Occupancy, ADR and RevPAR for a Small Guest House

"We were busy" is not a measurement

Ask most guest house owners how last month went and you will get a feeling: busy, quiet, better than last year probably. It is an honest answer and a useless one, because it cannot be compared to anything — not to last March, not to this March next year, and not to the month you tried a different rate.

The three numbers below fix that. None of them is complicated, none needs a spreadsheet, and between them they answer the question a feeling cannot: was that actually a good month?

1. Occupancy — how full you were

Occupancy is the share of your available room-nights that were sold.

Six rooms across a 30-night month gives you 180 available room-nights. Sell 108 of them and you ran at 60%.

It is the easiest of the three to measure and the easiest to misread, because occupancy says nothing about money. You can fill every room at a price that loses you money and report 100%. Anyone can be fully booked tomorrow if they are willing to charge little enough.

One practical note: measure it against the rooms you actually offer. A room kept for family, or taken out of service for the winter, should not be listed as bookable — leaving it in drags your occupancy down for no reason.

2. ADR — what you earned per room sold

Average daily rate is your income divided by the room-nights you actually sold.

Note the denominator: nights sold, not nights available and not number of bookings. A three-night booking at R 900 a night counts as three room-nights, not one.

ADR is where discounting shows up. Your advertised rate might be R 1 200, but once weekday specials, long-stay rates, off-season pricing and your cheaper rooms are averaged in, the real figure is often a good deal lower. If your ADR sits well below what you thought you charged, something is discounting you harder than you realised — and until you measure it, you will not know which of those things it is.

Like occupancy, it misleads on its own. ADR can be raised any time by pricing yourself into an empty house.

3. RevPAR — what each room you own earned

Revenue per available room divides income by every room-night you had, sold or not.

Which is the same thing as:

That second form is the point. RevPAR cannot be gamed by trading one number for the other, because it contains both. Discount to fill rooms and ADR falls as occupancy rises. Push your rate and occupancy falls as ADR rises. RevPAR moves only when the combination genuinely improves.

Why it matters: two months that look nothing alike

A six-room guest house, two 30-night months. 180 available room-nights each.

April felt like the better month. It was busier — a quarter more room-nights sold, a fuller house, a busier breakfast room. And it earned R 2 700 less.

Occupancy alone says April won by a mile. ADR alone says March won. Only RevPAR gets it right, and it gets it right because it is the only one that looks at both.

Where to find them in GHM Suite

Open a property and go to the Reports tab, then pick a period along the top — 7 days, 30 days, 90 days, month to date or last month.

• Occupancy is the Avg Occupancy card, with your average length of stay underneath. There is also an Occupancy Rate chart further down that breaks it out day by day, which is where you see your weekday-versus-weekend pattern.
• ADR is the Avg Daily Rate card. The line beneath it tells you how many booking nights it was averaged across — worth a glance, because an ADR drawn from four nights is not a trend.
• RevPAR is not shown as its own figure. Multiply the two cards together, or divide Gross Income by your rooms times the nights in the period. For a six-room property over 30 days at 60% and R 900, that is R 540.
• Compare against yourself. The income and guest cards show the change against the previous period, and the monthly income chart gives you the shape of your year. Your own last-year-same-month is a far more useful benchmark than any industry average.

What counts as good

Nobody can honestly hand you a target occupancy for a South African guest house. It swings on your town, your season, your room count and whether you are on the coast in December or in a farming town in June. A figure that would be poor for a city guest house can be a strong year for one with a three-month season.

So use yourself as the benchmark:

• Same month, last year. The only comparison that holds season constant.
• RevPAR trend over a year. Twelve months of RevPAR tells you whether the business is improving; one month tells you almost nothing.
• Weekday versus weekend. If weekends are full and weekdays are empty, that is a pricing problem with a specific shape, not a general one.
• Before and after a change. Raised your rate in September? Compare September RevPAR to August, and to last September.

The trap worth naming

The instinct when rooms sit empty is to drop the price, and occupancy is the number that rewards you for it — instantly and visibly. It is the most satisfying metric to move and the easiest one to move for the wrong reason.

Before discounting, work out what the fuller month actually earns. Sometimes the answer is clearly yes: an empty room earns nothing, and a discounted guest also buys dinner. Sometimes, as in the table above, you work harder for less. RevPAR is how you tell the two apart before the month happens rather than after.

Common questions

Looking at your reports and not sure what they are telling you? Send us a message — a real person in South Africa will answer.