Occupancy rate
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Occupancy rate
The occupancy rate is a very important ratio, which gives you management information on the relationship between the number of occupied rooms and the total number of rooms. The occupancy rate is the % of the available rooms occupied during a certain period between 12.00 and 12.00 the next day.
The hotel market has a structural overcapacity: the supply of hotel rooms exceeds the demand for the hotel(nights). So whatever you do, it is, (as in reality), very difficult to achieve an occupancy rate exceeding 80%. This means that in a year, from your 100 hotel rooms you had 80 rooms occupied. On taking over your occupancy rate is 50% (Operating_review).
Of course, the fixed costs will be the same at any occupancy rate, the height of the variable costs is related to the number of occupied rooms. Keep in mind that the number occupancy rate is NOT the same as the number of guestnights or the number of bookings. There are all kinds of help available on the internet like Little Hotelier.
Please check the link to the 100 rooms that are available: their location and details on their facilities.
Basic elements causing your occupancy rate
A few basic elements in occupancy
- the balance between supply and demand, as explained there is some overcapacity in the hospitality market, in the region of Emerald Forest Hotel as well.
- the competitors: how active are they? Dos your strategy tells you apart from the competitors?
- the total of all your decisions in managing and promoting the hotel
and will loose some customers (occupancy rate).
- aiming at the right target group, the right markets.
Different target groups, markets
There is also a difference between the two target groups: they each have their own occupancy rate which you can find in your results. Check the next pages for detailed information:
Weekends and the leisure target group
Please take into account that in this game a year is calculated as 52 weeks * 7 days = 364 nights per year!
The maximum capacity of room nights to be sold during the weekend, mainly to leisure guests is:
52 weeks x 100 rooms x 3 weekend days (out of 7 days) = 15,600 'room nights'.
At the average room price in the weekend min. € 80, max. € 100, so the Bergman's calculated at € 90.
This could generate a maximum revenue from occupied rooms of 15,600 x € 90 = € 1,404,000.
The actual revenue from renting the rooms now during weekends is € 704.340 as stated in the Operating review.
So actual revenues € 704,340 ./. maximum € 1,404,000 = a bit over 50% occupancy rate as stated by the documentation.
So 50% of 15,652 room nights is 7,826 room night. So an occupancy rate of the rooms of 50%.
To be more specific on this look at the file Revenue per room.
Trying to analyze the revenues of the rooms as shown in the operating review, might bring some differences to what you expect. This due to -cancellations, overbooking, group-reductions, no shows, friends & relatives. So a few % difference in these revenues is normal.
Weekdays and the business target group
Please take into account that in this game a year is calculated as 52 weeks * 7 days = 364 nights per year!
The maximum capacity of room nights to be sold during the weekdays, mainly to business guests is:
52 weeks x 100 rooms x 4 weekend days (out of 7 days) = 20,800 'room nights'.
At the average room price during the weekdays min. € 100, max. €140, so the Bergman's calculated at € 120.
This could generate a maximum revenue from occupied rooms of 20,800 x € 120 = € 2,489,760.
So actual revenues € 1,244,880 ./. maximum € 2,489,760 = a bit under 50% occupancy rate as stated by the documentation.
So 50% of 20,800 room nights is 10,374 room night. So an occupancy rate of the rooms of 50%.
To be more specific on this look at the file Revenue per room.
Trying to analyze the revenues of the rooms as shown in the operating review, might bring some differences to what you expect. This due to -cancellations, overbooking, group-reductions, no shows, friends & relatives. So a few % difference in these revenues is normal.
Benchmarks
All over the year, an average of 50% doesn't seem to be too bad a position to start from. Of course, there is a strong relationship with the profit. Between 50 and 60% as an average all over the years seems to be realistic: check real benchmarks. Above 60% generally means you are doing a good job unless your prices are very low and your costs high. Some periods you can get up to 95%, but as an average all over the year occupancy-rates above 80% are nearly impossible in the industry. Higher prices without explaining to the customers (marketing costs) or proper investments, will make the occupancy rate go down. Lower prices attract cheap-buyers which might boost your occupancy rate. But int he end, per room you will not make less profit so your profit will drop. So it is all about the balance and following your concept.
Indication
This gives an indication of the maximum growth. Of course, things change if you have a higher occupancy rate AND a higher sales price.
So making additional costs (apart from the fixed and variable costs you cannot "avoid"), this calculated maximum gives you an indication of what you could make on extra costs which still could be earned back. Or, even better, lead to more profit! Also, take into account that last year the net profit was € 436,301.
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