Quick answer
A hotel's break-even is the occupancy level at which revenue exactly covers all costs — no profit, no loss. You calculate it in two steps: first the break-even revenue (fixed costs ÷ (1 − variable cost %)), then you translate it into rooms per night by dividing by net ADR and open nights. What makes hotels special is the sheer weight of fixed costs: the building, depreciation and base payroll exist no matter how many rooms you sell.
Why a hotel's break-even is different
In foodservice the biggest cost is raw material, which rises with every cover sold. In a hotel almost everything is fixed: the building, depreciation, the mortgage, base staff, a front desk open 24 hours. Each extra room you sell costs very little (cleaning, breakfast, linen, utilities), so the contribution margin per room is very high — often above 70–80% of net ADR.
That creates an operating-leverage structure: below break-even you lose money fast, above it you make money just as fast. It's why a half-empty hotel bleeds heavily while the same hotel full prints big profits. Knowing the exact break-even point — in rooms per night, not abstract euros — is the first thing to do before setting rates, promotions or a budget.
The two cost types: fixed and variable
This distinction is the foundation of the whole calculation. Get it wrong and your break-even is fiction.
Fixed costs (you pay them even with an empty hotel)
| Item | Typical monthly (30-room hotel) | |---|---| | Rent or property mortgage | 8,000 – 15,000 € | | Base payroll (reception, housekeeping lead, maintenance) | 18,000 – 28,000 € | | Depreciation (furniture, plant, refurbishment) | 4,000 – 8,000 € | | Insurance, accountant, licences | 1,500 – 3,000 € | | Fixed utilities, subscriptions, PMS/channel manager | 2,000 – 4,000 € | | Fixed marketing and routine maintenance | 2,000 – 4,000 € |
Variable costs (only per room sold)
- Housekeeping on demand: 6–12 € per room
- Breakfast: 3–7 € per person
- Linen and laundry: 3–6 € per room
- Incremental utilities (hot water, room heating, amenities): 2–5 €
- OTA commissions: 15–25% of the rate — the heaviest variable line
- Card / POS fees: 1–1.5%
In a well-run hotel, variable costs per occupied room sit between 20% and 35% of net ADR. Everything else is margin that goes toward covering fixed costs.
The break-even formula
The calculation happens in two stages.
Stage 1 — Break-even revenue:
Break-even (€) = monthly fixed costs ÷ (1 − variable cost %)
Stage 2 — Translate into rooms:
Rooms per night = Break-even (€) ÷ (net ADR × open nights)
Net ADR is the effective average rate after VAT and channel commissions. Using gross ADR is the most common mistake and produces a far too optimistic break-even. To rebuild ADR, occupancy and RevPAR from revenue and rooms, use the RevPAR and ADR calculator.
A full worked example
Take a 30-room hotel, open all month (30 sellable nights → 900 available room-nights per month).
Monthly fixed costs:
- Property mortgage: 12,000 €
- Base payroll: 22,000 €
- Depreciation: 6,000 €
- Insurance, accountant, licences: 2,000 €
- Fixed utilities, PMS, channel manager: 3,000 €
- Marketing and maintenance: 3,000 €
- Total fixed costs: 48,000 €/month
Net ADR: 90 € (average rate of 110 € gross, less VAT and average OTA commissions).
Variable cost per room: 27 € (cleaning, breakfast, linen, utilities, amenities) → i.e. 30% of net ADR. Contribution margin per room = 90 − 27 = 63 €.
Stage 1 — Break-even revenue:
48,000 ÷ (1 − 0.30) = 48,000 ÷ 0.70 = 68,571 €/month
Stage 2 — Rooms needed:
Direct method on margin: rooms per month = fixed costs ÷ margin per room =
48,000 ÷ 63 = 762 room-nights per month
Over 30 days: 762 ÷ 30 = about 25 rooms per night.
That's 762 room-nights out of 900 available = break-even occupancy of 85%. That's a red flag: with those fixed costs and that ADR, the hotel only breaks even when it's nearly full all month. The lever here isn't selling more — it's raising ADR.
ADR changes everything: same hotel, different break-even
Keeping the 48,000 € of fixed costs and the 30% variable rate, here's how break-even occupancy shifts as net ADR changes:
| Net ADR | Margin per room | Room-nights/month to break even | Break-even occupancy | |---|---|---|---| | 70 € | 49 € | 980 | impossible (>900) | | 90 € | 63 € | 762 | 85% | | 110 € | 77 € | 623 | 69% | | 140 € | 98 € | 490 | 54% | | 170 € | 119 € | 403 | 45% |
The read is clear: every extra euro of ADR slashes the occupancy you need. Going from 90 to 140 € of ADR drops break-even from 85% to 54%. In hospitality, price matters more than fill: filling at low rates may not even break even. Knowing the real cost per occupied room is the starting point — calculate it with the cost per occupied room calculator.
Seasonal break-even: the average month lies
Few hotels run flat all year. A seaside hotel earns 70% of revenue in four months; a city hotel dips in August. Break-even calculated on the "average month" is fiction: in low season the break-even occupancy is unreachable, while in high season it's easily exceeded.
The operating rule is to calculate the annual break-even and then spread it across months by expected demand. Annual fixed costs (48,000 × 12 = 576,000 €) plus one-off items (major maintenance, bonuses, renewals: ~40,000 €) = 616,000 €. At an average 70% margin, the break-even annual revenue is 616,000 ÷ 0.70 = 880,000 €. From there you plan by season: the strong months must "fund" the weak ones.
Strategies to lower break-even
- Raise net ADR. As shown, it's the most powerful lever. Dynamic pricing, segmentation and upselling move the break-even far more than fill does.
- Cut OTA commissions. Every direct booking is worth 15–25% more in net ADR. Pushing the direct channel improves margin per room without touching fixed costs.
- Cut fixed costs. At a 70% margin, 1,000 € less in fixed costs lowers break-even by 1,000 ÷ 0.70 = 1,430 € of required revenue.
- Ancillary revenue with low fixed cost. Bar, spa, late check-out, parking: they use the same structure and lift revenue per available room (RevPAR) without raising fixed costs proportionally.
- Control variable costs. Negotiate breakfast and laundry, optimise housekeeping: every euro of variable cost saved raises margin per room and lowers break-even occupancy.
Common mistakes
- Calculating on gross ADR. Ignoring VAT and OTA commissions inflates the margin and makes you think you break even at an occupancy that's actually loss-making.
- Forgetting depreciation. The building and furniture wear out: leave them out of fixed costs and your break-even is understated while you quietly erode capital.
- Using the average month instead of seasonality. It leads to unrealistic budgets and badly timed promotions.
- Confusing occupancy with profit. Filling at giveaway rates can lift occupancy but worsen the P&L: every room sold carries variable costs.
- Calculating break-even only once. Fixed costs and ADR change: recalculate at every material change and at least each season.
Related resources
- Hotel break-even calculator — break-even occupancy from costs and rates
- Cost per occupied room calculator — the basis of every pricing decision
- RevPAR and ADR calculator — the three KPIs together from revenue and rooms