- Annually: A yearly overview offers a comprehensive look at the hotel’s performance, aiding in annual budgeting, forecasting, and crafting long-term strategies.
- After marketing initiatives: Post-campaign, assessing the occupancy rate can provide a clear picture of the campaign’s success and areas of improvement.
During special events: If your hotel is in proximity to event venues or popular festivals, it’s beneficial to calculate the occupancy rate during these periods. This data can inform pricing and promotional strategies for upcoming similar events.
What is the average hotel occupancy rate?
For the most part, between 2022 and 2023, global hotel occupancy rates have remained between 50% and 65%, with peaks and troughs in line with seasonality. However, there have been some occasions where occupancy has drifted outside these margins. In January 2022, for example, the occupancy rate of hotels in Europe fell to just 34%. Compare that to August 2022, where European hotels saw an occupancy rate of 74%; the highest of any continent over the same time period.
According to this data, as at August 2022, the hotel occupancy rates in key regions was as follows:
- Asia Pacific: 62%
- Americas: 66%
- Europe: 74%
- Middle East and Africa: 63%
What is a good occupancy rate for a hotel?
In general, a good hotel occupancy rate will depend on:
- The type of hotel
- The location
- Guest experience and reviews
- Quality and variety of amenities
Looking at occupancy rate in isolation is rather meaningless, you need to evaluate it in conjunction with other metrics to understand if increasing, or decreasing, your occupancy rate is the right thing to attempt.
However, it’s not a realistic expectation to think you can have a full hotel all the time. You may have empty rooms sometimes – most often this occurs on weeknights. You may also have times of the year when you don’t see as much business, and your occupancy rate dips lower than you would like. For example, if your hotel is located in a popular ski destination, you may see lower occupancy during the summer months. A hotel at the beach will expect lower occupancy rates in the winter.
Comparing yourself with other hotels in the area can help you get a good gauge of whether you have a competitive occupancy rate. A newer hotel in a prime location will often see higher occupancy rates, but only if your costs are fair and you treat customers well.
Get the Occupancy Rate formula and more: Download the formula sheet
Key factors that affect hotel occupancy rate
While several factors can influence hotel occupancy, some stand out due to their significant impact. Understanding and managing these factors can be the difference between a thriving hotel and one that struggles to fill its rooms. Here’s a closer look at these pivotal elements:
The old adage “location, location, location” holds true in the hotel industry. A hotel situated in a prime area, be it a city centre, near tourist attractions, or in proximity to business hubs, often enjoys higher occupancy rates. Accessibility, safety, and the surrounding environment also play crucial roles. Hotels in picturesque or unique settings can also benefit from their location, even if they’re a bit more secluded.
Most hotels experience peaks and troughs in demand based on the season. For instance, a beach resort might see higher occupancy during summer months, while a ski lodge would be busier in the winter. Recognising and preparing for these seasonal fluctuations is essential for maximising occupancy throughout the year.
Striking the right balance in room pricing is a delicate art. Price too high, and potential guests might look elsewhere; price too low, and while you might fill rooms, you could be compromising profitability. Dynamic pricing, which adjusts rates based on demand, local events, and other factors, can help hotels maintain a competitive edge and optimise occupancy.
The actions and strategies of nearby hotels and similar establishments can significantly influence a hotel’s occupancy rate. If competitors offer promotions, revamped amenities, or new services, it can draw potential guests away. Staying informed about the local competitive landscape and being ready to adapt is crucial.
In today’s digital age, online reviews play a massive role in a traveller’s decision-making process. Positive reviews can boost a hotel’s reputation and drive bookings, while negative feedback can deter potential guests. Actively managing and responding to reviews, and ensuring consistent high-quality guest experiences, can positively impact occupancy rates.
While the hotel occupancy rate might seem like a straightforward figure, it’s the result of a complex interplay of various factors. By understanding and strategically managing these elements, hoteliers can better position their establishments for success.
How to improve hotel occupancy rate
Fortunately, for any hotel that may be struggling, or that just wants to see higher numbers for occupancy because they have empty rooms, there are plenty of tips to improve hotel occupancy rate numbers. Cleanliness, price, and guest experience are big factors, but there is so much more you can do.
Consider the following six ideas to help you improve your current hotel occupancy rate.
1. Create packages and promotions
When your hotel has something more to offer than the competition around you, your occupancy rates are going to go up. That’s a good thing, and it’s something you want to see. But think carefully about the packages and promotions you want to offer.
If your occupancy rates rise, but your prices are so low that your hotel isn’t actually making any money from its guests, those rates don’t mean anything. You can fill your hotel to capacity every night with prices that are low enough, but you’ll still be losing ground financially.
Instead, offer great packages and promotions that help people save money but are still targeted with strong pricing for your hotel in mind.
2. Target the right markets
If your occupancy rates are lower than your competition it could mean that you are not reaching the right people with marketing initiatives.
You need to make sure your hotel is reaching the people who will be most likely to stay there. That could be business travellers, young couples with families, or any other specific types of groups.
Knowing your target market matters, and when you focus your marketing and promotional efforts on appealing to that market will help you increase your occupancy rate.
3. Use events
If there are cultural events that happen in your city, why aren’t you seeing a spike in occupancy? Why aren’t the people who come to these events staying with you?
Those are questions that you need to answer in order to raise your occupancy rates to where you’d like them to be. Talk to groups in the area that put on these types of events, and find out what you can do to be a part of all the action and excitement.
Market to people who have stayed there before, and who may not know about the event. The goal is to bring people to your hotel when they come to the event, and to potentially hold events at the hotel as well.
4. Partner with local businesses
Companies often need hotels when they send their employees to various locations for business trips (learn how to attract these business travellers to your hotel here). Local companies may have people coming in from outside the area, and companies with a number of locations in areas around the country may have get-togethers in specific places.
These companies can easily be contacted, and there are ways to work with them to provide meeting spaces, rooms at a discount, and other perks and amenities that they may appreciate. Getting these companies to book rooms at your hotel can really raise your occupancy rate.
5. Help people declare their love
Holding weddings at your hotel can be an excellent way to raise your occupancy rate. Even if the couple getting married are local, they probably have friends and family members who will be coming to the wedding from outside of the area.
Those people will need a place to stay, and what better place than the hotel where the wedding is being held. You don’t need a dedicated chapel to do this. You can use a meeting room that can be decorated, or other types of locations that can be romantic and beautiful.
Discounts for midweek weddings can also be a great way for you to increase your midweek occupancy. It will cost the couple less than a weekend wedding, and it will also help to raise occupancy rates during a time when these rates are typically lowest.
6. Work with real estate agents
People who are coming to town and looking for properties to buy or rent will need somewhere to stay. Why not your hotel? It can be a great choice, but people have to know about it.
If you have good relationships with local real estate agents, these agents can recommend your hotel to the people they work with. That can help your occupancy rate increase, and can get you repeat business in some cases.
For example, when the people who are looking for property return to look again, or they move into the area and are waiting to close on the home they chose on their last trip to your location, they will need somewhere to stay. Feeling welcomed by the local community and its businesses is a great way to help people feel good about their new area and all it has to offer, as well.
When you focus on your hotel occupancy rate it can seem discouraging if it isn’t where you want it to be, but when you employ the right tips and tricks to raise it organically, it becomes much easier for your hotel to do well and for you to feel good about the options and choices you have available to you.
With a higher average hotel occupancy rate you’ll see more people coming to your hotel, and word-of-mouth advertising will spread. You can also help more people, and show your local community that you acknowledge them and want to be a part of that community in many positive ways.
How to boost your midweek occupancy rate
It can be easy, and very tempting, to think that slashing rates to virtually nothing will sell more hotel rooms and increase room revenue during the week. While it may sell a few rooms, the discounting strategy rarely sells enough to offset the reduced revenue.
It’s important to keep in mind that lower rates don’t create demand; they can set the wrong expectations for guests and erode your price integrity. Instead, think of adding value to beat the midweek blues.
Here are 11 effective ways to boost your hotel’s midweek occupancy and revenue:
1. Create and promote special packages
Packaging allows you to mask actual room rates with features, which add value to staying at your hotel. If your hotel offers additional services like fitness classes and spa treatments, package them together with accommodation for a really great deal that encourages guests to use services they may not have previously thought about.
2. Target the right audience
When it comes to marketing, think who might be a weekday target audience, and geographically where they are.
Try collaborating with tourist attractions locally and submit advertisements or editorial to newspapers and websites in population centres within the vicinity promoting midweek breaks that include bus tours, wine tasting trips, or a concert.
3. Develop mailing lists
Develop mailing lists of your best weekend customers and stay in contact with monthly emails listing midweek special offers and promotions. Remind them that midweek is the best time to visit local shops and attractions; away from the weekend crowds. Mail them midweek discount vouchers too.
4. Create one-day only events
Use your imagination and create special one-day conferences, poetry readings, art shows, and other cultural events during the week.
These are especially popular with people in their late 50s and early 60s and importantly these are the people who often have the most disposable income. Think about holding exhibitions of students’ work in conjunction with local schools and colleges.
5. Open it to corporate meetings
Promote your space to local companies who could use it for meetings and social events.
Be clever and target companies that have branches or offices elsewhere, so visiting delegates may need accommodation.
6. Offer ‘2for1’ meal rates
You can also offer free drinks or desserts for midweek visitors via newspaper advertising and social media posts.
7. Promote midweek weddings
With more people working freelance or flexible hours, weddings during the week are becoming more popular; especially for second marriages or older couples who value the intimacy of a quieter occasion. Make sure they don’t clash with corporate events or any other activity that could spoil the atmosphere
8. Promote longer stays
Tempt your weekend guests to extend their break and stay longer.
Use discount deals and make sure your guests know about it. Tell them in your pre-stay email and in person when they check in.
9. Collaborate with locals
Reach out to the largest restaurants in town.
Do this in October or November and offer up a special rate to groups with Christmas parties planned during the week at those restaurants.
10. Work with real estate agents
Find out who the local key players are in real estate – commercial as well as residential.
There are hundreds of people in town every night viewing a new house or opening a new office, and they need a place to stay. Offer the realtor or agent special rates, and free advertising in your room brochure.
11. Offer midweek breaks as prizes
For example, you can make it your prize in Facebook competitions and boost likes at the same time.
Why your best available rate (BAR) can improve hotel occupancy
Best available rate relates to the best publicly available rate for guests booking at your hotel. This is before customers might apply loyalty points or promotional codes to receive discounts.
The BAR rates are available to the general public, do not require pre-payment and do not impose cancellation or change penalties and/or fees, other than those imposed as a result of a hotel property’s normal cancellation policy.
BAR pricing is an attempt to reduce confusion for hotel guests caused by complex rate strategies with many different prices.
This means the guest could pay different prices each night. The rate distributed will fluctuate to be the same as unrestricted rates available publicly on any other channel, including online retailers, hotel web sites, global distribution system (GDS), and more.
Increase your occupancy rate and generate more revenue with SiteMinder
Occupancy rate stands as one of the most critical metrics in the hotel industry. A higher occupancy rate not only signifies more guests but also translates to increased revenue. In today’s competitive market, ensuring rooms are consistently occupied is a challenge. SiteMinder steps up as the ultimate solution, offering a platform specifically tailored to skyrocket your hotel’s occupancy rate, ensuring rooms are seldom left vacant.
- Targeted Marketing Tools. SiteMinder’s platform is equipped with tools that allow you to reach potential guests more effectively and boost your marketing efforts. By understanding guest demographics and preferences, you can craft promotions and offers that resonate, driving more bookings and, in turn, increasing occupancy.
- Seamless Channel Integration. With SiteMinder’s seamless channel management, your hotel gains unparalleled visibility across a multitude of booking platforms. From global OTAs to regional travel sites, ensure your hotel is the top choice for travellers everywhere. This widespread presence directly contributes to higher booking rates and improved occupancy.
- Real-time Room Management. Avoid overbookings and double-bookings with SiteMinder’s real-time inventory management. By providing an up-to-the-minute view of room availability and allowing instant updates, you can maximise room occupancy, ensuring every available room is utilised to its full potential.