Occupancy Rates

[YellowSocks]

Well, as I'm not planning on selling anytime soon, the numbers are for myself. I guess I wanted to know what the proper term for them was. Do I have this right? "Occupancy Rate" is Rooms x 365 and Adjusted Occupancy is comps and block offs figured in?
The comps in July include two room nights where friends came... then left money for us. Not sure if that becomes lodging income, or tip, or gift, or what.
Another comp in July is in exchange for a cool mural in the Art Dept. (Picture coming eventually...) We upgraded our long term stay from the cheapest room to a better room, and let her parents stay here one night. In exchange she created some original art for the wall. Do I understand correctly that that comp should be included as regular occupancy?
It never even occurred to me to figure out ADR... What else should I be figuring out?
=)
Kk.

 

[swirt]

Well, as I'm not planning on selling anytime soon, the numbers are for myself. I guess I wanted to know what the proper term for them was. Do I have this right? "Occupancy Rate" is Rooms x 365 and Adjusted Occupancy is comps and block offs figured in?
The comps in July include two room nights where friends came... then left money for us. Not sure if that becomes lodging income, or tip, or gift, or what.
Another comp in July is in exchange for a cool mural in the Art Dept. (Picture coming eventually...) We upgraded our long term stay from the cheapest room to a better room, and let her parents stay here one night. In exchange she created some original art for the wall. Do I understand correctly that that comp should be included as regular occupancy?
It never even occurred to me to figure out ADR... What else should I be figuring out?
=)
Kk..

Since you are doing this for your own. I would only include comps if they were attracted to your B&B for your B&B. Your friends coming probably should not be included because they were there because of you personally, not because they found your B&B and just had to stay there. You were comping them for personal reasons, not because they stayed with you for 4 nights and you comped them the 5th night or something like that.....or the electric and hotwater were out so you comped them for part of the cost of their stay.
The painting one is probably similar ..did the painter come stay because they found your B&B and had to stay there for an art show, at which time you said "wow what a lovely painting can I trade you your payment for it"...or was it somebody you found and then suggested the trade. Would they have been real guests if you didn't comp them? Did you turn people with actual money away, because of the people you comped? IF they wouldn't have been "real guests" then they probably shouldn't be counted. In this case I would remove them from the number of roomnights booked and the number of roomnights available when using the adjusted formulas.

 

[swirt]

Well, as I'm not planning on selling anytime soon, the numbers are for myself. I guess I wanted to know what the proper term for them was. Do I have this right? "Occupancy Rate" is Rooms x 365 and Adjusted Occupancy is comps and block offs figured in?
The comps in July include two room nights where friends came... then left money for us. Not sure if that becomes lodging income, or tip, or gift, or what.
Another comp in July is in exchange for a cool mural in the Art Dept. (Picture coming eventually...) We upgraded our long term stay from the cheapest room to a better room, and let her parents stay here one night. In exchange she created some original art for the wall. Do I understand correctly that that comp should be included as regular occupancy?
It never even occurred to me to figure out ADR... What else should I be figuring out?
=)
Kk..

ADR is useful in figuring out so that you can compare it to your Average Daily Cost.
If ADR < ADC its time to re-think things
Though I find it more helpful to look at Average Cost per RoomNight Taken (this number is fuzzier if the number of people you have in a room varies)
Average Cost per RoomNight Taken = (Total expenses for the year) / # of room nights taken

 

[muirford]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

I understand your point about the adjusted values, and I do think you need to take them into account internally. But the adjusted values become less useful the longer you have the business, just my opinion - sort of like micro economics vs. macro economics. In five years of data, one month up or down from the year before tends to even out.
And you have to be careful you don't allow the adjusted values to get in the way of discovering trends. Like - July revenue was down this year to last year but we took two days off in the middle, so that's okay. When I used to work in a marketing department years ago, it seemed like the actual numbers varying from the forecast was always okay if you had a reason.
.

And you have to be careful you don't allow the adjusted values to get in the way of discovering trends. Like - July revenue was down this year to last year but we took two days off in the middle, so that's okay.

Isn't that what the adjusted values allow you to see? They take the two days off into consideration so that you can compare this July to last July. It would help you see the trend despite the differing situation.
.

I've seen business owners who come up with a reason every month - usually out of their control, like bad weather, price of gas rumors, whatever - so that they never see the forest for the trees. Maybe the real problem is that your rates are too high, or too low, or you're not doing enough marketing. That's what I meant...

 

[muirford]

I think to have an apples-to-apples comparison for everyone, the standard is nights occupied out of 365 times number of rooms. I think you may count comps - or the second night of BOGOs, or whatever. There's no income for those, so that just gets reflected in your ADR (average daily rate) and total revenue, but they are still rooms that are occupied as part of the business. Blocking out rooms is a different story - since that is totally at your discretion, it's not really fair to take them out of the occupancy equation. Or at least not the occupancy equation if you are looking to sell your business. One of the ways occupancy rates get inflated is from owners who count those days as fully occupied when selling the business..

I think to have an apples-to-apples comparison for everyone, the standard is nights occupied out of 365 times number of rooms. I think you may count comps - or the second night of BOGOs, or whatever. There's no income for those, so that just gets reflected in your ADR (average daily rate) and total revenue, but they are still rooms that are occupied as part of the business. Blocking out rooms is a different story - since that is totally at your discretion, it's not really fair to take them out of the occupancy equation. Or at least not the occupancy equation if you are looking to sell your business. One of the ways occupancy rates get inflated is from owners who count those days as fully occupied when selling the business.

Accounting has a lot to do for the BOGO tho for me. I actually do a 50/50 on it. So I am not selling one room night, I am selling TWO at 50% off. That is the only way I can work it in my software, and I DO want to show the room was occupied and used and we paid for the amenities.
A COMP to me means simply a freebie. Sure we encounter the same costs to serve these guests, but they have paid nothing for the room. The occupancy can be 100% if we comped more rooms, but how is that accurate?
I guess I am looking at it solely from the income producing rooms. That to me is the occupancy rate.
.

A COMP to me means simply a freebie. Sure we encounter the same costs to serve these guests, but they have paid nothing for the room. The occupancy can be 100% if we comped more rooms, but how is that accurate?
I guess I am looking at it solely from the income producing rooms. That to me is the occupancy rate.

If you were comping 100% of your rooms, your occupancy rate would be 100% and your revenue would be $0 - and your ADR would be $0. That would be a pretty accurate picture to me!!
What I've heard from others, and I tend to agree, is that occupancy rate has been over-relied upon in the past to give an accurate idea of what the business health is. As your example shows, 100% occupancy with a revenue of $10,000 for a three-room B&B doesn't really display a healthy business picture, even though the occupancy looks fab. You really have to look at all the factors, and know what went into (or was kept out of) each calculation.

 

[swirt]

I think it depends on your use of the numbers. If you are looking to sell the place, then you have to (ought to, should be bound to...) use 365 days in the calculation, otherwise there is no way to compare one place to another. If your comps found you then they count. If you went and grabbed somebody off the street and said here come stay free, then no they don't count.
If you are looking for your own information and feedback then use the number of room nights you make available. This is the only way you could fairly compare one year to another without the risk of taking an extra week off one year messing up the comparison. In this case again comps count if they found you because you are trying to determine who would have stayed on their own.
Occupancy Rate = (# roomnights filled * 100 ) / (#rooms * 365nights)
Adjusted Occupancy Rate = (# roomnights filled * 100 ) / (# roomnights made available)
Average Daily Rate = (Total yearly income from rooms) / (#rooms * 365nights)
Adjusted Average Daily Rate = (Total yearly income from rooms) / (# roomnights made available)
The non-adjusted values are needed for comparing inn to inn. The adjusted values are needed for comparing year to year (internally)..

I understand your point about the adjusted values, and I do think you need to take them into account internally. But the adjusted values become less useful the longer you have the business, just my opinion - sort of like micro economics vs. macro economics. In five years of data, one month up or down from the year before tends to even out.
And you have to be careful you don't allow the adjusted values to get in the way of discovering trends. Like - July revenue was down this year to last year but we took two days off in the middle, so that's okay. When I used to work in a marketing department years ago, it seemed like the actual numbers varying from the forecast was always okay if you had a reason.
.

And you have to be careful you don't allow the adjusted values to get in the way of discovering trends. Like - July revenue was down this year to last year but we took two days off in the middle, so that's okay.

Isn't that what the adjusted values allow you to see? They take the two days off into consideration so that you can compare this July to last July. It would help you see the trend despite the differing situation.
.

I've seen business owners who come up with a reason every month - usually out of their control, like bad weather, price of gas rumors, whatever - so that they never see the forest for the trees. Maybe the real problem is that your rates are too high, or too low, or you're not doing enough marketing. That's what I meant...
.

LOL yes it is hard to see the forest from beside the river of denial.

 

[YellowSocks]

Well, as I'm not planning on selling anytime soon, the numbers are for myself. I guess I wanted to know what the proper term for them was. Do I have this right? "Occupancy Rate" is Rooms x 365 and Adjusted Occupancy is comps and block offs figured in?
The comps in July include two room nights where friends came... then left money for us. Not sure if that becomes lodging income, or tip, or gift, or what.
Another comp in July is in exchange for a cool mural in the Art Dept. (Picture coming eventually...) We upgraded our long term stay from the cheapest room to a better room, and let her parents stay here one night. In exchange she created some original art for the wall. Do I understand correctly that that comp should be included as regular occupancy?
It never even occurred to me to figure out ADR... What else should I be figuring out?
=)
Kk..

Since you are doing this for your own. I would only include comps if they were attracted to your B&B for your B&B. Your friends coming probably should not be included because they were there because of you personally, not because they found your B&B and just had to stay there. You were comping them for personal reasons, not because they stayed with you for 4 nights and you comped them the 5th night or something like that.....or the electric and hotwater were out so you comped them for part of the cost of their stay.
The painting one is probably similar ..did the painter come stay because they found your B&B and had to stay there for an art show, at which time you said "wow what a lovely painting can I trade you your payment for it"...or was it somebody you found and then suggested the trade. Would they have been real guests if you didn't comp them? Did you turn people with actual money away, because of the people you comped? IF they wouldn't have been "real guests" then they probably shouldn't be counted. In this case I would remove them from the number of roomnights booked and the number of roomnights available when using the adjusted formulas.
.

The painting one is probably similar ..did the painter come stay because they found your B&B and had to stay there for an art show, at which time you said "wow what a lovely painting can I trade you your payment for it"...or was it somebody you found and then suggested the trade. Would they have been real guests if you didn't comp them? Did you turn people with actual money away, because of the people you comped? IF they wouldn't have been "real guests" then they probably shouldn't be counted. In this case I would remove them from the number of roomnights booked and the number of roomnights available when using the adjusted formulas.

The painting was done by the guest we had here for eight weeks on a summer job. When she first arrived we discovered that although she's majoring in archeology and philosophy (and classics), she almost went to art school instead. I mentioned that I'd like to have some original art, preferably a mural, in the Art Dept. She began working on the design. When she was almost ready to install we began to talk compensation (if any). She mentioned that her parents would be traveling across country and would like to stop and visit and she where she was staying. So, they probably wouldn't have been guests if she wasn't doing the painting, but they might have been... In addition, she had to clear out on weekends where we were already booked. After the last one we moved her into the room where she'd be painting... the upgrade was part compensation, part practicality since it was a lot easier for her to work on the wall when she was sleeping right next to it!
Happily I didn't turn away any paying guests for my friends (else my friends wouldn't have come and I'm glad they did!). I'm going to continue tracking both numbers for my own information. The lower number is the official one, but the higher number is the actual, at least in terms of how much work I did!
=)
Kk.

 

[happyjacks]

Well, as I'm not planning on selling anytime soon, the numbers are for myself. I guess I wanted to know what the proper term for them was. Do I have this right? "Occupancy Rate" is Rooms x 365 and Adjusted Occupancy is comps and block offs figured in?
The comps in July include two room nights where friends came... then left money for us. Not sure if that becomes lodging income, or tip, or gift, or what.
Another comp in July is in exchange for a cool mural in the Art Dept. (Picture coming eventually...) We upgraded our long term stay from the cheapest room to a better room, and let her parents stay here one night. In exchange she created some original art for the wall. Do I understand correctly that that comp should be included as regular occupancy?
It never even occurred to me to figure out ADR... What else should I be figuring out?
=)
Kk..

Since you are doing this for your own. I would only include comps if they were attracted to your B&B for your B&B. Your friends coming probably should not be included because they were there because of you personally, not because they found your B&B and just had to stay there. You were comping them for personal reasons, not because they stayed with you for 4 nights and you comped them the 5th night or something like that.....or the electric and hotwater were out so you comped them for part of the cost of their stay.
The painting one is probably similar ..did the painter come stay because they found your B&B and had to stay there for an art show, at which time you said "wow what a lovely painting can I trade you your payment for it"...or was it somebody you found and then suggested the trade. Would they have been real guests if you didn't comp them? Did you turn people with actual money away, because of the people you comped? IF they wouldn't have been "real guests" then they probably shouldn't be counted. In this case I would remove them from the number of roomnights booked and the number of roomnights available when using the adjusted formulas.
.

The painting one is probably similar ..did the painter come stay because they found your B&B and had to stay there for an art show, at which time you said "wow what a lovely painting can I trade you your payment for it"...or was it somebody you found and then suggested the trade. Would they have been real guests if you didn't comp them? Did you turn people with actual money away, because of the people you comped? IF they wouldn't have been "real guests" then they probably shouldn't be counted. In this case I would remove them from the number of roomnights booked and the number of roomnights available when using the adjusted formulas.

The painting was done by the guest we had here for eight weeks on a summer job. When she first arrived we discovered that although she's majoring in archeology and philosophy (and classics), she almost went to art school instead. I mentioned that I'd like to have some original art, preferably a mural, in the Art Dept. She began working on the design. When she was almost ready to install we began to talk compensation (if any). She mentioned that her parents would be traveling across country and would like to stop and visit and she where she was staying. So, they probably wouldn't have been guests if she wasn't doing the painting, but they might have been... In addition, she had to clear out on weekends where we were already booked. After the last one we moved her into the room where she'd be painting... the upgrade was part compensation, part practicality since it was a lot easier for her to work on the wall when she was sleeping right next to it!
Happily I didn't turn away any paying guests for my friends (else my friends wouldn't have come and I'm glad they did!). I'm going to continue tracking both numbers for my own information. The lower number is the official one, but the higher number is the actual, at least in terms of how much work I did!
=)
Kk.
.

I count comps that are business related (ie a charity gift cert or a media fam tour) and I don't count family/friend comps. So in your situation I would count your mural-related comps since the mural is for business use.
I also agree that as a business calculation, Occupancy Rate has to be based on #rooms x 365, regardless of whether I block days or rooms off for personal reasons. And that Occ.Rate means nothing without looking at ADR.