Occupancy Rates

[YellowSocks]

It was mentioned on another thread that occupancy rates can be inflated. Yesterday I was updating my spreadsheet and I put in a calculation for occupancy rates by month and year. I was wondering about comps and block outs. In July we had 9 comps (no blockouts), so was my rate 63% or 70%? In August we have a night blocked off to go to a wedding... is my projected rate 25% or 26%? Which is my "actual rate"?
Thanks!
=)
Kk.

 

[JunieBJones (JBJ)]

Since a comp or block out is not income, you can't add them in.

 

[Penelope]

Oops, my ignorance is showing again: what are "comps"?

 

[JunieBJones (JBJ)]

Complimentary stays.
Like if a restaurant comps your meal. No charge to you.

 

[JunieBJones (JBJ)]

She might be deducting them somehow under marketing, but it is a fine line for us to be able to do that.

 

[muirford]

I think to have an apples-to-apples comparison for everyone, the standard is nights occupied out of 365 times number of rooms. I think you may count comps - or the second night of BOGOs, or whatever. There's no income for those, so that just gets reflected in your ADR (average daily rate) and total revenue, but they are still rooms that are occupied as part of the business. Blocking out rooms is a different story - since that is totally at your discretion, it's not really fair to take them out of the occupancy equation. Or at least not the occupancy equation if you are looking to sell your business. One of the ways occupancy rates get inflated is from owners who count those days as fully occupied when selling the business.

 

[Penelope]

Keep in mind: I am not an Innkeeper, just an assistant. But ... someday, I'll have my own inn, so I'd like to get as much of this under my belt as possible...
Isn't Occupancy different than ADR?
To me, and I KNOW I coulf be wrong, isn't occ just that: the amount of nights that were occupied whether they paid or not?
And for blocking, do you figure it : (hypothetically) 2 rooms booked out of a possible 3 (because you blocked 1)? That would be 66% occ instead of 50%.
I dont' know maybe I just misunderstand.

 

[muirford]

Keep in mind: I am not an Innkeeper, just an assistant. But ... someday, I'll have my own inn, so I'd like to get as much of this under my belt as possible...
Isn't Occupancy different than ADR?
To me, and I KNOW I coulf be wrong, isn't occ just that: the amount of nights that were occupied whether they paid or not?
And for blocking, do you figure it : (hypothetically) 2 rooms booked out of a possible 3 (because you blocked 1)? That would be 66% occ instead of 50%.
I dont' know maybe I just misunderstand..

It is completely different than ADR - ADR is average daily rate and occupancy is the total number of rooms occupied. That's why I believe you may count comps and freebies in your occupancy numbers, because the fact that they were free will get accounted for in your ADR and total room revenue.
If you block rooms and you count them in your occupancy you have to start putting all sorts of caveats on it. For example - next week we have five nights blocked off for a trip for DH's family. I could say - take those nights out of August completely; my occupancy is based on 156 room nights available instead of 186. Or I could say, my occupancy the rest of the month is 80%, so I'll apply the 80% to that week also (even though I know that week is usually less busy; that's why I blocked it off). Or I could just eat it - it's my choice to take the days off so my occupancy is lower in August than it might be if I chose to work those days.
The only way to truly compare occupancy rates across B&Bs, in my opinion, is to not account for blocking off days or months closed, so that there is a level playing field for the comparison. If you are looking to buy a place, all those idiosyncracies around the occupany rate should be revealed, of course. But some sellers are not full disclosers and then you get inflated occupancy rates.

 

[Penelope]

Keep in mind: I am not an Innkeeper, just an assistant. But ... someday, I'll have my own inn, so I'd like to get as much of this under my belt as possible...
Isn't Occupancy different than ADR?
To me, and I KNOW I coulf be wrong, isn't occ just that: the amount of nights that were occupied whether they paid or not?
And for blocking, do you figure it : (hypothetically) 2 rooms booked out of a possible 3 (because you blocked 1)? That would be 66% occ instead of 50%.
I dont' know maybe I just misunderstand..

It is completely different than ADR - ADR is average daily rate and occupancy is the total number of rooms occupied. That's why I believe you may count comps and freebies in your occupancy numbers, because the fact that they were free will get accounted for in your ADR and total room revenue.
If you block rooms and you count them in your occupancy you have to start putting all sorts of caveats on it. For example - next week we have five nights blocked off for a trip for DH's family. I could say - take those nights out of August completely; my occupancy is based on 156 room nights available instead of 186. Or I could say, my occupancy the rest of the month is 80%, so I'll apply the 80% to that week also (even though I know that week is usually less busy; that's why I blocked it off). Or I could just eat it - it's my choice to take the days off so my occupancy is lower in August than it might be if I chose to work those days.
The only way to truly compare occupancy rates across B&Bs, in my opinion, is to not account for blocking off days or months closed, so that there is a level playing field for the comparison. If you are looking to buy a place, all those idiosyncracies around the occupany rate should be revealed, of course. But some sellers are not full disclosers and then you get inflated occupancy rates.
.

Thank you so much for taking the time to type that. It really makes more sense to me now.
Now when you said:

Or I could just eat it - it's my choice to take the days off so my occupancy is lower in August than it might be if I chose to work those days.

what did you mean by "eat it"? I know it's just a figure of speech, but I don't know what context you are using it in.

 

[swirt]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally).

 

[stephanie]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)

In my search, I'm seeing a LOT of B&Bs that seem to think ADR means the average advertised rates for each room each night. I.E. they have 2 rooms at $150/night, 2 suites at $200/night. ADR=((2x$150)+(2x$200))/4 total rooms=$175.
I'd probably assume the same thing, even if it wasn't what I've been seeing all over the place. I think what you're describing would be better termed as "Average Daily Income."
Ugh. Real estate agents should have to pass a test on this. And they all treat me like an idiot when I call and ask what each term means to them and how they calculated the number.

 

[EmptyNest]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)

In my search, I'm seeing a LOT of B&Bs that seem to think ADR means the average advertised rates for each room each night. I.E. they have 2 rooms at $150/night, 2 suites at $200/night. ADR=((2x$150)+(2x$200))/4 total rooms=$175.
I'd probably assume the same thing, even if it wasn't what I've been seeing all over the place. I think what you're describing would be better termed as "Average Daily Income."
Ugh. Real estate agents should have to pass a test on this. And they all treat me like an idiot when I call and ask what each term means to them and how they calculated the number.
.

ADR means the average advertised rates WRONG...SWIRT is correct

 

[muirford]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)

In my search, I'm seeing a LOT of B&Bs that seem to think ADR means the average advertised rates for each room each night. I.E. they have 2 rooms at $150/night, 2 suites at $200/night. ADR=((2x$150)+(2x$200))/4 total rooms=$175.
I'd probably assume the same thing, even if it wasn't what I've been seeing all over the place. I think what you're describing would be better termed as "Average Daily Income."
Ugh. Real estate agents should have to pass a test on this. And they all treat me like an idiot when I call and ask what each term means to them and how they calculated the number.
.

If you are working with a real estate agent who tries to push ADR as average advertised rates, drop them and fast. The standard accepted use of ADR is as swirt described it. If a B&B owner is trying to tell you their ADR is their average advertised rates, go over their numbers with a fine-toothed comb and get the basis for each calculation. They either lack understanding of their business or are trying to gloss over the real numbers. No one in their right mind would think that your advertised rates count for anything; it's how many rooms you sell and what you actually sell them for. It's like the rack rate posted on the door of the hotel room - when was the last time anybody actually paid the rack rate?

 

[muirford]

Keep in mind: I am not an Innkeeper, just an assistant. But ... someday, I'll have my own inn, so I'd like to get as much of this under my belt as possible...
Isn't Occupancy different than ADR?
To me, and I KNOW I coulf be wrong, isn't occ just that: the amount of nights that were occupied whether they paid or not?
And for blocking, do you figure it : (hypothetically) 2 rooms booked out of a possible 3 (because you blocked 1)? That would be 66% occ instead of 50%.
I dont' know maybe I just misunderstand..

It is completely different than ADR - ADR is average daily rate and occupancy is the total number of rooms occupied. That's why I believe you may count comps and freebies in your occupancy numbers, because the fact that they were free will get accounted for in your ADR and total room revenue.
If you block rooms and you count them in your occupancy you have to start putting all sorts of caveats on it. For example - next week we have five nights blocked off for a trip for DH's family. I could say - take those nights out of August completely; my occupancy is based on 156 room nights available instead of 186. Or I could say, my occupancy the rest of the month is 80%, so I'll apply the 80% to that week also (even though I know that week is usually less busy; that's why I blocked it off). Or I could just eat it - it's my choice to take the days off so my occupancy is lower in August than it might be if I chose to work those days.
The only way to truly compare occupancy rates across B&Bs, in my opinion, is to not account for blocking off days or months closed, so that there is a level playing field for the comparison. If you are looking to buy a place, all those idiosyncracies around the occupany rate should be revealed, of course. But some sellers are not full disclosers and then you get inflated occupancy rates.
.

Thank you so much for taking the time to type that. It really makes more sense to me now.
Now when you said:

Or I could just eat it - it's my choice to take the days off so my occupancy is lower in August than it might be if I chose to work those days.

what did you mean by "eat it"? I know it's just a figure of speech, but I don't know what context you are using it in.
.

You're welcome.
By 'eat it' I meant count those blocked-off days as possibly-occupied days, which makes the occupancy rate lower - using 186 as the base for August occupancy rather than 156.

 

[muirford]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

I understand your point about the adjusted values, and I do think you need to take them into account internally. But the adjusted values become less useful the longer you have the business, just my opinion - sort of like micro economics vs. macro economics. In five years of data, one month up or down from the year before tends to even out.
And you have to be careful you don't allow the adjusted values to get in the way of discovering trends. Like - July revenue was down this year to last year but we took two days off in the middle, so that's okay. When I used to work in a marketing department years ago, it seemed like the actual numbers varying from the forecast was always okay if you had a reason.

 

[swirt]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)

In my search, I'm seeing a LOT of B&Bs that seem to think ADR means the average advertised rates for each room each night. I.E. they have 2 rooms at $150/night, 2 suites at $200/night. ADR=((2x$150)+(2x$200))/4 total rooms=$175.
I'd probably assume the same thing, even if it wasn't what I've been seeing all over the place. I think what you're describing would be better termed as "Average Daily Income."
Ugh. Real estate agents should have to pass a test on this. And they all treat me like an idiot when I call and ask what each term means to them and how they calculated the number.
.

This is why it is important for the person showing the result to show how they got it. It's like when in math class. The answer is not as important as how it was reached. I don't think I would ever suggest taking the final numbers reported as fact until I had seen how they were calculated and where the raw numbers came from. There are too many places where people can fuzz the numbers (intentionally or unintentionally). I agree, "Average Daily Income" would be a more meaningful term for what is described as ADR, but the convention has been set.

 

[Morticia]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)

In my search, I'm seeing a LOT of B&Bs that seem to think ADR means the average advertised rates for each room each night. I.E. they have 2 rooms at $150/night, 2 suites at $200/night. ADR=((2x$150)+(2x$200))/4 total rooms=$175.
I'd probably assume the same thing, even if it wasn't what I've been seeing all over the place. I think what you're describing would be better termed as "Average Daily Income."
Ugh. Real estate agents should have to pass a test on this. And they all treat me like an idiot when I call and ask what each term means to them and how they calculated the number.
.

Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)

In my search, I'm seeing a LOT of B&Bs that seem to think ADR means the average advertised rates for each room each night. I.E. they have 2 rooms at $150/night, 2 suites at $200/night. ADR=((2x$150)+(2x$200))/4 total rooms=$175.
I'd probably assume the same thing, even if it wasn't what I've been seeing all over the place. I think what you're describing would be better termed as "Average Daily Income."
Ugh. Real estate agents should have to pass a test on this. And they all treat me like an idiot when I call and ask what each term means to them and how they calculated the number.

I just looked at the ADR as calculated by my booking software. NO idea how that works. It came up with an average for the 7 rooms of something like $134 which is LESS than any one room's rate and we were running 90% occ. I tried separating out the rooms and doing the calc individually. Again, room selling for $170-$175 and having ONE open night showed an ADR of $157. Just didn't make sense. UNLESS the software is calculating it on an entire month and not just on the dates I selected.

 

[Morticia]

Since a comp or block out is not income, you can't add them in..

Since a comp or block out is not income, you can't add them in.

I would think differently on this one. Comps, because there was a guest in the room, free or not, IS real occupancy. Blocked dates, because you are not allowing anyone, still count toward the occ bottom line but in a negative way.
Altho, if you can show the buyer how you did the numbers, they can figure it however they want, and that's the more important feature.
But maybe that wasn't the question.

 

[JunieBJones (JBJ)]

I think to have an apples-to-apples comparison for everyone, the standard is nights occupied out of 365 times number of rooms. I think you may count comps - or the second night of BOGOs, or whatever. There's no income for those, so that just gets reflected in your ADR (average daily rate) and total revenue, but they are still rooms that are occupied as part of the business. Blocking out rooms is a different story - since that is totally at your discretion, it's not really fair to take them out of the occupancy equation. Or at least not the occupancy equation if you are looking to sell your business. One of the ways occupancy rates get inflated is from owners who count those days as fully occupied when selling the business..

I think to have an apples-to-apples comparison for everyone, the standard is nights occupied out of 365 times number of rooms. I think you may count comps - or the second night of BOGOs, or whatever. There's no income for those, so that just gets reflected in your ADR (average daily rate) and total revenue, but they are still rooms that are occupied as part of the business. Blocking out rooms is a different story - since that is totally at your discretion, it's not really fair to take them out of the occupancy equation. Or at least not the occupancy equation if you are looking to sell your business. One of the ways occupancy rates get inflated is from owners who count those days as fully occupied when selling the business.

Accounting has a lot to do for the BOGO tho for me. I actually do a 50/50 on it. So I am not selling one room night, I am selling TWO at 50% off. That is the only way I can work it in my software, and I DO want to show the room was occupied and used and we paid for the amenities.
A COMP to me means simply a freebie. Sure we encounter the same costs to serve these guests, but they have paid nothing for the room. The occupancy can be 100% if we comped more rooms, but how is that accurate?
I guess I am looking at it solely from the income producing rooms. That to me is the occupancy rate.

 

[swirt]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

I understand your point about the adjusted values, and I do think you need to take them into account internally. But the adjusted values become less useful the longer you have the business, just my opinion - sort of like micro economics vs. macro economics. In five years of data, one month up or down from the year before tends to even out.
And you have to be careful you don't allow the adjusted values to get in the way of discovering trends. Like - July revenue was down this year to last year but we took two days off in the middle, so that's okay. When I used to work in a marketing department years ago, it seemed like the actual numbers varying from the forecast was always okay if you had a reason.
.

And you have to be careful you don't allow the adjusted values to get in the way of discovering trends. Like - July revenue was down this year to last year but we took two days off in the middle, so that's okay.

Isn't that what the adjusted values allow you to see? They take the two days off into consideration so that you can compare this July to last July. It would help you see the trend despite the differing situation.