What a room really earns

Ask a hotelier how the season went and they will quote their occupancy. It is the easiest number to feel — you can see the full rooms. It is also the most misleading.

The three numbers

• Occupancy: the share of available rooms that were sold
• Average rate: what a room that actually sold earned on average
• Revenue per available room: what a room earned on average, sold or not

The first two each describe half of the reality. The third puts them together, which is why it is the one that decides.

Why occupancy alone misleads

You can always fill up, provided you drop the rates far enough. A full summer at low prices looks like a success on the occupancy chart, while it took more housekeeping, more breakfasts and more hours on reception for the same revenue — sometimes less.

The opposite misleads just as much. A high average rate on half-empty rooms tells a good story, but the rooms that stayed empty earned nothing, and they still counted in the costs.

Reading them together

Revenue per available room settles the argument between the other two: it rises when a price increase is absorbed, it falls when that increase empties the property. Comparing two periods on this number alone tells you whether the pricing decision worked.

The other two explain the result. Revenue per room falling with occupancy steady points to a pricing problem; with the average rate steady, to an occupancy problem. The fix is not the same.

Setting your rates with this

Lodalia works out all three per period and per room type, from the stays already recorded. You see which increase was absorbed and which one cost you nights, before deciding next season’s rate.