Jan 20, 2026
The Occupancy Myth: Why 95% Isn’t the Success You Think It Is
The most expensive myth in boutique hospitality: Full hotels are not the most profitable hotels. In fact, they’re often the least profitable. This article will show you exactly why.
ALTAREV | REVENUE INSIGHTS
Insights for Boutique & Lifestyle Hotels in Portugal
January 2026
The Full Hotel Fallacy
Why “Great Occupancy” Is Often a Revenue Warning Signal
The Conversation That Reveals Everything
This comes up constantly in conversations with independent hotels:
“We had a fantastic month — occupancy was over 90%.”
My follow-up question is simple:
“And how did revenue quality look?”
That’s usually where the conversation slows down.
Because occupancy is easy to celebrate.
Revenue quality is harder to see — and far more important.
The Core Myth
Full hotels are not automatically profitable hotels.
In boutique and lifestyle properties, very high occupancy is often a symptom of something else:
weak rate discipline
late discounting
pressure from OTAs
fear of empty rooms
None of those are strategies.
The Occupancy Trap (What We Commonly See)
In many Portuguese boutique hotels, pushing occupancy beyond a certain point creates three predictable effects:
Rates soften faster than owners realise
Operational pressure increases disproportionately
Guest experience becomes harder to protect
The result is a hotel that looks successful, but quietly underperforms.
A Simple Illustrative Comparison
(Hypothetical, but representative of a common pattern)
Scenario A — “Very Full”
Occupancy in the low-to-mid 90s
Rates softened late to secure volume
High operational intensity
Scenario B — “Controlled”
Occupancy in the high-70s to low-80s
Stronger average rate
Fewer low-yield bookings
In practice, Scenario B frequently produces:
higher room revenue
better margins
less operational strain
Not because rooms are empty —
but because the right rooms are sold at the right price.
The Hidden Costs of “Full” That Rarely Show Up in Reports
1. Operational Load Is Non-Linear
Housekeeping, breakfast service, front desk pressure and maintenance don’t scale neatly.
The last 10–15% of rooms often:
generate the lowest margin
create the most friction
absorb disproportionate staff time
Busy does not equal profitable.
2. Guest Experience Becomes Harder to Defend
At sustained high occupancy, hotels often see:
longer wait times
less personalised service
more service recovery situations
Even small drops in guest satisfaction can suppress future ADR — quietly, over time.
3. Rate Integrity Gets Trained Out of the Market
Late discounting teaches guests to:
wait
compare obsessively
anchor on lower prices
Once that behaviour is learned, it’s difficult to reverse.
You’re not just filling rooms —
you’re shaping future demand behaviour.
What “Healthy Occupancy” Actually Looks Like
Rather than chasing a single percentage, strong boutique hotels define a target occupancy range.
Typical ranges we often see work well:
Urban boutique hotels: roughly high-70s to mid-80s
Lifestyle / design hotels: low-70s to low-80s
Coastal / resort properties: wider ranges depending on seasonality
The exact number matters less than this principle:
Occupancy should be the result of good pricing — not the goal.
Why This Matters Even More in Portugal
1. OTA Pressure Is Structural
Most independent hotels rely heavily on OTAs.
Once discounting starts, visibility algorithms amplify it.
2. Seasonality Encourages Panic Decisions
Shoulder periods often trigger unnecessary rate drops that damage peak-season positioning.
3. New Supply Raises the Stakes
As more lifestyle product enters the market, competing on price becomes a losing game.
Rate discipline is what protects long-term positioning.
The Shift: From Occupancy to Revenue Quality
Hotels that consistently outperform tend to track different questions:
Which bookings actually create margin?
At what point does occupancy stop helping?
How does rate integrity affect guest mix?
Where do operational limits start eroding value?
This is revenue management as decision-making, not just pricing.
A Quick Self-Check
If you answer “yes” to more than one of these, it’s worth looking closer:
Are your fullest months not your strongest financially?
Do rates drop noticeably to fill the last rooms?
Does service feel stretched during peak occupancy?
Are pricing decisions driven by fear of empty rooms?
These are signals — not failures.
The Uncomfortable Truth
An empty room at the right rate
is often healthier than a sold room at the wrong one.
Because long-term performance is built on:
rate power
guest quality
operational stability
brand positioning
Not on how full the hotel looks at 23:59.
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—
Jake Gruijters
Revenue Management Consultant, AltaRev
Helping boutique hotels build disciplined, defensible revenue strategy
