Analysis of Strategic Objectives: Occupancy, RevPAR, and ROCE

Strategic Objectives

The senior management of Luxe Horizon has set the following three strategic objectives at the beginning of the five-year period.

1. Increase overall occupancy rate to at least 80% by Year 5.
2. Achieve a 10% year-on-year increase in REVPAR (Revenue per Available Room).
3. Maximize return on capital employed (ROCE) to above 12% by Year 5.

Occupancy Rate

Occupancy rate is a core operational metric in the hospitality industry. It reflects the percentage of available rooms that are actually sold over a specific period (Elphick, 2024). An occupancy rate of 80% is considered a healthy benchmark in a competitive market. It shows that there is a strong demand, brand appeal, effective pricing strategy, and operational efficiency. A higher occupancy rate will ensure that the hotel’s fixed costs are spread over a larger number of paying guests, improving operating leverage (Lagos, 2024).  It signifies brand popularity and market positioning, contributing to long-term guest loyalty and potential for upselling services (spa, restaurant, events).

Evaluation of Horizon Occupancy Rate

The company has achieved the target in year 2, Year 3, and year 5. There is substantial increase in occupancy rate (34%) in year 2 as compared to year 01. But this rate decreased in year 03 and in year 04 that is below the target. In year 05 company is successful in achieving the target.