Would you rather have a serviced accommodation property with 90% occupancy or 75%?
Most people would probably choose 90%.
But before making that decision, there is another question worth asking: what do the numbers actually look like?
When it comes to serviced accommodation occupancy, a full calendar can look very impressive. But occupancy on its own does not necessarily tell you whether a property is performing as well as it could.
You also need to look at the nightly rate, operating costs, changeovers, cleaning, gaps between bookings and, ultimately, what the property actually returns.
Occupancy is an important figure when you’re managing a serviced accommodation property, but it is only one part of the overall picture.
A property with 90% occupancy might sound better than one with 75%. However, if that 90% occupancy has been achieved by accepting much lower nightly rates, the difference may not be as significant as it first appears.
On the other hand, a property with slightly lower occupancy could potentially generate a better return if the bookings are coming in at stronger rates and with lower operating costs.
That is why we always need to look beyond the percentage.
The question isn’t simply:
“How full is the calendar?”
It is:
“What is the property actually returning?”
Take a longer term booking as an example.
Let’s say a guest books one of our properties for a month.
From an operational point of view, that can be a fantastic booking.
You’ve got 100% occupancy for that period, one guest, no regular changeovers and potentially just a weekly clean to manage. There is less laundry, less preparation and generally less day to day management.
From an operational perspective, we love those bookings.
But there is another side to consider.
You may have accepted a lower nightly rate in order to secure that longer booking. So while the calendar looks fantastic, could you potentially have generated more revenue by taking several shorter bookings at higher nightly rates?
Possibly.
But equally, maybe not.
And that is where things become more interesting.
Shorter bookings can allow you to achieve a higher nightly rate, but they also create more work.
Every additional booking can mean another:
There is also more management involved in keeping everything running smoothly.
So, if a property is achieving a higher nightly rate but requires significantly more cleaning, laundry, changeovers and management, you need to understand what that means for the final return.
A higher rate does not automatically mean higher profit.
Likewise, lower occupancy does not automatically mean poor performance.
This is one of the balances we are constantly looking at in serviced accommodation.
At what point does a longer booking become worth accepting at a slightly lower nightly rate?
There isn’t necessarily one answer.
It depends on the property, the market, the time of year, the length of the booking and the costs involved in operating it.
For example, a month long booking at a slightly lower rate might make perfect sense if it removes several changeovers and gives you a reliable income for that period.
But if demand is particularly strong and you could realistically achieve much higher nightly rates from shorter bookings, the calculation could look very different.
That is why it is important not to look at occupancy in isolation.
Another part of managing a serviced accommodation property is knowing when to hold your rate and when to be more flexible.
If demand is strong, there may be little reason to reduce your nightly rate simply to make the calendar look fuller.
You might end up with 100% occupancy, but if you have filled those dates at rates that are too low, you may have left money on the table.
Equally, there will be times when accepting a slightly lower rate makes sense.
If you are approaching a quieter period and have empty dates coming up, securing a booking can be preferable to leaving those dates completely unoccupied.
It is about understanding the balance rather than chasing one particular number.
The honest answer is: you need to see the numbers first.
If we can achieve 90% occupancy at a fantastic nightly rate, of course we would take that.
Those opportunities do exist, and when they come along, they can be fantastic.
You have strong occupancy, good revenue and, ideally, a healthy return without creating unnecessary operational work.
But those opportunities are not always there.
Most of the time, managing serviced accommodation means looking at the bigger picture and balancing occupancy against nightly rates, costs and workload.
That is much more useful than simply trying to get the highest possible occupancy percentage.
It can be tempting to think that the ultimate goal for any serviced accommodation property should be a completely full calendar.
But a full calendar looks better than it necessarily performs.
If you have 100% occupancy but have had to significantly reduce your nightly rates, increase your operating costs and take on considerably more work, you need to ask whether you have actually maximised the property’s performance.
Sometimes a slightly lower occupancy rate can produce a better overall result.
The important thing is understanding why.
When we look at property performance, occupancy is obviously important. But it should be considered alongside the other numbers.
You need to look at:
Occupancy – How many nights are actually booked?
Nightly rate – What are you achieving for those nights?
Operating costs – How much are cleaning, laundry, utilities, management and other costs affecting the return?
Booking length – Are longer bookings reducing your operational workload, or are shorter bookings producing enough additional revenue to justify the extra work?
Gaps between bookings – How much time is actually being lost between stays?
Overall return – What does the property ultimately generate after the relevant costs?
Looking at all of these together gives you a much clearer picture of how the property is performing.
Everyone in the serviced accommodation industry is looking for those exceptional deals where the numbers all work beautifully.
We sometimes call them the unicorn deals.
I’ve had plenty of them before, and they are fantastic when the money comes in and there is less work involved.
But they aren’t always there.
For most properties, the reality is about finding the right balance between occupancy and nightly rate while keeping the costs and operational workload under control.
That is why I would be careful about judging a serviced accommodation property simply by looking at its occupancy percentage.
A property at 90% occupancy isn’t automatically performing better than one at 75%.
You need to look at what sits behind those numbers.
A full calendar looks fantastic. But the real question is what that calendar is actually producing.
If you’re considering a serviced accommodation property and want to understand how different strategies could affect its performance, the team at Castle Properties can help you look at the bigger picture.
