Your breakeven room rate is the ADR at which room revenue exactly covers costs at a given occupancy. Roughly, breakeven ADR = total costs for the period ÷ rooms sold (occupancy × rooms available). It falls as occupancy rises because fixed costs spread over more rooms. Selling below the variable cost per occupied room — common in OTA rate wars — loses money on every “extra” booking.
First, split your costs in two
Breakeven maths only works once you separate two kinds of cost. Fixed costs — rent or EMI, salaries, insurance, most utilities — you pay whether a room sells or not. Variable costs — housekeeping, laundry, amenities, the electricity and water a stayed room uses, OTA commission — you only incur when a room is actually occupied. The variable cost per occupied room is your true floor: sell below it and the booking costs you money to accept.
The breakeven rate formula
At its simplest, breakeven ADR = total costs for the period ÷ rooms sold, where rooms sold = occupancy × rooms available × days. Cover all your costs — fixed plus variable — across the rooms you expect to sell, and that is the average rate you must achieve to break even.
Example: a 50-room hotel with ₹9,00,000 of monthly costs expecting 60% occupancy sells about 50 × 0.60 × 30 = 900 room-nights. Breakeven ADR = ₹9,00,000 ÷ 900 = ₹1,000. Every rupee of ADR above ₹1,000 at that occupancy is profit; below it, loss.
Why breakeven falls as you fill up
Fixed costs do not care how many rooms sell, so the more rooms you spread them across, the less each room has to carry. At 40% occupancy the same hotel sells only 600 room-nights, pushing breakeven ADR to ₹1,500; at 80% it sells 1,200 and breakeven drops to ₹750. This is why occupancy and rate are linked, and why the RevPAR view — price times fill — matters more than either number alone.
The OTA discount trap
Online travel agents make it easy to dump rooms cheap to “fill the hotel,” and the commission — often 15–25% — is a variable cost that eats into an already-thin rate. A room sold at ₹1,200 through an OTA at 18% commission nets ₹984, which may be below your breakeven once housekeeping and utilities are added. The fix is not to abandon OTAs but to know your floor, protect rate on dates that will sell anyway, and steer repeat guests to direct booking where the commission stays in your pocket.
Room Rate Breakeven Calculator
Find the minimum ADR needed to cover fixed and variable costs at a target occupancy. Set your floor rate before you start negotiating with OTAs.
Step by step
Find your breakeven room rate and set a floor.
- Total your period costs. Add all fixed and variable costs for the month.
- Estimate rooms sold. Rooms available × expected occupancy × days in the period.
- Divide to get breakeven ADR. Total costs ÷ rooms sold gives the average rate needed to break even.
- Set a rate floor above variable cost. Never sell below the variable cost per occupied room, including OTA commission — that is a guaranteed loss.
Frequently asked questions
What is a breakeven room rate?
It is the average daily rate (ADR) at which a hotel’s room revenue exactly covers its costs for a period, given an expected occupancy. Roughly, it equals total period costs divided by the number of rooms sold.
Should a hotel ever sell rooms below cost?
Not below the variable cost per occupied room — housekeeping, utilities, amenities and OTA commission — because each such booking loses money. Selling below full breakeven but above variable cost can occasionally make sense to capture contribution on otherwise-empty nights, but only deliberately, not as a habit.
Why does the breakeven rate change with occupancy?
Fixed costs are spread across the rooms you sell. The more rooms occupied, the less fixed cost each carries, so the breakeven rate falls as occupancy rises and climbs as it drops.
Keep reading
RevPAR, ADR and Occupancy Explained: The Three Numbers Every Hotel Lives By
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