Occupany Rate Calculations

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12/30/2012

My wife and I are still working on finding the right place for us. A place has recently come up on the market that might work.  Since I have not been focused on the B&B business, I need to refresh my mind on a question or two.

Occupancy Rate = Total Nights Available * Number of rooms / Nights Sold, correct?   360 Night * 10 Rooms / 2880 nights = 80%

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12/30/2012

Thank you, one and all.  I needed to refresh my memory so I could understand what number I am looking at and and re-work the business plan (actually starting from scratch as this property is totally different).  I have to explain how I am calculating the rate in the plan for clarity.

The only major draw back right now is the Inn Keepers Quarters are gutted.

I am still waiting for the County Assessor to confirm property assessment and taxes.

Kay Nein's picture
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02/13/2012

I like to look at monthly % occupancy mainly to compare to last year's % to judge our success.  If you just look at revenue, it can be misleading.  We had a ton of advance reservation deposits taken in August for Sept & Oct.  It seemed as if Aug was was up, but the % occupancy was the same as last year.  And instead of looking at annual %occ, you should consider looking at month-to-month %occ - you will get alot more insight into the business that way.  

There are alot of different numbers you can crunch to analyze a business.  All of them put together give you a clearer picture - don't just rely on one set of anaytics.

And remember that percent ("per 100") = portion over whole = 2880/3600

gillumhouse's picture
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05/22/2008

I go by revenue. This is how much revenue I was able to generate the way I do things. A high occupancy rate would kill me. I do not WANT 100% or even 75%. I would like to have a few thousand $$ more. And if I see my revenue going up each year, I am happy. Have just about talked myself into struggling with king-size sheets next year and getting smaller night stands (since DH is "agin it" it is probably the right decision) with rate increases for the 2 rooms with larger beds as well as a slight increase for the other room that has more "space" as a queen. That will increase my revenue, pay for the upgrade in value in the first year (I hope) and therefore give me more revenue annually. (I have been using king-size blankets, quilts, and down-filled comforter in that room already so only sheets and a couple pillows will have to be purchased in addition to the mattress & box spring.)

Breakfast Diva's picture
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05/26/2009

I focus more on revenue than occupancy. We are pulling in a substantial amount that are packages & POS (point of sale). It's much better for us to focus on REVPAR (revenue per room).

happykeeper's picture
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12/11/2008

That's us. Revenue is king.

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OnTheShore's picture
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08/28/2011

We are only open about 5 or 6 months out of the year. The rest of the time the water pipes are frozen solid (more or less). So doesn't make sense for  us to calculate occupancy number based on 365 days in a year -- rather we look at our occupancy for our season.

The point for an aspiring is to not look at the occupancy rate as presented, but rather to understand the numbers used in calculating it (e.g. room nights sold / room nights available, however that was determined...)

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10/07/2008

Re Occupancy, when people are shocked at times. Really are we not supposed to take any days off? I mean the NORMAL WORLD has 2 days PER WEEK off, it is called the weekend. PLUS Holidays, PLUS Vacation.

I am not sure why someone sees occupancy and thinks it needs to be super high to be realistic in this business. Weird, maybe I am the only one who thinks we are not and should not be robots.

As it is, when we have no guests we are still working.

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Madeleine's picture
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09/29/2011

Joey Bloggs wrote:

Re Occupancy, when people are shocked at times. Really are we not supposed to take any days off? I mean the NORMAL WORLD has 2 days PER WEEK off, it is called the weekend. PLUS Holidays, PLUS Vacation.

We looked at businesses that were '3 season' in the hopes of having downtime, but not too much. Now, I wish we had looked for a really good 'seasonal' business so we could take 4-5 months off.

Friends are having a tough time selling their 'lifestyle' business because no one takes into account they could WORK the 6 months our friends take off. All they look at are the numbers. Basing their occ on when they are open, they run around 85%. Basing the occ on a full year, it's more like 20%. But they like being semi-retired.

And, yes, no one expects us to take time off. It's a business. If we are on vacation, someone else should be running the place for us. That IS how guests and buyers look at it. (Had a long time repeat leave me a message the other day saying they would be here on Tues, save them a room. Of course, we weren't open on Tues so I had to call them back to say no can do, we're visiting family. SHOCK! They couldn't believe we weren't here.)

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Madeleine's picture
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09/29/2011

You're missing a couple of nights in there (365,  not 360).

And it's room nights booked divided by nights available. 2880/3560 = 79%

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12/30/2012

Hmm...........we got the same number.  I hate math.

We are planning on being closed a few nights and I wanted to use round numbers as an example.

Booked and sold are two different things since the booking can be cancelled under the Cancellation Policies.

Madeleine's picture
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09/29/2011

Sorry. Yes, sold. Meaning transaction completed. If someone cancels here that voids the transaction so it doesn't show when doing the occ calculation.

We take months off. We still base the occ calculation on 365 days.

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04/02/2014

Do pay attention when looking at a previous innkeeper's occupancy rate.  It may be skewed if they take no time off or they take lots of time off and how they do the calculations.  We take Thanksgiving and Christmas off to spend with our kids.  Other inns are open making lots of money but it's not worth it to us.  We take school vacations off too and a week for a vacation, a week for my husband's hunting trip, etc. etc.  We also don't push midweek business all winter because we go to our kids basketball games and therefore aren't upset if we don't have guests - actually we're quite happy.  So if innkeepers were to purchase our place and were open those holidays and school vacations and pushed midweek business, they could make another $20K+ a year over what we make.

Generic's picture
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02/24/2011

There are lots of ifs, ands and buts when it comes to occupancy. Sometimes high occupancy signals that you can charge more. $600 in income from 6 rooms can be $100 a room per night for 6 rooms or $120 for 5 rooms or $150 for 4. But the work involved isn't the same. You may be a lot happier doing the work of 4 rooms for the same money. And you may not be able to get beds in heads at a cheaper price because people will perceive your quality differently.

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Kay Nein's picture
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02/13/2012

Great information - I hadn't thought about that.  Thanks!

happykeeper's picture
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12/11/2008

Absolutely agree.

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