Performance & revenue
Occupancy rate
Also written: occupancy
Occupancy rate is the percentage of available rooms occupied by paying guests over a specified period. It measures a property's capacity utilization, reflecting demand levels and sales efficiency across daily, monthly, or annual operational cycles.
Formula
Occupancy Rate = (Number of Rooms Sold / Total Available Rooms) × 100
How it is used
Revenue managers track occupancy daily alongside ADR to assess demand velocity and adjust dynamic pricing strategies. High occupancy signals opportunities to raise rates and optimize yield, while low occupancy triggers promotional tactics or distribution shifts. Operators use occupancy forecasts to schedule housekeeping, manage labor costs, and project food and beverage purchasing requirements. Investors rely on historical and projected occupancy to evaluate market stability, property performance against competitive sets, and overall asset valuation during acquisition or refinancing underwriting.
Worked example
A 150-room hotel sells 120 rooms on a Tuesday night. The occupancy rate is (120 / 150) × 100 = 80%. If 5 rooms are out of order for renovation, the available inventory drops to 145, increasing the occupancy rate for the remaining available inventory to (120 / 145) × 100 = 82.76%.
Common mistake
Chasing 100% occupancy by severely discounting rates often dilutes RevPAR and inflates operational expenses due to higher room wear and labor costs.