What is an occupancy rate?

Occupancy rate is a metric used in the hotel industry to evaluate the utilization of available units in a hotel. It indicates what percentage of all rooms available in the hotel (total room capacity) have been occupied or rented in a given period of time.

How is occupancy rate calculated?

Occupancy rate can be calculated by dividing the rooms occupied in hotel by total room capacity available on a given period of time:

Example:

Total daily room capacity (size of the hotel): 100 rooms
* Total days available during the month of January: 31
= January´s total room capacity: 3,100 (100 * 31)

Occupied rooms for the month of January: 2,480
/ January´s total room capacity: 3,100
= Occupancy rate in January: 80 % (2,480 / 3,100)

Why is occupancy rate important?

Occupancy rate is one of the key revenue management indicators because is tightly related to hotel revenue. It is common practice to associate high occupancy rates with good performance. However, it´s important not to evaluate this indicator in isolation. To obtain the maximum room revenue for a hotel Revenue Managers must find the right balance between ADR (average daily rate) and occupancy.