Pearson New International Edition International pcl tp indd 1

FRONT OFFICE SEMANTICS
Occupancy index:
A ratio measure computed as
Assume that you are a hotel owner and that your revenue manager informs you
that your hotel achieved a 60 percent occupancy last month. Did managers do a good
job of managing the hotel’s occupancy? To make this evaluation, you must know how
the hotels with which you directly compete (i.e., your competitive set) managed their
occupancy levels. The occupancy index developed by Smith Travel Research is the
measurement tool developed to do this.
Competitive sets and indexes were introduced in this text as means of predicting
future rooms volume. They also can assist in making decisions about occupancy man-
agement. If your hotel achieved a 60 percent occupancy rate, the performance of your
revenue managers would likely be considered good if the occupancy rate achieved by
your hotel’s competitive set was 45 percent (therefore, your occupancy index was 133
percent: 60 
45 
133 percent). If, however, the competitive set’s occupancy rate
for the same period was 80 percent, your occupancy index is 75 percent (60 
80 
75 percent). This figure indicates that your managers were less effective decision
makers than their direct competitors. Figure 10 details the evaluations routinely
made when examining a hotel’s occupancy index.