What is hotel occupancy rate and how to calculate this metric?

What is hotel occupancy rate?

A hotel occupancy rate is a metric that represents the percentage of occupied rooms in your property at any given time. It's simple to calculate: just divide the number of occupied rooms by the total number of available rooms.

Why is hotel occupancy rate important?

Hotel occupancy rate is crucial for several reasons. For starters, it offers valuable insights into your hotel's performance and demand. When combined with metrics like Average Daily Rate (ADR) and Revenue per Available Room (RevPAR), it plays a key role in revenue management. By understanding demand, you can craft pricing and marketing strategies that drive growth.

Moreover, occupancy rate helps identify customer demand, enabling you to adjust operations accordingly. It also improves revenue forecasting, allowing you to plan more effectively for operational needs and predict future earnings based on expected demand.

How to calculate the occupancy rate?

To calculate the occupancy rate, divide the number of occupied rooms by the total number of rooms, then multiply by 100 to get the percentage.

Occupancy rate = (Occupied rooms / Total rooms) x 100

For example, if you have a hotel with 50 rooms and 35 are occupied, your occupancy rate would be 70%. This is generally considered a solid rate.

What is considered a good occupancy rate for a hotel?

Occupancy rates fluctuate throughout the year, heavily influenced by your hotel's location and seasonality. Typically, a good occupancy rate falls between 60-70%. Rates of 80-90% are considered excellent, often achieved during peak seasons.

How to improve your hotel occupancy rate?

Now that you're familiar with occupancy rates, let's explore effective strategies to boost your hotel's performance and set your property up for success.

Create and leverage a loyalty program

A loyalty program is more than just a fun perk - it's a powerful tool to encourage repeat bookings and increase the chances of referrals from loyal guests. Developing a well-structured loyalty program is one of the simplest and most effective ways to improve your occupancy rates.

Think of it as free marketing: you have a list of loyal guests ready to be engaged. During low occupancy periods, you can launch targeted campaigns offering special rates to your repeat customers. It's a win-win - your guests get a great deal, and you fill more rooms.

Encourage guests to leave reviews

Guest reviews are one of the most powerful promotional tools. Satisfied guests are more likely to share their positive experiences, and platforms like TripAdvisor, Google, and OTAs such as Booking.com often prompt guests to leave reviews.

Ensure you have a system in place to capture reviews-whether on your website or through social media. By showcasing these testimonials, you can build trust with potential guests and boost your occupancy rates.

Target different market segments

Every market segment has its own unique behaviors. Business travelers, for instance, tend to book during the weekdays, while leisure travelers often prefer weekends. Families, meanwhile, are guided by school holidays throughout the year. By targeting different segments, you can ensure steady demand regardless of the season or day of the week.

The more specific your market segments, the better you can tailor your marketing and promotional efforts. This not only improves your return on advertising spend but also drives higher occupancy rates.

Partner with local businesses and attractions

Collaborating with local businesses is a smart way to attract more guests. It's in everyone's best interest to encourage visitors to explore the area. Consider partnering with local tourism bureaus, event organizers, restaurants, and shops to offer special package deals or unique experiences like farm tours, cooking classes, or city tours paired with overnight stays.

Even better, create bundled offers that include accommodation and activities across multiple local businesses. The more partners you have, the more word will spread, making it easier to attract guests with irresistible deals.

Make sure your rates are competitive

It's a smart idea to tap into your hotel's comp set to see what kind of rates are being offered at any given time of the year. This insight helps you to stay ahead of the competition.

Dynamic pricing is key here - it allows you to adjust room rates based on demand, competition, and seasonality. By staying flexible, you can remain competitive and maximize revenue.

Tap into social media

Posting regularly on social media is a great way to support your marketing efforts organically. But don't stop there - use targeted campaigns to promote special offers and highlight your property's unique features. By showcasing what sets your hotel apart, you can increase its appeal and, in turn, boost occupancy rates.

Flexible policies

Flexibility goes a long way in attracting bookings. Policies like free cancellations and flexible check-in and check-out times can make your hotel more appealing to potential guests and help drive up occupancy rates.

Offer 10/10 customer service

Customer service is at the heart of your operation. The better the experience you provide, the more likely guests are to return - it's that simple. Delivering top-notch service not only enhances guest satisfaction but also helps to improve occupancy rates over time.

Don't shy away from data

Data analytics is a powerful tool for improving your hotel's performance. By leveraging data, you can better understand customer behavior and preferences, which helps enhance the guest experience. Tracking metrics like occupancy trends, guest demographics, and booking channels enables you to fine-tune your strategies, resulting in higher occupancy rates and more effective campaigns.

Seasonal promotions

Seasonal promotions are a smart way to maintain steady occupancy year-round. They not only help fill rooms during slower periods but also attract budget-conscious travelers with competitive pricing. Once these guests experience your property, they'll be more likely to return at full price in the future.

Conclusion

We've looked at occupancy rates, their importance, how to calculate them, as well as actionable ways to improve them. These rates aren't just a vanity metric; they're a key indicator of your hotel's performance and growth potential. The more rooms you fill, the more revenue you generate - making occupancy rates a vital focus for any successful hotel operation.

Download our guide "The Metrics that Matter"