Break-even occupancy and ADR calculator
Work out the occupancy a hotel needs to cover its fixed costs and its debt service, the ADR it needs at your expected occupancy, and how much headroom sits between break-even and the level you expect to trade at.
A hotel covers its costs and its loan through the trade: how full it runs and what it charges. This calculator finds the point at which that trade breaks even. Enter the room count, the average daily rate, the share of room revenue that varies with occupancy, the fixed annual running costs and the annual debt service, and it returns the break-even occupancy, the RevPAR and revenue at break-even, the ADR you would need at your expected occupancy, and the headroom between break-even and the level you expect to trade at. It is the first test a lender applies to whether the trade can carry the debt.
- RevPAR at break-even£0
- Room revenue at break-even£0
- Break-even ADR at expected occupancy£0
- Occupancy headroom vs expected0 pts
Indicative only. Not financial advice or an offer of finance.
How the break-even model works
The calculator works from the room revenue a hotel earns at full occupancy, then strips out the costs that move with occupancy to find the trade that is left to cover the fixed bills and the loan.
- Room revenue at full occupancy = rooms × 365 × ADR. The most the rooms can earn in a year.
- Contribution margin = 1 − the variable cost ratio. The share of each pound of room revenue left after housekeeping, commissions and consumables.
- Break-even occupancy = (fixed costs + debt service) ÷ (room revenue at full occupancy × contribution margin). The occupancy at which the trade first covers the fixed costs and the debt service.
- Break-even ADR = (fixed costs + debt service) ÷ (rooms × 365 × expected occupancy × contribution margin). The rate the hotel would need if it ran at the occupancy you expect.
The model is rooms-led and deliberately simple: it does not add food, beverage or spa revenue, which in a full-service hotel would lower the break-even occupancy the rooms alone have to reach. It is built to show how sensitive a hotel is to rate, occupancy and cost, which is exactly what a lender is testing when it sets debt service cover. A wider margin between break-even and expected occupancy means more resilience to a soft season or a cost rise. To turn a settled trading income into the debt it will support, use the debt yield and DSCR calculator, and to capitalise that income into a value use the going-concern value calculator.
Break-even occupancy: common questions
What is break-even occupancy for a hotel?
Break-even occupancy is the occupancy level at which a hotel's trading income first covers its fixed running costs and its debt service. Below it, the hotel does not earn enough to pay its bills and its loan, so the shortfall is met from reserves or working capital. Above it, the hotel carries itself and starts to build profit. It is the number a lender looks at first when it tests whether the trade can support the debt.
How do you work out break-even occupancy?
Take the fixed annual costs plus the annual debt service, then divide by the annual room revenue at full occupancy after variable costs. In other words, break-even occupancy equals fixed costs plus debt service, divided by rooms times 365 times ADR times the contribution margin. The contribution margin is the share of room revenue left after the costs that rise and fall with occupancy, such as housekeeping, commissions and consumables.
What is a healthy occupancy for a UK hotel?
As context, UK hotel occupancy ran at about 76 percent across 2025, with London closer to 82 percent (STR and HotStats). A comfortable trading position usually sits several percentage points above break-even, so that a soft season or a rise in costs does not push the hotel below the level at which it covers its debt. The right margin of safety depends on the market, the seasonality and the operator.
What is RevPAR and how does it relate to break-even?
RevPAR, revenue per available room, is ADR multiplied by occupancy. It blends how full the hotel is with how much it charges into a single figure. Break-even can be read as a RevPAR: the RevPAR at which room revenue, after variable costs, covers the fixed costs and the debt service. Two hotels can reach the same break-even RevPAR through different mixes of rate and occupancy.
Related calculators and finance
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