Occupancy is a fairly straightforward metric that all professional pet care facilities should track. It is the number of rooms booked divided by the number of total available rooms. While the calculation is simple, the quotient may not be as straightforward as it seems. Certainly, higher occupancy most likely means a healthier business. However, occupancy does not tell the whole story and should not be the lone metric of focus when managing a pet boarding facility.
Having an alarmingly high occupancy rate and a lengthy wait list much of the time can actually be misleading. Most might think their business is as good as it gets when they are at 100% occupancy. Another might look at this same scenario and point out the hidden message of rate inefficiency. When demand far outnumbers supply, there is most likely a rate imbalance and an adjustment should be made.
“Occupancy tells a story,
but not the whole story.”
Let’s look at a simple example: Kennel A has 10 rooms available for $25/night. Demand for these 10 rooms is very high. In fact, 20 very good clients all want to book these rooms. Obviously, only 10 will get in and 10 will be turned away. Nonetheless, Kennel A will have 100% occupancy with $250 in revenue – they can’t do any better than that, right? However, Kennel A decides to reassess their situation and they realize demand is 200% compared to their actual availability. Based on their supply and demand calculations, they decide to increase prices by $10/night. At $35/night, they now only need to reach 70% occupancy to match their current revenue and anything above that would result in an increase in revenue. They roll out their new rates and, as expected, demand did decrease. Interestingly, they still filled every room for 100% occupancy, but this time they only had 3 clients on their waiting list, lowering demand to 130%. They were still able to maximize their occupancy and optimize revenue to $350 – a 40% increase!
Occupancy can also play a key role in how rooms are filled. The type of reservations matters. One dog vs a 3 dog reservation can make a significant difference in revenue performance. Each can occupy the same room, but the 3 dog reservation will result in much higher revenue.
Let’s look at another scenario. Kennel A and B both have 10 rooms available and can each hold up to 3 dogs in each room. They both charge the same rates per room: $20 per room for 1 dog, $35 per room for 2 dogs and $50 per room for 3 dogs. Kennel A books all 10 of their rooms to the first 10 customers that come knocking – it just so happens that all 10 are single dog families, so that equates to $200 in revenue. Kennel B is a bit more selective. They have forecasted their expected Yield based on historical data and know they can expect 50% of their bookings to be multi-occupancy clients. They systematically accept bookings based on this data and end up filling 8 of their rooms. However, 1 room has 2 dogs and 3 rooms have 3 dogs. So, let’s look at the numbers:
|Kennel A||Kennel B|
|# of total dogs||10||15|
|RevPAR (revenue per available room)||$20||$26.5|
|ADR (average daily rate)||$20||$33.13|
Kennel A $200 revenue (10 x $20 = $200)
Kennel B $265 in revenue (4 rooms x $20 = $80, 1 room x $35 = $35, 3 rooms x $50 = $150)
As you can see, occupancy tells a story, but not the whole story. Looking at occupancy alone, Kennel A is the winner. But the end goal is not about occupancy. It’s about converting occupancy into revenue. Kennel B significantly outperforms Kennel A in revenue and still has 2 rooms in reserve for a last minute bookings.
The above scenarios are two simplified examples, but they convey a lesson that is very real. Hopefully, these examples can help you to start evaluating your business from different angles. Two other metrics that are important for your business are RevPAR and ADR – we will cover each of these in more detail.