All summer at 95%. Happy guests, exhausted staff, phones ringing. Then the accountant arrives with the year-end figures and the surprise: the margin is thin. "How is that possible if we were always full?"
It's possible — and more common than you'd think. Occupancy measures how many rooms you sell, not how much you earn. In this article we look at the numbers to check when your hotel is full but profits are low, and what they tell you.
Suspect number one: the price is too low
If the hotel fills months in advance and you never have a room free on strong dates, your price is probably below what the market will pay. Every room sold "too early, too cheap" is lost margin. See when to raise room rates and when to wait.
The numbers to look at
1. ADR (average daily rate per room sold)
Room revenue ÷ rooms sold. Compare it with last year and with comparable competitors. If it hasn't moved for years while costs rise, you've found a first cause.
2. RevPAR (revenue per available room)
Room revenue ÷ rooms available. It combines occupancy and price. A hotel at 80% with a high ADR can have a better RevPAR than one at 95% with a low ADR.
3. Net revenue after commissions
What you keep after OTA commissions, discounts and programmes. If much of your revenue comes from OTAs with programmes and promotions switched on, being "full" may cost you 20% or more of revenue. See how much an OTA booking really costs you.
4. Cost per occupied room (CPOR)
Cleaning, linen, breakfast, supplies, energy, variable staff, divided by rooms sold. If it has risen a lot (energy, wages, raw materials) and prices haven't, margins shrink. See how to calculate the cost of a room and assess a rate.
5. Average length of stay
Lots of short stays mean lots of turnovers and higher costs per night sold. See short stays and lots of room turnovers.
6. GOP and GOPPAR
GOP (gross operating profit) is what remains after operating costs. GOPPAR divides it by available rooms. It's the number that truly measures operating profitability.
7. Unprofitable rates
Child discounts, extra beds, half board, corporate deals: some rates bring occupancy but very little margin. See child discounts, third beds and single rooms: how to avoid unprofitable rates.
A diagnosis table
| Indicator | Last year | This year | Comment |
|---|---|---|---|
| Occupancy | |||
| ADR | |||
| RevPAR | |||
| OTA commissions and discounts (% of revenue) | |||
| Cost per occupied room | |||
| Average length of stay | |||
| GOP / GOPPAR |
Levers to improve
- pricing: raise rates on strong dates, follow booking pace;
- channel mix: shift bookings from OTAs to direct;
- costs: review suppliers, energy use, housekeeping organisation;
- length of stay: encourage longer stays;
- extras: upsell parking, upgrades, services. See how to sell parking, upgrades and extras without being pushy;
- rates: remove or fix those that don't cover costs.
Frequently asked questions
Is high occupancy always a good sign?
No. It's only good if paired with an adequate average rate and controlled costs. 100% occupancy months ahead often signals prices that are too low.
Which numbers should I check monthly?
Occupancy, ADR, RevPAR, revenue by channel with commissions, cost per occupied room. GOP at least quarterly.
Where do I find this data?
Your PMS and channel manager for occupancy, prices and channels; your accounts for costs. A simple monthly spreadsheet combining them is enough to start.
Want to find out where your margin is going?
With our free marketing audit we analyse your hotel's prices, channels and costs and show you where you're losing margin. We use the same kind of cost and revenue analysis we built for our own hotels.
