Every spring, before the season opens, the same discussion comes back, and it always has two sides. One says “fill it — a full hotel is a living hotel”. The other says “hold the rate — we do not sell ourselves cheap”. Both sides think they are choosing between two levers. They are choosing between one lever and one bill.
First the fraction, because we only ever say half of it
Occupancy is rooms sold divided by rooms available. Almost every conversation is about the top of the fraction — how many I sold — and almost none about the bottom. That is where the easy lies hide.
In our example hotel, 47 rooms over 30 nights give 1,410 available room nights. With 987 sold, occupancy is 70%. Now say two rooms were closed all month for plumbing work, and you take them out of the bottom of the fraction. The percentage goes up, and not one extra room was sold. That is not necessarily wrong — but it is a different indicator, and you cannot compare it with last year if last year you counted another way.
The rule is simple and costs nothing: whatever base you choose, write it next to the percentage. In WisDom RM the number of rooms is set once, in Settings, and you can lower it for a single night in the Night Analysis when a floor really is closed. Under the occupancy figure the app writes the whole base: how many rooms were sold, out of how many, over how many nights. A percentage without its base is an opinion with decimals.
One target, three roads
Let us put numbers on the dilemma. The room revenue target for the month is €84,882 — exactly the revenue of the example month. The variable cost of each room sold (CPOR) is €14. Fixed costs for the month are €42,100. The reference rate is €86.
Now move only the rate, ten per cent up and ten per cent down, and let the arithmetic tell you how many rooms the same target needs each time.
894 × €81 = €72,414 for fixed costs and profit
Rate €86 · contribution €72 → 987 rooms · occupancy 70.0%
987 × €72 = €71,064
Rate €77 · contribution €63 → 1,103 rooms · occupancy 78.2%
1,103 × €63 = €69,489
Fixed costs are the same on all three lines so the difference is profit: €2,925
The fullest line is the poorest one. And not by a little: €2,925 in one month, with 209 more rooms to sell, make up, clean and live in. The team works harder to bring home less.
Look at which column moves against occupancy: the contribution. €81, €72, €63. Every euro you take off the rate comes entirely out of the contribution, because the variable cost of the room does not fall with it. Cleaning a room costs the same whether you sold it at €95 or at €77.
One more test is worth doing. If you judge the three lines by RevPAR, they look identical — €60.23, €60.20 and €60.23. Of course they do: we kept revenue the same on purpose, and RevPAR stops at revenue. The indicator is not wrong; it is just not the judge here. The judge is profit.
Occupancy is a requirement, not a target
This is the whole article in one line. You do not choose occupancy. You choose a rate — and occupancy is the number of rooms that rate asks of you to get where you want to go. It is the invoice of your decision, not the decision.
That is why “this year we are aiming for 80% occupancy” says nothing until you add the rate. Eighty per cent at €77 and eighty per cent at €95 are two different businesses, with different staffing, different wear and tear, and a different bank balance at the end of the season.
It also works the other way, and this is the most worrying finding in the table: the target you set is not the result you got. You set a revenue target, you reached it on all three lines, and you got three different profits. A revenue target without a stated rate is half a target.
The dilemma is not solved once
You do not decide in March and you are done. You decide again every week, because occupancy has a property that none of your other indicators has: it also exists in the future tense. ADR and RevPAR you learn after the night has closed. The rooms already booked for a Saturday three weeks away you know today.
That is where on-the-books works: how many rooms are already taken for the nights that remain, and how your pace stands against last year’s pace at the same point of the same month — not against last year’s final result, which at this point last year was half-empty too.
And the point that matters most, because this is where many calculators quietly cheat: when the app projects where the month will end, it assumes no rate movement. Volume is estimated from last year; the rate stays the one you are actually selling at today. If the likely scenario adds rooms, it adds them because last year, from the same point up to arrival, that many more bookings came in — not because “the rate will go up by then”. And if there is no basis from last year, the scenario stays empty instead of guessing.
In practice this gives you something the spring meeting cannot: you know on the 10th of the month that your pace is not reaching the line you chose, while there are still twenty nights left to change your mind — instead of finding out on the 3rd of next month, when all you can do is explain it.
Did you know? For the monthly target, WisDom RM does not pick a rate for you. It takes your revenue target and shows, at three rates — the anchor rate, +10% and −10% — how many room nights each one needs, what profit it leaves, and where the ceiling is if you sell out. The choice stays yours, with the arithmetic in front of you.
Try it free for 14 days →Conclusion
The next time “rate or occupancy?” lands on the table, the answer is neither. It is a third question: at what profit? Choose a rate, see how many rooms it asks for, and ask whether you can find them. Occupancy will follow on its own, and it will be right whatever it shows — as long as you know why it shows that.
A full hotel is not a success. It is a result. Whether it was a success is told by the line underneath — and that line is not measured in percentages.
Mathematician with studies in hospitality management and years of night shifts in hotels. WisDom RM — and this blog — were born on the night shift.
LinkedIn ↗