Hotel Occupancy Rate: Understanding This Crucial Metric

In this post we are going to go deep into why you should pay attention to your hotel occupancy rate and why hotel occupancy rate matters so much.

How to Calculate Your Hotel’s Occupancy Rate

A hotel’s occupancy rate is the percentage of rooms in the property that are occupied at a given time. As a hotel owner, it’s important to know what that rate is. Knowing this rate for designated time periods gives you a strong indication of how well your hotel is doing. 

Hotels are not the only entities that need to know about occupancy rate. Apartment complexes, restaurants, and other businesses also pay attention to this metric. 

In the following article, we’ll get into a little more detail about why the occupancy rate matters to hotel owners. We’ll also give you an easy formula to calculate it.

Why Your Hotel Occupancy Rate Matters

If you’re a hotel owner, you doubtless understand that the more rooms you have filled at any given time, the better it is for you. Your hotel occupancy rate tracks the percentage of rooms guests have booked for any given night. 

With many rooms booked, you will have a high rate of hotel occupancy. Having a lower rate means that not as many rooms have been booked.

Virtually any hotel will see fluctuations in how many rooms are filled and how many are empty. That’s natural, but more empty rooms and a lower occupancy rate are indicators that you may need to work on your marketing strategy. Ideally, you want to have as high of an occupancy rate as possible as often as you can. 

The Occupancy Rate Formula

It’s relatively easy to learn how to calculate the occupancy rate for your hotel, and you should know how to do it. What you do is take the number of occupied rooms in the hotel, then divide that by the total number of rooms. You then multiply that number by 100. 

Let’s look at an example. Say you’re a hotel owner, and your hotel has a total of 50 rooms available. On a given night, you have booked 30 of them. 

You’ll need to divide 30 by 50, and then multiply that by 100. The number you get when you do this is 60, meaning you have a 60% room occupancy rate for that night.

Let’s do one more example. You have 150 rooms, and 117 are booked on a particular night. 117 divided by 150 x 100= 78, so you have an occupancy rate of 78% for that night.

Once you have mastered the use of this formula, you can rapidly and easily calculate your occupancy rate for any night. You’ll have a useful metric for judging how successful you currently are at filling up your hotel with paying customers. 

What is a Good Occupancy Rate for a Hotel to Have?

As we mentioned, there’s almost no way to have a completely steady and consistent occupancy rate as a hotel owner. If you have an off season, it’s natural that your occupancy rate will be lower during those times. If you have a peak season, that’s when it should be higher. 

It’s likewise a little difficult to state a particular number and say that’s what you should aim for in terms of hotel occupancy. However, many hotel owners will tell you they’re happy if they can maintain a rate of anywhere from 70%-95% at any given time. 

Such hotel owners will often look for a sweet spot somewhere in that range. However, they will also likely accept that the number will change based on factors like what kinds of guests you’re targeting, what type of hotel you have, where the property is located, and your total number of rooms. 

Your Hotel’s Vacancy Rate

If a hotel has an occupancy rate, it follows that it should have a vacancy rate as well. As you would expect, this is the number of unoccupied rooms in a hotel at any given point. Just as you want a higher number for your hotel occupancy rate, you want a lower number for your vacancy rate.

The Hotel Vacancy Rate Formula

If you are trying to calculate your hotel’s vacancy rate, there is an easy formula for that as well. You must take the total number of unoccupied rooms, multiply that by 100, and then you can divide by the total room count. 

Let’s try an example. We’ll say you have 50 available rooms, and 30 are occupied. That means you have 20 unoccupied rooms. 20 x 100= 2,000. 2,000 % 50= 40. 

This means that in the scenario we just gave you, you have a 40% vacancy rate and a 60% occupancy rate. That’s not so great. You would likely have to come up with some strategies to get more customers into those vacant rooms. 

How to Increase Your Occupancy Rate

Many hotel owners who are not finding the success with their business endeavors that they’d like are faced with a fundamental question: how can they increase their occupancy rate and lower their vacancy rate? If you’re not able to solve this dilemma, it’s not inconceivable that your hotel could go out of business. 

Increasing your occupancy rate sometimes means getting creative. Let’s talk about some methods you can try that might get you pointed in the right direction.

Advertise Your Hotel as a Place for Corporate Meetings

Corporate meetings can be a real boon to hotel owners. You might have a hotel where people stay while they’re on vacation sometimes, but making the facility seem attractive to those in the business world can potentially open you up to a whole new revenue stream. 

If you’re crafting ads for your hotel that appear via a pay-per-click marketing strategy, you might write copy for the ads that identifies your hotel as being a good place for individuals in business to stay. You might mention aspects of the hotel in the copy that would be attractive to someone traveling for work.

You could also try to partner with corporate retreat organizers like Surf Office. Whatever you can do to attract corporate clients may very well end up raising your occupancy rate. 

Change Your Pricing Strategy

Changing your pricing strategy is probably the simplest and easiest way to potentially attract more customers. 

Price-Per-Segment Pricing

Price-per-segment pricing refers to incentivizing guests to stay at your hotel by either offering lower rates for specified stay durations or by booking multiple rooms. Let’s say you’re finding that your hotel occupancy numbers are down either during the offseason or on weekdays. Consider dropping your prices when a guest either arranges a longer stay or when they book a larger number of rooms. 

This can often tie into your targeting of corporate clients. If you encourage those in the business world to book a longer stay or to rent several rooms at one time, and you drop the price if they do so, that might allow you to start seeing higher occupancy rates.

Set Up Stay Restrictions

Creating stay restrictions for your hotel’s rooms can also help your occupancy rate in some instances. A stay restriction refers to a hotel owner or operator demanding that someone who rents one of their rooms remain there for a specific period of days. 

This might help if you have guests who are trying to only rent a room for Friday and Saturday night on a certain weekend, but who plan to check out without staying through Sunday night. You may be able to raise your occupancy rate on Sunday night if you give preferential treatment to guests who are willing to stay all three of those days. 

Make Sure You’re Targeting the Right Market

Just like virtually any other kind of marketing, as a hotel owner, you want to make sure you’re marketing to the individuals who are most likely to want your products or services. If you’re creating marketing material that is very generalized, it’s not as likely to get as positive of a reception as more targeted ads.

Pay attention to who is renting your rooms most of the time. They will likely fall into specific categories based on their trip’s purpose, their ages, whether they have children with them, etc. 

Once you have determined who your ideal customer is, cater your marketing efforts toward them. If you create targeted ads that make your hotel seem like a high-value proposition to the right would-be customers, that often results in higher occupancy rates.

Offer a More High-End Hotel Experience

You might also try to make staying at your hotel seem more appealing. You can do that by offering free breakfast, free Wi-Fi, late checkout times, or anything else that you think will go over well. If you can point to these as reasons why someone might stay at your hotel over a competitor, that can raise your occupancy rate. 

Mention Local Events

Ask yourself what local events happen close to you that set your geographic location apart from others. Are there any yearly or seasonal festivals that take place close by? Is there a marathon, a conference, or a concert? 

Post about these events in conjunction with your hotel whenever you can. You might mention the event on your hotel’s landing page, write about it on your blog, or mention it on your social media channels. 

You might also consider promotional packages that have to do with any nearby events. For instance, if there’s a concert happening at a venue close by, you might mention your hotel provides free shuttle service to and from the event. 

You can also try to collaborate with the hosts of the event. If you can set up a cross-promotional strategy where the event organizers are mentioning your hotel and you’re creating hype around the event on your website and elsewhere, that benefits you both.

Emphasize Inclusivity

You can emphasize inclusivity at your hotel. You might have a pet-friendly policy you can mention on the website. You can provide high chairs to traveling families with young children who are going to eat in your onsite restaurant. Make sure you have some rooms for individuals with disabilities as well. 

Make Your Location Seem Attractive

There are probably things to do around your hotel or not far from it that would be appealing to someone who’s spending time there. Try to promote anything nearby that is more likely to get someone to visit. 

You can talk about things to do in your area on your hotel’s blog, if you have one. You can also mention local activities on the social media platforms on which you’re active. 

If you’re not on social media yet, create accounts for your hotel. In the modern era, using social media for marketing and promotion is expected and not something you can afford to pass up.

Try to make it seem like you’re an expert who knows everything about the area surrounding your hotel. That might mean the difference when someone decides whether to book with you or not. 

Set Up Local Partnerships

You can collaborate with local businesses. These kinds of partnerships tie you firmly into the community and make you a fixture of it.

Try to set up cross-promotion with any area restaurants and other attractions. See if they’re willing to mention your hotel in their ad copy if you do the same thing for them. 

These kinds of partnerships can only help you as a local hotel owner. They will make it seem like you’re an entrenched part of the culture in a specific town, city, or part of the country. 

Keep a Close Watch on Your Hotel’s Occupancy Rate

When you know how to calculate your hotel’s occupancy rate, you have a significant tool that you can use to determine how successful your hotel is during any given period. If you see that there is a time of the week or the year when you consistently have a much lower occupancy rate, you know that’s a time you need to improve. 

You can do so by employing some of the strategies we mentioned here. Having someone on your team who’s skilled at marketing can also help you. They may be able to come up with some additional creative ideas that will get those rooms filled. 

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