Occupancy
Regular readers of my postcards will know of m,y interest in Statistics … and the travel and leisure industry provides a wealth of useful examples that I wish I had been aware of when I was teaching the subject.
Whenever two or three hoteliers are gathered together, for example, there is one topic of conversation that is almost bound to crop up: Occupancy - the percentage of all “rental units”, (usually, that is, rooms) that are occupied or rented at a given time.
This “room occupancy” rate is one of several possible statistical measures – or performance indicators which can be used to compare hotels. There are also, for example, sleeper occupancy, double occupancy, and income occupancy, They all work on the basis of comparing actual performance to the potential.
But these are just some of the Statistics that hoteliers bandy around. Amongst the others are the Average Daily Room Rate and the Revenue per available room.
The reason there are so many is that every hotel is different and one feature may well distort the overall picture. Each one tells us something different and interesting … giving a useful indicator of the success, or otherwise, of a hotel as well as a means of comparison.
The basic room occupancy statistic is perhaps one of the easiest and most useful when it comes to comparing hotel performance:
Room Occupancy = Number of rooms sold x 100
Number of rooms available
However, technically it’s easier for a small hotel to obtain a high level of room occupancy than it is for a large hotel which has to fill more rooms for each percentage point.
It’s pretty meaningless, however, for a hostel which operates a number of dormitory rooms; where people share a room renting a bed for the night. In this case Sleeper occupancy might be a more useful statistic.
Sleeper occupancy = Actual sleepers x 100
Possible sleepers
Likewise, a hotel which has many rooms designed for dual occupancy, (Double or Twins), then if they are sold as Singles, the income derived will be less than if they are sold as if for two people. So, this performance indicator helps indicate how efficient the hotel is in managing room requests for singles … .
Most hotel rooms are intended as Dual Occupancy – for two people … and priced accordingly, taking into account the additional capital cost of providing the room (which is usually bigger than a single room), including the additional cost of heating and lighting, cleaning expenses (time and materials), etc. which result from the larger room size; the additional laundry and breakfast, etc., for the second person. Selling the rooms as a Single for one person to occupy can mean generating more income, but not necessarily mean that the hotel, (as a business), is getting the best value out of the space. That is why the Double occupancy statistic can be revealing.
Double occupancy = Number of double rooms let as doubles x 100
Number of Double Rooms available
For the record: Some hotels here in Kyrgyzstan, especially in Issyk Kul, won’t sell a double occupancy room, (a Double or a Twin), as a single … one person can occupy the room as a single, but they pay the full rate as if if two were staying there.
They say that Cash is King, and cashflow is an important aspect of any business, but revenue can be affected by discounts and special offers, so Income occupancy, (which shows the relationship between the income actually earned and that which could have been earned if full occupation had existed at full rates), can be a useful indicator.
Income occupancy = Actual income earned x 100
Possible total income
When it comes to cash, a simple statistic is the Average Daily Rate, (ADR):
Average Daily Rate= Room Income received
Number of rooms Rooms “sold” that day
Although this gives an indication of the “value” of the rooms … but it can be distorted by the occupancy level and the composition of different types of rooms available. In theory an ADR of USD80 is more impressive than another of USD70 … but it could represent just one room being occupied where the guest has paid USD80 whereas on another day, ten rooms may have been occupied which each guest paying USD70 … which is obviously a better result. Also, a Presidential Suite being occupied at USD1000 a night can seriously affect this statistic, even though it may be sold only a few nights each year.
Perhaps a more useful statistic is the Revenue per Available room, (RevPAR):
RevPAR = Room income received
Number of rooms available that day
which combines both income and occupancy level in a single statistic. It is usually less than the ADR, but gives a better impression of the hotel’s performance.
When it comes to providing the authorities with statistics … they always ask us how many koika mest we have, (that is, how many people we can accommodate). They also ask us how many guests we have accommodated each month, from each country, how many nights they stayed and how much they paid us. Fortunately they don’t ask for a complete breakdown by individual guest, (that would be a nightmare to produce and process), but are happy to receive aggregate totals for each country once every three months.
So that’s another set of statistics to add to those first three: koika mest, the number of guests, guest nights and income.
Now, why are my thoughts focused at the moment on such statistics?
About a month ago I was involved in a meeting where we told about a plan to revise the tax system for the hotels, pensionats, resorts and sanatoria around Lake Issyk Kul.
The idea is to change the basis of taxation for those offering accommodation one based on income received to the number of koika mest. This strikes me as illogical … albeit it should be easy to administer, (and possibly to cheat), but illogical.
Generally speaking, hotels do not provide accommodation by renting out koika mest, to guests, but rooms. A Twin room may have two koika mest, (beds), but may be occupied by just one person – single occupancy.
Worse … it may not be occupied at all.
Back in 1999, and again in 2010, for example, we suffered bad seasons when Issyk Kul received very few guests. (In one case this was the result of a lorry carrying cyanide to the Kumtor Gold mine falling off a bridge into the River Barskoon, and spilling its cargo into the water … in the other it was due to a Revolution and the subsequent closure of the border with Kazakhstan).
I suppose that in the case of single occupancy, then the price can be adjusted to include the new tax element … but if the room is not let to a guest, then I wonder how the hotel is to find the money to pay the bill?
Having said that, it seems that the vast majority of owners and managers are in favour of the new system.
Bishkek