If you are running a hotel or guest house, no matter how small, then you need to know how your occupancy figures affect your bottom line.
At any given time of the year, your aim as a hotel manager will be to fill as many of the available rooms in the hotel as possible – that is a given.
Getting in control of your occupancy numbers allows you to instantly see how well you are using these available rooms, helping to reduce the average overhead for each room and, most importantly, to improve your profits.
What your occupancy rate tells you
Your occupancy rate tells you the number of rooms occupied by guests as a percentage of total rooms available in your hotel – in the most basic terms, it shows you how much of your hotel’s capacity is being used.
So if you increase your occupancy rate, you will also bring down the marginal costs for each room and will increase your bottom line profit across the hotel.
A better occupancy rate has other benefits too, aside from spreading your marginal costs across more rooms. When a greater number of rooms are occupied, the increased number of guests will also boost other revenue streams in the hotel. So more guests will equal more profits in the bar and more meals sold in your restaurant – all of which has a positive effect on cash flow and end profits.
Using technology to manage your capacity
As with so many things in the modern world, technology is helping to make the job of managing your hotel’s occupancy a much easier task to deal with.
Using software tools, you can set up a computer model that will show total revenue achieved if your hotel is full to capacity. This model can then be sensitised to show how your revenues will look when based on lower occupancy levels over the entire course of the year.
Saints Tourism & Leisure can help you set up an occupancy model tailored to the exact needs of your hotel or guest house.
A regular view of your occupancy
Room sales will change on a daily basis, so it is important that you keep an equally regular overview of your capacity.
Occupancy should be looked at daily and the majority of computerised front-of-house systems will automatically calculate your daily occupancy figure for you – providing a hassle-free way for you to keep up to date with these numbers.
Tracking and measuring these occupancy levels over time is an incredibly useful way to identify the peaks and troughs in room sales over the year. If you spot certain weeks during the year when occupancy is particularly low, you can act accordingly to try boosting sales.
Introducing targeted marketing and special offers when rooms sales are flagging can have a very positive impact on your occupancy level – especially with so many potential guests booking through discount hotel websites and looking for a last-minute bargain.
Alternatively, you may decide it is just not worth opening at certain times in the year – for example, January and February can be lean months in the hotel industry and an ideal time for you to take a break or close down for refurbishment or a rebrand.
Look for the patterns and trends
Your historic occupancy levels don’t just tell you about the past and current sales – they can also help you to highlight future opportunities.
You may decide to increase your tariff at times when occupancy levels are particularly high, such as Bank Holidays. Within reason, there is nothing wrong with boosting prices at this time as it is simply following the laws of supply and demand. But apply caution and don’t price yourself out of the market!
By tracking and reviewing certain key performance indicators (KPIs) in your front-of-house system, you can reveal some extremely helpful insights about the future profitability of the hotel.
Occupancy gives rise to two other important KPIs that you would be well advised to measure and review:
- Average Room Rate – this gives you a helpful overview of your pricing using the following formula – Price/Tariff x Occupancy Rate.
- Revenue per Available Room – this is commonly known as RevPAR in the industry and can be found by dividing your total revenue by the number of available rooms.
Increasing either of these KPIs will increase your profit, so they are important metrics to review over time with a view to creating improvements and efficiencies.
Talk to our Tourism & Leisure team
As you can see, occupancy is a fundamental KPI to be aware of when managing your hotel’s finances.
While you do have control over the tariff you charge – based on your mark up over cost, competitors prices and the time of year etc. – there is a myriad of external factors which can affect your overall occupancy…the weather being just one!
What you can do is keep a close eye on your occupancy and associated KPIs and be as proactive as possible with your marketing and discounting in a bid to influence that all-important occupancy number.
If you’d like to know more about managing your hotel KPIs and setting up a software-driven front-of-house system for your hotel, please contact Saints Tourism & Leisure.