Hotel break-even point: formula, room nights and how to use it
The hotel break-even point is the occupancy (or room-night count) where contribution from sold rooms covers fixed costs. The formula is fixed costs ÷ (ADR − variable cost per occupied room). Independents use it to stress-test discounts, group blocks and low-season decisions — especially once OTA commissions shrink the effective ADR.
The formula in plain language
Fixed costs (rent, core payroll, insurance, base utilities) do not move with tonight's occupancy. Variable costs (amenities, cleaning extras, payment fees, breakfast COGS) do. Each sold room contributes ADR minus that variable cost. Divide fixed costs by that contribution to get break-even room-nights; divide by rooms available to get break-even occupancy.
Break-even room-nights = fixed costs ÷ (ADR − variable cost per occupied room).
Use our free hotel break-even calculator to turn your numbers into rooms per night and occupancy.
Why OTA commissions change the math
A $100 ADR sold on an OTA at 18% commission is closer to $82 of hotel revenue before variable costs. That raises the room-nights you need to break even. Direct bookings on your own site keep the full ADR (minus payment fees), which is why break-even and channel mix belong in the same conversation.
- Run break-even twice: once at your posted ADR, once at ADR × (1 − commission).
- Group discounts that look fine at rack rate can fall below contribution margin after commission.
- Pair this guide with RevPAR, ADR and occupancy.
Decisions break-even actually informs
Stay open in shoulder season? Accept a corporate rate? Add a second housekeeper on weekends? Break-even will not answer brand strategy, but it stops you from confusing 'busy' with 'covering costs'.
How GuruHotel helps
GuruHotel turns a hotel's official website into a direct booking channel: an AI-built site, a conversion-optimized booking engine, real-time inventory synced with your PMS (Cloudbeds direct, 345+ more via Channex) and Stripe-powered payments — commission-free on every direct reservation.
FAQ
What is the break-even point of a hotel?
It is the number of room-nights (or the occupancy %) at which room contribution equals fixed costs. Above that line, each additional room sold adds to profit after variable costs; below it, you are still digging out of fixed costs.
How do I calculate hotel break-even occupancy?
Compute break-even room-nights = fixed costs ÷ (ADR − variable cost per occupied room), then divide by rooms available in the period (for a night: by your room count). The result is break-even occupancy.
Should I include OTA commission as a variable cost?
Either subtract it from ADR to get effective rate, or add it to variable cost per occupied room — do not ignore it. Mixing OTA and direct channels without adjusting ADR will understate the rooms you need.
How does GuruHotel relate to this?
GuruHotel provides an AI-built hotel website, a direct booking engine, real-time inventory and Stripe-powered payments, helping independent hotels grow commission-free direct bookings alongside their OTA channels.