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Hostel vs. Hotel Occupancy Rates

General Hostel Operations

Ington6 started this discussion 12 years 1 month ago

Hi,
I'm working on projections for a new hostel and came across the towns average occupancy rates for hotels. There currently is no other hostel in this town and it is a relatively affluent ski town with lots of fly-in tourist. The ADR for the town was 35% with major lulls in May/June and Oct/Nov as I had expected. How do hostel occupancy rates differ from those a hotel would be able to maintain? My breakeven rate is 35.5%, but the statistics are making me re-analyze my business plan considering I thought I could sustain 50%. What are some of other hostel owners occupancy rates in a similar market? Any help would be greatly appreciated.

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Rucksack Brian

12 years

It’s not really accurate to compare hostel and hotel occupancy rates because our business models work so differently. Hotels calculate their occupancy rate by the number of rooms sold. Hostels calculate it by the number of beds sold.

If you have a 100-bed hostel, then you’ll hit 100% occupancy with 100 guests. Let’s assume those guests are divided into 4-bed dorms, so you would have 25 occupied rooms.

Now let’s assume that the hotel next door has 100 rooms. With 100 guests their occupancy rate might be 100% (1 person per room) or 50% (2 people per room) or somewhere in between. Also, the full 25-room capacity of your hostel would only constitute 25% occupancy for the hotel if you compared the rooms evenly, even though the number of guests is the same.

So the comparison doesn’t really work. It gets even less accurate when you start comparing your costs. Your 100 guests in 25 rooms will cost you far less money for electricity, heating, and staff than the hotel’s 100 guests in 50 or 100 rooms.

Of course this ignores the fact that hotels will probably attract a different clientele than your hostel, so counting their guests wouldn’t accurately reflect your potential business either.

Unfortunately that doesn’t help you choose an occupancy rate to use for your projections. The 100-room hotel is just an example to make the math easy. Did the report that you found also give you an average number of rooms for the hotels in your city? Looking at the numbers you found, if the average hotel occupancy rate is 35% in your city, then we could guestimate around 70 guests per night for a 100-room hotel. Maybe you could do a similar calculation with the real numbers to get a guess at the number of people who pass through.

I don’t know which country your hostel will be in, but maybe there are some ski hostels in the US, Canada, Europe, or elsewhere that would have similar markets and be willing to share their data. You might have better luck if you contact them directly though, because this is information that they might not be comfortable sharing openly on an international forum.

A few older threads ask similar questions. You can check them out here:
Hostel Occupancy Rates vs. Hotel Occupancy Rates?
Business plan question: Hotel -vs- Hostel occupancy statistics
Occupancy rates
Occupancy Rates/Biz Plan

I hope some of this helps a little.

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gordo

12 years

I'm going to have to disagree with Brian a little here.

Hotels DO measure room occupancy rather than bed occupancy but the point is still the same; bookable unit. You can't book 1/2 a bed in a hotel room. How many people are actually staying is irrelevant. What matters is how many bookable units are being paid for, whether you define this as room or bed is neither here nor there (unless you have the option of booking a room as either a twin or 2 bed dorm for example... then it gets complicated). Given that the vast majority of hotel rooms are double rooms (ie. one double bed), the number of guests isnt at issue, its the number of occupied beds. I guess I'd have to ask Brian whether or not he considers one person booking a double bed in his hostel as an occupied room, or a 1/2 occupied room given that theyre paying for the whole room?

In more general terms, comparing hotel and hostel occupancy rates is tricky. The general seasonal trends are usually the same when it comes to leisure travelers; however a great many hotels host a lot of business travelers who, simply put, dont care about the weather. Personally, I've found that if you can look at weekend occupancy rates in the city/region then that will give you a better rate to compare with as most business travelers dont stay over weekends. Another factor is conventions/conferences - never underestimate the impact they can have on hotel occupancy rates and yes, they will often stay over weekends. Sorry to be difficult.

In terms of comparing occupancy rates to costs, Brian IS correct - in as much as theyre incomparable. The marginal cost of each guest in a hostel is very low compared to a hotel but in both cases you will find that the vast majority of costs are essentially fixed - assuming of course your major costs are rent and staff. Energy costs (usually 3rd on the list) will of course vary according to occupancy but you may find (depending on location) that just the season makes more of a difference than the number of people. As Brian said, it costs a lot more to heat/light an extra room for one person in a hotel than it does to heat/light the same room for one extra guest in a dorm. But what really makes a difference is whether the heating/AC is on or off and the number of HOT showers. Hot water costs are obviously dependent on occupancy, heating/cooling/lighting isnt.

I appreciate that doesnt really answer your questiosn... but hopefully it's some food for thought.

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Ington6

12 years

Ok, just found something interesting in an executive summary definition of occupancy rates.
"Occupancy Rate- The average daily rate of occupancy for a calendar year. The occupancy rate is computed by dividing the total number of visitor-days by the persons per unit, and dividing this amount by the inventory multiplied by 365 days. For example, (579,000 visitor-days/2.0 persons per unit)/(1,750 rooms x 365 days)=45% occupancy rate."

So my thought, and feel free to correct me, is that hotel occupancy rates are calculated by taking into account 2 people per room. So they do differ from hostel occupancy rates be because we calculate per bed with no assumptions like in their equation. The reason I brought this up is because I thought hotel occupancy rates would just be number of rooms/rooms occupied, with no regard to persons per room. Simply changing the persons per unit to 1.7 people instead of 2 people yields a 54% occupancy rate with this formula.

As I said, feel free to correct me if I am missing something. I most likely am.

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gordo

12 years

You're not missing anything, if anything you're over-complicating it. Hotels rarely count the number of people staying, they count the number of occupied rooms. Whether there's 1 or 2 people in there makes no difference. Instead of thinking about the number of people think about how much 'stock' you've sold. Hotels calculate their occupancy based on number of sold rooms/number of available rooms. Hostels calculate it based on number of sold beds/number of available beds. The equation is the same and in all honesty, neither really counts the number of people, just the amount of 'stock' sold.

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