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Revenue Management Glossary

Occupancy

Definition

The occupancy rate is a key performance metric for hotels, which measures the percentage of the property’s available rooms that are booked in a given period of time.

How to use it

The occupancy rate helps hoteliers better understand demand patterns, how competitive their pricing in within their compset, develop more efficient operational processes and price their rooms more accurately.

Occupancy is also a good way to gauge whether your revenue management and marketing strategies are effective. If you have high occupancy, it is likely that your marketing and pricing strategies are accurate; whereas, if your occupancy is low, you should review both to see where you can improve your competitiveness and boost revenue.

Finally, occupancy rates are critical for financial forecasting, which will improve your operational decision-making and planning.

Formula

To calculate the occupancy rate, divide the total number of occupied rooms (within the given period of time) by the total number of available rooms (excluding rooms that are not available because they are undergoing renovations, etc.), then multiply that value by 100.

Related Terms

ADR, RevPAR, Occupancy, Revenue Management, Revenue Management Strategy, Dynamic Pricing, RMS, Revenue Management System
“The three most important performance metrics for a property’s hotel are occupancy, ADR and ReVPAR, which, when used together, give hoteliers the ability to understand how well their property is attracting guests and allocating its inventory across the distribution channels. By monitoring all three of these metrics on a regular basis, your property will glean valuable information that will help you streamline your operations, boost bookings and maximize revenue.”

Sarah Kock

Sarah Kock