You know what you sell a room for — but do you know what that room costs you? Setting a price without knowing your room cost is navigating without a compass: you can't see how far you can discount, or below which price you start losing money. This guide explains how to calculate hotel room cost step by step.
Why know your room cost?
- Price floor: Every sale below cost is a loss. Discounting without knowing your floor is dangerous.
- Profitability: Profit metrics like GOPPAR are only meaningful if cost is calculated correctly.
- Decisions: Only by knowing cost can you decide, in low season, "sell at cost rather than stay empty."
Direct vs indirect costs
- Direct (variable) costs: Incurred when a room is sold — housekeeping labor, laundry, guest amenities, incremental energy. Largely avoided if the room is empty. This is CPOR (cost per occupied room).
- Indirect (fixed) costs: Incurred whether the room is occupied or not — rent, insurance, administrative staff, depreciation, base energy.
Healthy pricing requires knowing both: short term, anything above direct cost can be acceptable; long term, you must cover all costs.
How to calculate cost per room
Simple approach: Total Operating Expenses ÷ Rooms Sold = average occupied-room cost (CPOR).
Example (monthly):
- Total operating expenses: ₺1,400,000
- Rooms sold: 3,500
- CPOR ≈ ₺400 → selling a room below ₺400 is (long-term) a loss.
For more precision, allocate costs by department and room type.
Cost components
- Labor: The largest line in most hotels. Housekeeping, front desk, general staff. Allocate per room (LPAR — labor per available room).
- Energy + water: A demand-driven variable part plus a fixed part.
- Cleaning + amenities: Fully variable (per occupied room).
- Maintenance: Partly fixed, partly usage-driven.
- Depreciation: Annual wear of building, furniture, equipment — fixed, allocated per room.
- Distribution: OTA commissions (varies by channel; tied to sales).
Allocating fixed costs to rooms
Fixed costs are spread over "available rooms": Annual Fixed Cost ÷ (Rooms × 365). This gives the fixed burden each room must carry regardless of occupancy. As occupancy drops, fixed cost per room rises — which is why profit pressure grows in low season.
Season and room-type differences
- Season: At low occupancy, fixed cost per room rises; your effective price floor goes up.
- Room type: A suite consumes more cleaning/amenities/energy than a standard room. Separating cost by room type sets the right price differential.
How cost relates to price
Cost is the floor of your price, not the target. Market and demand set the price; but cost gives you the "how low can I go" limit. Read RevPAR, ADR and occupancy metrics together with cost.
Mini glossary
- CPOR: Cost per occupied room (mostly variable).
- LPAR: Labor cost per available room.
- Depreciation: Annual wear allowance of fixed assets.
- Direct cost: Expense incurred when a room is sold.
FINO.TR combines your PMS data and competitor rates to help you see which price is profitable on which date — recommending the right rate without dropping below your cost floor. You always make the call.