Chartered Financial Analyst with 15+ years experience in hospitality finance and real estate investment.
Find your hotel’s breakeven occupancy. Enter any three variables—Monthly Fixed Costs, Average Daily Rate (ADR), Variable Cost per Room, or Breakeven Room Nights—to solve for the fourth.
Hotel Breakeven Calculator
Hotel Breakeven Formula (Occupancy)
The breakeven formula for a hotel finds the total number of room nights (Q) you must sell in a month for your total revenue to cover all fixed and variable costs.
Q = F / (P – V)
Solve for Monthly Fixed Costs (F):
F = Q * (P – V)
Solve for Average Daily Rate (P):
P = (F / Q) + V
Solve for Variable Cost per Room (V):
V = P – (F / Q)
Variables Explained
- Monthly Fixed Costs (F): Your total, recurring monthly overhead (e.g., property mortgage/rent, salaried staff, property taxes, insurance, franchise fees, utilities).
- Average Daily Rate (ADR) (P): Your average *revenue* per room sold. This is a key hotel metric (Total Room Revenue / Total Rooms Sold).
- Variable Cost per Room (V): The average cost directly tied to selling one room (e.g., housekeeping labor, supplies/linens, utilities, OTA commissions, franchise fees tied to revenue).
- Breakeven Room Nights (Q): The total number of room nights you need to sell each month to reach $0 in profit.
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What is a Hotel’s Breakeven Point?
A **Hotel’s Breakeven Point** is the exact number of room nights (Q) a property must sell in a given period (usually a month) to cover all of its costs. It is the minimum occupancy level required to stop losing money and begin generating profit. This is often expressed as a **breakeven occupancy percentage** (Breakeven Room Nights / Total Available Room Nights).
**Fixed Costs (F)** are your consistent monthly overhead, whether you sell 1 room or 3,000. This includes your mortgage or rent, property taxes, insurance, and salaries for fixed staff (like management, front desk, and administration).
**Variable Costs (V)** are costs incurred *only* when a room is sold. This includes housekeeping labor and supplies (linens, toiletries), electricity used by the guest, franchise fees, and commissions paid to Online Travel Agencies (OTAs) like Booking.com or Expedia.
The **Contribution Margin** (P – V) is the profit from a single room night that goes toward paying your fixed costs. If your ADR is $180 (P) and your variable cost per room is $45 (V), your contribution margin is $135. This calculator finds how many $135 “profit chunks” you need to cover your total fixed costs.
How to Calculate Hotel Breakeven (Example)
Let’s calculate the breakeven point for a 100-room hotel.
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Identify Monthly Fixed Costs (F):
Your monthly mortgage, taxes, insurance, and salaried staff total $200,000.
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Identify Average Daily Rate (P):
Last month, you generated $324,000 in room revenue from 1,800 rooms sold. Your ADR (P) is `$324,000 / 1800 = $180`.
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Identify Variable Cost per Room (V):
You calculate that housekeeping, supplies, utilities, and OTA commissions average to $45 per room sold.
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per room: $180 (P) – $45 (V) = $135.
Next, divide the fixed costs by this margin:
Q = $200,000 / $135 = 1,481.48 -
Conclusion:
You must sell 1,482 room nights (rounding up) each month to cover all costs. In a 30-day month, your hotel has 3,000 available room nights (100 rooms * 30 days). Your breakeven occupancy is `1,482 / 3,000 = 49.4%`.
Frequently Asked Questions (FAQ)
If your front desk is staffed 24/7 regardless of occupancy (e.g., with salaried employees), it is a **Fixed Cost (F)**. If you only add front desk hours *after* you pass a certain occupancy, those *additional* hours could be a **Variable Cost (V)**.
This calculator is designed for room revenue *only*. Other departments like Food & Beverage (F&B) or events should have their own separate breakeven calculations, as their variable costs and prices are very different.
OTA commissions are a prime example of a **Variable Cost (V)**. If an OTA takes a 15% commission on a $180 room, that’s $27 you pay *only* because you sold that room. This cost should be averaged into your (V).
You have three options: 1) Increase your ADR (P) through better pricing, 2) Decrease your Variable Costs (V) by controlling laundry/supply costs or negotiating OTA fees, or 3) Decrease your Fixed Costs (F) by refinancing your mortgage or reducing overhead.