Definition
Occupancy is the share of a hotel's available rooms that were sold in a period — a volume measure that shows how full the hotel is, not how profitably it filled.
Also called: Occupancy Rate · Hotel Occupancy
How it is calculated
- Occupancy % = (Rooms Sold ÷ Rooms Available) × 100
In practice
Occupancy is the most intuitive hotel metric and the most frequently over-weighted. It is a means rather than a goal: a hotel that is ninety per cent full at a rate which does not cover its costs is losing money efficiently.
Low occupancy is also commonly misdiagnosed as a price problem when it is a demand and distribution problem. Before cutting rates, the useful question is which of four things is actually binding — visibility, where guests cannot find the hotel; conversion, where they find it but do not book; segment mix, where the hotel depends on one season; or product and reputation, where a review score below the competitive set caps everything.
Discounting into a visibility or conversion problem does not fix it. It simply sells the same few rooms for less and teaches the market to wait for the next discount.
Why it matters to an owner
Occupancy is worth managing only in combination with rate. Treat RevPAR, and ultimately profit, as the target, and use occupancy as a diagnostic rather than a scoreboard.
Frequently Asked Questions
Only when the rate it fills at makes commercial sense. Occupancy is a volume measure, so it can always be bought with a deep enough discount — which is why RevPAR and profit are the real targets.
Usually one of four things: visibility, conversion, segment mix, or product and reputation. Identifying which is binding matters, because discounting fixes none of the other three.