For many C-level suite executives in the hotel and resort business they are constantly looking at how to improve this number. However in doing so if they are attempting to lower their rates to do this, it is a mistake and revenue will suffer.
According to this Stat (Average occupancy Rates) they monitor on average what the occupancy rates are each and every quarter. This has to be a painstaking amount of work just to get these numbers.
So based on that, they have found for years that the occupancy for the USA hotels, Resorts are at a 65%.
As you can see that is average overall even from years back,. That does not sound too bad if they are charging full price for these rooms, which many of them are not.
I like a deal just like anyone else so this is a game the Revenue Manager has to play each and every day. They have to forecast what is going to happen before it happens. When they are at full occupancy and they can keep the pricing overall on average to the regular retail price it is a good thing.
However to increase this number is not that easy. I have talked to some hoteliers and found out that most of the year depending on the season the rates can go from 65% to as low as 30% or lower. I am not sure what the break even point is but higher is better.
Many managers make the mistake to just look at the occupancy numbers and then they start to discount. That is not always a good idea and the revenue lost because the price is lower , there are more costs with more rooms being used and need ti be cleaned and maintained, Profit margin is then lost in many cases and there is no profit but maybe a break even scenario
What would it take to create a 10% increase in revenue for that location? What would that mean overall to the property and revenue to the hotel/ resort.
Let´s take this example:
Hotel / Resort has 300 rooms that book out at $150.00 average night , 7 days a week.
At 65 % occupancy that is great revenue stream again if the prices are slightly higher then the discounts that are normally given to get more people to enjoy the stay of whatever destination or event that brought them there.
What if we could increase this by 10%? Would that be a great revenue gained that normally would be lost?
300 Rooms and 65% occupancy would equal 105 rooms still empty.
105 rooms X $150 per night is a loss of over $15,000 per day that is being lost, over $110,000 for just 7 days. If that maintains for the rest of the year it adds up to a small fortune of over $ 1 million in lost revenue.
What if this could be changed?
Let´s raise the occupancy rate from 65% to 75% for the year. Now we see in hurry that by increasing it that much it will bring in an additional $35,000 revenue for just that week.
What if technology would do that? What if it could, what if it does? Would it make sense, i mean significant dollars to at least explore and learn more? You be the judge when you may see your occupancy rates rise with very little additional effort or cost.