Calculate revenue potential

What is the occupancy rate?

Occupancy is the share of your rooms that were sold across a period. It is the simplest number in the hotel and the easiest one to misread.

It tells you how full you were. It says nothing at all about what you earned. A hotel can be full and unprofitable. A hotel can be two thirds full and doing very well.

Count rooms sold to paying guests only. Rooms that were out of order come out of your available count, not your sold count, because they were never sellable in the first place.

Occupancy formula

(Rooms sold ÷ Rooms available) × 100

Your 40-room hotel over a 30-day month has 1,200 available room nights. You sold 780 of them.

(780 ÷ 1,200) × 100 = 65%

How to calculate your property's monthly and yearly occupancy

For a single night, divide rooms sold by rooms available. For a month or a year, work in room nights: multiply your rooms by the nights in the period, then divide your total rooms sold by that figure.

Do not average your daily percentages. A 100% Saturday and a 30% Tuesday do not average to a meaningful number, because those two days have different weight in your revenue.

The comparison worth making is against the same period last year, and against your comp set right now. Occupancy in isolation is a number without a scale.

Why is your occupancy rate important?

Occupancy is where most pricing conversations start, and it points in a different direction than most hoteliers expect.

You sell out most nights. You are underpriced, and that costs you more than an empty room would. A hotel that never turns anyone away has never tested its ceiling. Raise your rate on your three strongest nights and measure what actually happens.

You have rooms left most nights, at a level that looks normal for you. Occupancy is not your problem. Your rate is where the next gain lives. Filling the last few rooms at a discount often costs more than it earns, once housekeeping, amenities and commission are counted.

You are well below your usual level. Treat this as a visibility problem before a pricing one. Check that your rooms are live on every channel, that your rates are current, and that your own website can take a booking without asking for four screens of detail. Discounting a hotel nobody can find does not fill it.

Occupancy multiplied by ADR gives you RevPAR. That is the whole relationship, and it is why neither number means very much on its own.

4 strategies to improve your property's occupancy

Rate cuts are the slowest of these four, and usually the most expensive.

1. Be live on the channels your guests already use

You cannot be booked where you are not listed. Most occupancy gaps start here rather than at the price, and this one is fixed in days, not seasons.

2. Push length of stay rather than headcount

Turning a two-night booking into three fills a room night at no extra acquisition cost. It is the cheapest occupancy you will ever buy.

3. Keep your inventory identical everywhere

Overbooking costs you a guest and a review. Underbooking costs you a room you could have sold. Both come from stock that is not the same on every channel at the same moment.

4. Go after your weak days on purpose

Midweek gaps are filled by local demand, not by tourists. Corporate accounts, training groups, long-stay guests and hospital or university visitors all book the nights your leisure guests skip.