Occupancy rate is a hotel KPI that measures the number of rooms occupied in a hotel at a given time, and compares that to the total number of rooms available on the property. It is displayed as a percentage.

Occupancy rate highlights how much of the available space in a hotel is actually being utilized by guests. It gives a broad overview of how a hotel is performing and allows managers to place other key hotel KPIs in appropriate context.

What is Occupancy Rate Used For?

Occupancy rate is used to determine a hotel’s performance. By tracking occupancy rate, hotels can more accurately determine the Average Daily Rate of rooms, forecast future trends for low and peak seasons, and apply other revenue management practices.

Benefits of Occupancy Rate

Without first understanding occupancy rate, most other key hotel KPIs can’t be understood meaningfully. For example, hotels still incur some operation costs for unoccupied rooms. So comparing occupancy rate with average daily rate and costs of room operations allows revenue managers to make decisions that increase a hotel’s overall profitability.

Limitations of Occupancy Rate

Increasing hotel occupancy rate is a favorable outcome, but managers may have to reduce room rates to achieve 100% occupancy. Some hotels may achieve maximum profitability at a 75 or 80 percent occupancy rate, based on other key metrics. A 100% occupancy rate doesn’t always equate to maximum profits.

How is Occupancy Rate Calculated

Occupancy rate is calculated by dividing the number of rooms sold by the number of rooms available. As a KPI, it can be calculated for any given period revenue managers are interested in, such as weekly, monthly, and annually.

Example of Occupancy Calculation

Total Number of Rooms Sold = 180
Total Number of Rooms Available = 300

Occupancy Rate = 180 (# of Rooms Sold / 300 (# of Rooms Available) = 0.6 x 100 = 60%