Understanding your hotel occupancy rate is one of the most important factors in determining how to reach financial success as a hotel. Too few customers, and of course you aren’t able to meet financial goals. Too many customers and you may have problems with maintaining a positive reputation due to the heavy influx. The key is to keep things at a steady balance, as well as to provide yourself with a comprehensive picture of your individual occupancy rate.
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Hotel occupancy rate definition – what is a hotel occupancy rate?
A hotel occupancy rate describes the amount of people at any given time that your hotel can provide comfortable space for. This percentage can be calculated by dividing the total number of rooms occupied by the available rooms, and then multiplying by 100. This results in a percentage such as 80% occupancy.
You can use a hotel occupancy calculator such as this one here for help.
Why is knowing your hotel occupancy rate important?
This percentage allows you to predict the future performance of your financial goals. You can understand if you are efficiently meeting your sales targets over time and compare them to set standards for the future. Take a look at the section below for further factors to take into consideration.
How to analyse your hotel occupancy rate
Your business is unique, so you will experience different booking patterns than hotels in other parts of the globe. For example, one hotel’s high season may be another’s low season. To fully understand your best case scenario, there are a few other factors to consider that will provide a more complete overview.
The first factor to consider is room type. Different rooms will be popular at different types or are only suitable for a certain group of people. You could have large rooms, small rooms and maybe also suites for honeymooners. These can’t be sold in the same manner and will also be booked at different times. There has to be a balance on pricing and when these types of rooms are promoted. For example, if you were a hotel located in Toronto, Canada, you probably wouldn’t get so many bookings on a honeymoon suite in the winter as you would in the summer.
The important thing to understand here is that the hotel occupancy rate alone doesn’t determine success. You have to make sure your prices make sense in comparison to competitors. It also requires marketing at the right time and to the appropriate target market over a longer period of time.
Duration of stay
Duration of stay also has an important influence on your number of bookings and desired occupancy rate. You can compare, for instance, whether it’s better to market a one night stay or promote a discount for a three night stay. Compare the prices of your competitors in the area and this will give you a good idea of where to begin.
Minimum length of stay
Some hotels don’t allow one night stays. This could be part of a strategy to lessen short term bookings and prioritize longer ones. The longer a customer stays, the less marketing you need to do to keep rooms full. This can be balanced across high and low seasons so the customer influx stays at a balanced rate.
Maximum length of stay
A similar tactic can be used when limiting length of stay. Let’s say that you’re coming close to your high season. In this case, you may want to limit the length of stay for some rooms so that you know they are free on specific dates for higher rates. This can result in higher returns as well as help your staff meet high season demands.
Closed to arrival dates (prioritize advance bookings)
When you are on the brink of high season, it may be a good idea to focus on maintaining your advanced bookings instead of accepting reservations on the same day. When you can be prepared for the number of people and how long they’ll stay during high season, you maximize your financial gains during that time. It also allows you to plan better for staff and issues like room service supplies and food.
Country of origin of guests
Not only does knowing demographic data aid in your marketing efforts, it also helps you plan how bookings should work throughout the year. Customers from cold areas may visit warmer areas during the summer. Or you may have a high season on holidays like New Years Eve in New York City. Knowing when these types of customers will come gives you insight on what rates to use for certain rooms and for when.
Average hotel industry occupancy rates
Average hotel occupancy rates vary from region to region. According to Statista, as of August 2019, the Americas had an average hotel occupancy rate of 70.9%. Overall, from the time period of 2015 and 2019, the hotel occupancy rate across the globe ranged from 50 to 80%. However, the Middle East and Africa experienced a rate that was even a bit lower than 50%. Europe has tended to have a more stable average occupancy rate at over 80%. This reveals how important Europe is as a tourist destination.
Nevertheless, this wide variety of average occupancy rates reveals how important it is to analyse your own average occupancy rate. Always compare your rates with local competitors (i.e. very close by). Even within these regions it is likely too broad for you to know whether your hotel is performing well and will not provide enough information for you to accurately predict sales goals.
Further tips for increasing hotel occupancy
Now that you’ve got an in-depth understanding of hotel occupancy and how it works, you need to use the proper tactics to ensure longevity. We’ve summarized some of the major ones below.
Form partnerships with travel agents and other partners
Travel agents constantly strive to offer their customers the best possible bang for their buck. The best way for them to do this is to have hotel partners that fit within their customer budget and provide consistent and reliable service. Check with travel agents that send customers to your area and it could result in a steady stream of customers at pre-planned times, the absolute ideal for a hotel.
Other partners could also include tour operators with overnight stays, tourism offices, travel bloggers who can review your hotel, and other hospitality related businesses. These could be, for example, a spa or car rental company where if a customer books through your hotel, they receive a discount.
Increase efforts on SEO
Using SEO, particularly local SEO (find an overview of SEO here) is extremely important for hotels. Hotels gain customers because they are needed for stays in that particular area. Therefore, it’s of the utmost importance to have at minimum a Google My Business listing. Google My Business shows important information about your hotel (which can include a way to book directly), as well as ratings directly on the sidebar of Google search. Furthermore, the more ratings you have, the higher Google ranks your website in general.
In addition, focus your website content on local attractions and interesting information about things to do in your local area. One of the best ways to do this is through a blog, and then include a backlink to your booking page.
Make directory listings
Speaking of listings like Google My Business and their importance for local SEO, hotels should have listings on all major travel booking sites. Some of the top travel booking sites are:
Important to note: 74% of users who book on a hotel site visit TripAdvisor at some point during their path to purchase, so this is a step that all hotels won’t want to miss.
Establish promotional packages
A great way to increase bookings in general is to promote certain discounts. Social media is a fantastic way to do this, either on your page or through paid ads. Once you know which rooms to sell and when, give them an extra promotional punch and ensure sustainable bookings.
Focus on your target audience
No matter how you plan to promote your brand, one of the most important factors is whether you target the right type of customers. Look through your social media metrics and see what types of people follow you. Check your website traffic (especially through Google Analytics). Search for patterns on demographic data, customer interests, and which marketing platforms lead them to your website.
Construct a customer retention strategy
The final tip is to implement a strategy that focuses on customer retention. Getting a new customer to book can be as much as five to twenty-five times more expensive than retaining an existing one. What’s more, hotel customers on average are willing to spend $25 more on the hotel brand they prefer. Stay in touch with your customers, for example, through social media and email marketing. Continue to offer them discounts and don’t let them forget your brand.
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