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01 / 05Break-even
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Break-even calculator

The occupancy or ADR you need to cover costs

Calculate the occupancy you need at your current ADR to cover costs, or the ADR you need at your current occupancy, in seconds. Both formulas use the contribution-margin form that hotel finance teams have used since the 1960s.

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Formula

Inputs

Your break-even

,

Break-even Occupancy % = Fixed Costs / ((ADR - Variable Cost per Room) x Rooms x Days) x 100

02 / 05Background & method

What break-even analysis means for a hotel

A hotel's break-even point is the occupancy (or, equivalently, the ADR) at which total revenue exactly covers total costs. Below that point the property loses money on every incremental room sold; above it, each additional room contributes its margin to operating profit. Break-even is not a target, it is a floor: the budget should be set at a comfortable margin above it, and any forecast that drops near it should trigger a pricing or cost response.

The math is the contribution-margin form that every introductory hotel finance textbook teaches: fixed costs divided by the margin earned on each additional room night. The two variants of the calculator solve for the two variables operators actually have to set: occupancy if your rate is structurally constrained (a small market with a clear comp set), or ADR if your occupancy is structurally constrained (a destination resort with a known number of room nights per year).

Break-even formula

Formula

Break-even Occupancy % = Fixed Costs / ((ADR - Variable Cost per Room) x Rooms x Days) x 100

Or

Break-even ADR = Fixed Costs / (Occupancy % x Rooms x Days) + Variable Cost per Room

Fixed Costs
Costs that do not vary with occupancy: payroll baseline, mortgage or rent, property tax, insurance, software subscriptions, fixed utilities.
Variable Cost per Room
Incremental cost of selling one more room: housekeeping labor, amenities, laundry, energy, payment fees, OTA commission if you blend it in.
ADR
Average daily rate over the period, exclusive of tax. Use blended ADR if you want a blended break-even.
Rooms x Days
Total sellable room-nights in the period; the denominator of the occupancy calculation.

How to read your break-even number

A 60-room independent with 2.4 million euros of annual fixed costs, 180 euro ADR, and 40 euro variable cost per occupied room has a break-even occupancy of 2,400,000 / (140 x 60 x 365) = 78.3%. If the hotel runs at 75% occupancy in a soft year, it loses money for the year. If it runs at 82%, it earns the margin on the incremental 8,000 room nights, or roughly 1.1 million euros of contribution above break-even.

Run the same property through the ADR variant: if the budget commits to 70% occupancy, the break-even ADR is 2,400,000 / (0.70 x 60 x 365) + 40 = 196.50 euros. If the hotel cannot reliably command a 196 euro blended rate at 70% occupancy, the budget is wrong and the answer is either a higher occupancy target, a lower fixed cost base, or both.

What goes into fixed vs variable cost

  • Fixed: full-time payroll baseline (GM, front office manager, head of housekeeping, sales lead), mortgage or rent, property tax, property insurance, software subscriptions (PMS, channel manager, accounting), fixed utilities (telecom, baseline electric demand charge), depreciation on long-lived assets.
  • Variable: housekeeping labor per turn, amenities consumed per stay (toiletries, coffee pods, water), laundry cost per turn, energy cost per occupied room above the baseline, payment processor fees, OTA commission if you allocate it as a variable cost, ancillary supplies linked to occupancy.
  • Semi-variable (allocate based on what changes most): seasonal banquet staff, on-call maintenance, marketing campaigns that scale with demand. The Uniform System of Accounts for the Lodging Industry (USALI) provides a standard allocation framework.

Strategies to lower break-even occupancy

The highest-leverage move on the break-even equation is ADR because every euro of ADR flows through the contribution margin. A 10 euro ADR increase on the example hotel above drops break-even occupancy from 78.3% to 72.0%, a 6.3 point shift. The same hotel cutting variable cost per room by 5 euros only drops break-even to 75.7%. And cutting fixed costs by 100,000 euros (a substantial structural change) drops it to 75.0%.

  • Lift ADR through tighter rate restrictions on shoulder dates, killing low-yield rate plans on high-demand dates, and ancillary attach-rate work that doesn't show up as ADR but feels like ADR to the contribution margin.
  • Reduce variable cost per occupied room by closing the gap between best-day and worst-day housekeeping productivity, by rationalizing the amenity catalogue, and by metering energy at the room level.
  • Reduce fixed costs by renegotiating property tax appeals (often 5 to 15% recoverable), refinancing legacy debt at current rates, and auditing the SaaS subscription stack annually.
  • Reduce OTA share, which functions as a variable cost rate cut at scale: shifting 10 points of share to direct effectively cuts variable cost per room by 2 to 3 euros at typical ADR.
  • Lengthen the operating season (resort hotels) so fixed costs amortize over more room nights, lowering the per-night break-even.
03 / 05FAQ

Common questions about Break-even.

A hotel's break-even point is the occupancy (or, equivalently, the ADR) at which total revenue exactly covers total costs and operating profit is zero. Below the break-even point the property loses money; above it, the contribution margin on each additional room night flows to operating profit. Break-even is a budget floor, not a target.

04 / 05Related tools

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05 / 05Track this in Pulse

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Pulse, the live KPI dashboard inside Prostay, calculates this metric on the same data your team works from. No manual exports, no end-of-month surprises.