what should I use for occupancy rate?

[Timothy Yost]

I think this should be looked at as a STR. It's a hotel that rents strictly by the week or month. I havent gotten any firm occupancy rates from sellers agent. What should I use for occupancy rate in my analysis?

[Paul Sandhu]

There were 2 motels in my town that did the same thing with the weekly or monthly rate.  Some guy started doing STRs.  They have a washer/dryer and full kitchen, which the motels do not.  Motel occupancy fell because all the people heard about the STRs.  The owner of 1 motel sold it and left town.  The owner of the other motel demolished it and sold the lot to be used as a truck stop.  How would you compete with houses that have a full kitchen and washer/dryer?

But to answer your question, this guy would drive by the motels every evening and count the vehicles. Figure one room per vehicle. Towards the motels downfall, occupancy was a steady 10% or less while that guys STR occupancy was 50% or greater.

[Dave Stokley]

Unless rates are stable throughout the year (nobody’s are) occupancy is a meaningless number. What you really want to know is annual revenue, and the best source I’ve found for that is Airdna (must use paid subscription to see comps). I’m sure there are some data aggregators out there specifically for hotels too. Also seems like if it’s an operating hotel they should be able to provide financials.

[Andrew Steffens]

Quote from @Timothy Yost:

I think this should be looked at as a STR. It's a hotel that rents strictly by the week or month. I havent gotten any firm occupancy rates from sellers agent. What should I use for occupancy rate in my analysis?

 I agree with the other comments above, but if you really want to know average annual occupancy rate as well as average nightly rate, we (as a 60 unit management company) use AirDNA.  Analyze the comps and weigh the ones most like the subject property heavier.

[Josh Green]

@Timothy Yost

Dave above said it best. You're going to have some play with occupancy depending on a lot of factors during ownership but to underwrite the deal you're going to want to see the bottom line: revenue vs. cost to own/operate.

I'll put this out here for others as well: the "enemy" method is not a great indicator of analyzing/estimating the performance of an STR at least not in the market I am in. Some markets that are niche vacation-only STR markets may see a better picture using this but what I'm seeing is the past year there were a lot of advance bookings due to a surge in national travel and COVID concerns. Now, we are back to normal and I see most bookings within 2 weeks. If you looked at my calendar at certain times it may look like I get 35% occupancy when I'm more like 70+. If you use airdna, my property might look like it Performa at about 30% of what it actually does because I have prioritized mid-term and direct bookings that won't show up on airdna.

With that, I've got a great method for analyzing the FLOOR of STRs in the Tampa Bay area but to capture the true average or ceiling I have found to be more difficult to obtain through many experiments. Luckily though, the deals I've been getting for my clients here work at the floor values anyway 👍🏼

[Dave Stokley]

Quote from @Josh Green:

@Timothy Yost

Dave above said it best. You're going to have some play with occupancy depending on a lot of factors during ownership but to underwrite the deal you're going to want to see the bottom line: revenue vs. cost to own/operate.

I'll put this out here for others as well: the "enemy" method is not a great indicator of analyzing/estimating the performance of an STR at least not in the market I am in. Some markets that are niche vacation-only STR markets may see a better picture using this but what I'm seeing is the past year there were a lot of advance bookings due to a surge in national travel and COVID concerns. Now, we are back to normal and I see most bookings within 2 weeks. If you looked at my calendar at certain times it may look like I get 35% occupancy when I'm more like 70+. If you use airdna, my property might look like it Performa at about 30% of what it actually does because I have prioritized mid-term and direct bookings that won't show up on airdna.

With that, I've got a great method for analyzing the FLOOR of STRs in the Tampa Bay area but to capture the true average or ceiling I have found to be more difficult to obtain through many experiments. Luckily though, the deals I've been getting for my clients here work at the floor values anyway 👍🏼

Agree 100%. I love Luke and Avery but the enemy method cannot provide a clear picture of the full year occupancy and revenue. 

[Timothy Yost]

Quote from @Dave Stokley:

Unless rates are stable throughout the year (nobody’s are) occupancy is a meaningless number. What you really want to know is annual revenue, and the best source I’ve found for that is Airdna (must use paid subscription to see comps). I’m sure there are some data aggregators out there specifically for hotels too. Also seems like if it’s an operating hotel they should be able to provide financials.

 I thought same thing and the agent did give me last years total income/expense report. That is what I used for the rental analysis but I wasn't sure how to handle occupancy rate for potential partner or financing. thank you all for the advice

[John Underwood]

A hotel is a hotel. I don't classify any hotel as the same as a STR.

The hotel owner should be able to provide the data you need.

[Paul Sandhu]

My wife cleans the STRs for that guy.  I think she's sleeping with him.

[Dave Stokley]

Quote from @John Underwood:

A hotel is a hotel. I don't classify any hotel as the same as a STR.

The hotel owner should be able to provide the data you need.

Amen. If it doesn't have private parking, kitchen, laundry, living space, etc., it ain't a STR.

[Conner Olsen]

Quote from @Timothy Yost:

I think this should be looked at as a STR. It's a hotel that rents strictly by the week or month. I havent gotten any firm occupancy rates from sellers agent. What should I use for occupancy rate in my analysis?

 Not knowing occupancy rate is a red flag, or a sign of operational deficiencies. 

[Carolyn Yates]

The star report provides ADR, occupancy, etc for hotels.  You can find it at www.str.com