Is airline passenger load factoring the same as occupancy in hotels?
Empty seats for airlines mean lost revenue. It is no different in hotels, where empty rooms also results in loss of income. In both cases it is irrecoverable. Empty seats on any flight or empty hotel beds on any particular night, can never be resold. The similarities part ways somewhat; when you consider a well operated hotel that for example, has 150 similar sized, identically furnished double bedrooms. Irrespective of whether 40 double rooms are occupied one night and 142 the next night, each occupied room on both nights provides the guests residing in them, the identical room-to-roam space. You wouldn’t have strangers coughing, snoring, and hanging around with their backside in your face. To a guest staying at that hotel it doesn’t matter one way or another how many other rooms are occupied (referred to as occupancy), each night. There are quite a many people however, who dislike staying in a hotel that has a very low guest count.
Fluctuating occupancy does affect the hotel as it impacts on room revenue. In this scenario, our 150 roomed hotel operator has determined that in order to meet the variable, semi-variable and fixed operational costs; it must sell a minimum 50 paying rooms each day at a particular rate. In other words it must achieve 34% occupancy to break-even (BE). On the night it had total 40 rooms occupied, it was below BE; whereas selling 142 rooms the next day, sent it’s occupancy well above the BE. The two nights combined reflect a 66.7% occupancy – which indicates that the hotel while making money is yet losing money by failing to achieve 100% occupancy. Be warned though…a high occupancy where the rooms are sold at incorrect/low rates can lead to losses. Conversely, a lower occupancy with rooms sold at premium prices can lead to higher revenue.
Imagine you are taking an Airbus 320 flight from point A to point B. This airbus seats150 and features a First Class cabin outfitted with 12 recliner seats. The Economy Plus cabin is outfitted with 42 seats and Economy Class features 96 seats. The difference between Economy Cabin and Economy Class is that the former has an extra inch of knee-space and another half-inch more headroom with up to 5 inches of extra legroom, than in the latter. Basically, the aircraft consists of three cabin sections, with the Economy cabin seating the largest number. Entering the Economy Class section you will not be very happy on finding it full. However, the feeling is somewhat different should only 48 of the 96 seats be sold. Most flyers find it the sight of empty seats blissful. Because, there is nothing more joyful than having extra space to stretch your legs, no frantic rush to dump the bags in the near empty overhead bins, cabin crew are likely to be more attentive and most of all, it raises the prospects of a quiet, undisturbed flight.
All well and good for passengers, but as in hotels where, when the number of rooms sold (occupancy) falls below a certain level it is in the red zone. Empty seats signal money lost, and any airline that flies regularly with many empty seats, i.e. below passenger load factor levels (PLF), is hemorrhaging financially. Does a below average PLF mean an airline is failing? Not necessarily. The 77.2 per cent reported by Emirates last year, is well below the global average of 81.4 per cent, but the airline is still extremely profitable. However, a sharp increase in empty seats may lead to serious problems. Monarch Airlines PLF in 2015 was 82.3 %, in 2016 it decreased to 76% and in 2017 it ceased to operate. Ryanair’s fleet of planes each has 189 seats. Last year it achieved the best PLF – a remarkable 95%, where on any given Ryanair flight just seven or eight tickets go unsold.
Yes, Airline Passenger Load factor and Hotel Occupancy play similar roles – It’s all about ‘putting many bums on seats on every flight or as many bums on beds every night’.
Fly safe…Sleep well.
Ilzaf Keefahs
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