For Embassy Suites By Hilton, what is the formula used to calculate the Occupancy Index?
Embassy_Suites_By_Hilton Franchise · 2025 FDDAnswer from 2025 FDD Document
Occupancy Index - The Occupancy Index measures a hotel's occupancy performance relative to an aggregated grouping of hotels (competitive set, market, tract, etc.). Occupancy Index is designed to measure a hotel's share of the segment's demand (demand = rooms sold). An index of 100 represents a fair share compared to the aggregated group of hotels. An index greater than 100 represents more than fair share of the aggregated group's performance. The Occupancy Index is calculated as follows:
(Hotel Occupancy / Comp Set Occupancy) x 100 = Occupancy Index.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 87–91)
What This Means (2025 FDD)
According to Embassy Suites By Hilton's 2025 Franchise Disclosure Document, the Occupancy Index is a measure of a hotel's occupancy performance relative to a grouping of hotels, such as a competitive set, market, or tract. The goal of the Occupancy Index is to measure a hotel's share of the segment's demand, where demand is defined as rooms sold. An index of 100 indicates a fair share compared to the aggregated group of hotels, while an index greater than 100 represents more than a fair share of the aggregated group's performance.
The formula to calculate the Occupancy Index for Embassy Suites By Hilton is (Hotel Occupancy / Comp Set Occupancy) x 100 = Occupancy Index. The competitive set data used in this calculation is provided by STR, LLC and its affiliates, which is an independent research firm providing information to the hotel industry. Each Embassy Suites By Hilton hotel, whether Company-Managed or Franchisee-Managed, generally identifies at least 3 competitive hotels for comparison.
The Occupancy Index uses a weighting that adjusts the competitive set's available rooms (supply) to match the room count of the specific Embassy Suites By Hilton property. This weighting process, referred to as "portfolio weighting" by STR, ensures a fair comparison by accounting for differences in property sizes. The FDD provides Occupancy Index data for comparable hotels, including both Company-Managed and Franchisee-Managed locations, allowing prospective franchisees to benchmark potential performance.
It is important to note that the Occupancy Index is relative to a specific competitive set and does not represent every hotel or lodging facility in a geographic area. Prospective franchisees should conduct their own market studies to assess the occupancy rates and potential index performance in their specific location, as recommended by Embassy Suites By Hilton. This will help in developing a realistic business plan and financial projections.