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"We're running at 90% occupancy."
That sounds impressive. It’s a number that sells easily, fits well in a presentation, and immediately creates a sense of success. But without context, it means almost nothing.
A resort can be 90% occupied and barely make any money. Another resort can have a much healthier operation with 65% occupancy. The difference usually lies in the average nightly rate, the costs to acquire those bookings, the type of guest, and what remains at the bottom line.
That is why I never look at occupancy rate first. I first want to know at what price the rooms were sold.
Take two resorts, each with ten rooms and thirty days in a month. Resort A sells 270 nights: 90% occupancy. The average nightly rate is €80. The room revenue is then €21,600.
Resort B sells 195 nights: 65% occupancy. The average nightly rate is €140. The room revenue is €27,300.
Resort B sells 75 fewer nights but generates €5,700 more in room revenue. And that is before we even look at costs. Fewer occupied nights usually also mean less cleaning, linen, breakfast, energy, wear and tear, and platform fees.
This example is intentionally simple, but it shows exactly why "full" is not a strategy.
The average nightly rate—often called ADR (Average Daily Rate) in hospitality—tells you how much a guest is, on average, willing to pay for a sold room. That amount is influenced by almost everything you do as a developer and operator.
Location plays a role. Design plays a role. The size and quality of the room play a role. Reviews, photography, service, brand, distribution, and season all play a role. Even the speed at which the team answers questions can influence conversion and, therefore, the price you can command.
A strong nightly rate is therefore not just a financial figure. It is a summary of the value the market sees in your product.
That does not mean you should always be as expensive as possible. A price that is structurally above the market without the experience to back it up leads to empty rooms and bad reviews. Pricing strategy is about the highest sustainable price for the right product, at the right time, for the right guest.
Occupancy is visible and feels concrete. A full lobby, a busy breakfast service, and plenty of check-ins provide energy. For a team, it can even feel like the hotel is performing well. But an operator can quickly increase occupancy by offering discounts, stacking last-minute deals, or listing almost all inventory on major booking platforms.
With that, you are buying volume. You are not automatically building value.
Heavy discounting can attract guests who are a poor fit for the concept, compare prices more frequently, and spend less during their stay. Large platforms can charge commissions that significantly cut into your margins. And once you are known as an accommodation that always offers discounts, it becomes difficult to raise prices again later.
The question, therefore, is not how many nights you sell. The question is how much healthy revenue each available room generates.
That is where RevPAR comes in: Revenue per Available Room. You can calculate RevPAR in two ways. You multiply the average nightly rate by the occupancy rate, or you divide the total room revenue by the number of available room nights.
In our example, Resort A has an ADR of €80 and 90% occupancy. The RevPAR is €72. Resort B has an ADR of €140 and 65% occupancy. The RevPAR is €91.
Resort B therefore generates more revenue from every available room, even though it is less full.
RevPAR is therefore a much better primary metric than occupancy. But even RevPAR is not the final answer. It looks at revenue, not profit.
Suppose you achieve a high nightly rate, but pay an extreme amount for advertising, commissions, and extra services to get it. The result may still be disappointing. That is why, after ADR and RevPAR, I want to look immediately at the cost structure.
What percentage of bookings come in directly? What are you paying to Booking.com, Airbnb, and other channels? How large is the team? Which amenities are included? How much does energy cost per occupied room? What is being reserved for maintenance and replacement? How much management fee is being paid? And which expenses are kept out of the model as “one-off” costs, even though they return every year?
A resort is not a spreadsheet with only revenue. It is a daily business with hundreds of small cost decisions.
The best operators therefore manage based on a combination of figures: ADR, RevPAR, occupancy, direct bookings, acquisition costs, guest spending, review scores, personnel costs, and ultimately, operating profit.
The type of booking also matters. A guest staying for one night requires almost the same check-in, cleaning, and administrative effort as a guest staying for five nights. Short stays can therefore put a lot of pressure on the team and costs.
A direct booking can be more profitable than a booking via a platform, even at the same room rate. A guest who books spa treatments, meals, transfers, or activities brings in more total revenue than someone who only sleeps there. A returning guest is often cheaper to reach again than a completely new guest.
That is why segmentation is important. You want to know not just how many rooms were sold, but to whom, via which channel, for how many nights, and with what total spend.
That sounds analytical, but good hospitality remains human. The numbers help you understand which guests are the best fit for your product and where your experience can be improved.
Pricing strategy begins before the first stone is laid. A room with noise issues, lack of privacy, or poor ventilation has a lower price ceiling. A beautiful pool that stays in the shade all day might look great in a render, but it won't fare as well in the reviews.
Conversely, good design can support a higher nightly rate without every solution needing to be expensive. Think of natural airflow, smart sightlines, good lighting, a comfortable bed, plenty of power outlets, strong water pressure, and spots where a guest actually wants to sit.
At Shape Haus, we therefore look at how a room will be sold and operated while we are still in the design phase. Which photo will be the first one on Booking.com? What is the moment the guest will remember? Which details reduce complaints? Which layout makes housekeeping faster? Which materials will still look good after hundreds of stays?
That is commercial architecture in the best sense of the word.
You cannot just slap a premium nightly rate on a brochure and expect the market to pay it. The promise made in marketing must be delivered by operations. A smooth arrival, a clean product, attentive staff, and quick problem-solving are not extras. They are part of the price.
Reviews play a dual role in this. They influence the choices of future guests and provide the operator with information. If guests keep mentioning the same point, whether positive or negative, it is not a coincidence. That is an operational opportunity.
Strong operators do not read reviews as compliments or complaints, but as data. They look for patterns, adjust processes, and use the improved experience to further build up the price.
Don't just ask, "What occupancy rate do you expect?" Also ask what the expected average nightly rate is, what that price is based on, and which comparable accommodations were used for benchmarking. Ask about RevPAR, seasonal variations, channel mix, commissions, length of stay, and net operating margin.
Above all, ask for a less optimistic scenario. What happens if occupancy is 10 percentage points lower? What if the average nightly rate is 15% lower? Which costs are variable and which remain fixed?
A good operator can explain that without hiding behind marketing jargon.
Occupancy rate isn't useless, then. It’s only dangerous when you look at it in isolation. An empty resort is obviously not a good resort. But a full resort that sells its rooms too cheaply can be just as much of a problem.
I prefer to look at a healthy balance: a price that matches the experience, enough demand to fill the available rooms well, and a cost structure that leaves room at the bottom line for maintenance, the team, improvements, and profit.
Full feels good. Creating value is better.
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