Overcapacity
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Overcapacity
Due to the fact that there is an oversupply in the city, there is an overcapacity. All the hotels in the city together offer more room capacity than there is demand in any year. The starting situation in the city is that there are approximately 10 competing hotels, all offering 100 rooms for 364 days (the rounded down number of days) in a year. So the total number of possible nights is 10 hotels x 100 rooms x 364 days in a year = 364,000 available room nights per year. This is the supply offered.
The basic occupancy rate in the city, as you take over is 50%. So, there is a demand for 182,000 room nights and an overcapacity of 182,000 room nights. So we assume that out of all the competing hotels, each has 18,200 nights overcapacity. Divided by 364 this means that in the total of a year, on average, 50 rooms are permanently not occupied. Over the years this will change due to your decisions, action, and competition.
Weekdays and weekend days
The numbers mentioned above are an average: There are some weekends which will be totally booked and some weekdays which have very few guests. So you cannot just shut down this overcapacity; it is spread all across the year and across the target groups. There is no further exact information on this, other than the average occupancy in a year.
By changing the last-minute prices, the rack rates and all other Year 1-2-3-4 decisions you take for your hotel, you hope to influence the occupancy rate. It is hard to tell which decision causes exactly which effect on the total package which will show results. The consistency of your strategy has proven to be very important to the customers in the market.
Weekdays account for 43% of the total of the number of room nights which are available weekends account for 57% of the total of all room nights in a year.
For both, the average over a year is 50% occupancy when you take over.
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