Is your attraction operating at its full design capacity potential?
Key performance indicators, like your capacity utilization metric can help you find out. This is a crucial metric for businesses.
Measuring this allows you to know your optimal capacity utilization and helps you identify your most and least popular listings, as well as which time slots are selling out. It can also bring you insight into your company’s actual level of output (how many tours you’re currently conducting) compared to its maximum potential capacity (how many tours you have the resources to conduct).
In this post, you’ll learn how to use a capacity utilization formula to better understand your true productive capacity and make informed decisions to boost your target profit margins.
- What is capacity utilization?
- How capacity utilization works
- How companies use capacity utilization
- Historical capacity utilization rates
- The key differences between capacity utilization and operational efficiency
- Why should travel and tourism companies care about measuring capacity utilization?
- Additional ways to calculate capacity utilization
- Capacity utilization example for travel companies
What is capacity utilization?
Capacity utilization is a measure of a company’s actual output level compared to its potential output level.
What does this mean? It’s the difference between how many tours you could run in a day based on your staff, equipment, and time slots and how many you’re actually running.
Let’s say your potential output is 10 tours a day but you’re only running 6. Your capacity utilization is at 60%. That gap could represent missed revenue, or, at the very least, room for better scheduling.
What is capacity utilization report?
A capacity utilization report can show you how many of your listings were booked at or above 75% in the last month and highlight those operating under 25% capacity.
With this information in hand, your attraction could then make informed staffing and pricing decisions to maximize your revenue and profit margins.
This sophisticated pricing and inventory technique is also known as yield management. It was initially pioneered by the airline industry to help maximize revenue per airplane seat.
A booking platform like Xola can provide you with a detailed capacity utilization report that breaks down your most popular tours and experiences at any time slot. If you operate an escape room attraction, for instance, you could find out how often your rooms are booked at full capacity.
When you have a good grasp on your inventory, you’re able to better allocate resources like equipment and staff, as well as make smart pricing decisions to boost your revenue.
How capacity utilization works
Capacity utilization quantifies the extent to which your business leverages its resources. It compares your actual production process (and output) to potential production, giving you insights into operational efficiency.
Imagine your tour company operates at a 70% capacity utilization rate. This means 70% of your tours are fully booked, while 30% have room for more guests. This metric helps you pinpoint opportunities to enhance productivity and profitability.
For example, if your popular afternoon city tour consistently books at 90%, but your morning tour lags at 50%, you have a clear indicator to adjust your strategy to be better aligned with market demand. Maybe offering a discount for morning slots or adding more afternoon tours could balance demand and boost overall capacity utilization.
Understanding these patterns allows you to make informed decisions about marketing efforts, staffing levels, and cost structures.
With accurate capacity utilization data, you can optimize resource allocation, ensuring that your staff and equipment are used efficiently. This leads to increased revenue and improved customer satisfaction as you better meet demand.
How companies use capacity utilization
Capacity utilization is a measure of how much of your attraction’s potential is actually being used. It compares your actual output like how many tours or activities you’re running to your maximum potential output, based on the resources you have available. That includes your team members, equipment, operating hours, and available time slots.
Let’s say your team has the capacity to run 10 tours a day, but you’re only running six. That means your capacity utilization is 60%. The other 40% represents unused potential, including billable hours and revenue left on the table.
In industries like consulting or law, businesses track billable hours. That’s the time spent on work they can charge clients for. The goal is to maximize billable work while minimizing tasks that simply don’t generate revenue.
While attractions don’t operate on hourly billing, the concept still applies. Your version of billable work is the time your team spends running tours, checking in guests, or delivering experiences that generate revenue.
By comparing your team’s total available hours to how much of that time is spent on revenue-producing activities, you get a clearer picture of your capacity utilization.
Are your guides sitting idle during certain hours? Are time slots going unsold?
Tracking and analyzing this data can help you optimize schedules, reduce downtime, and ultimately increase revenue without expanding resources (i.e., hiring more guides or introducing new activities).
What they use capacity utilization for
Businesses across industries use capacity utilization to inform decisions around resource management, project planning, and team productivity. At its core, it’s about comparing actual output to what’s possible and using that data to make your attraction more efficient and profitable.
In hospitality, for example, a hotel chain might use the metric to spot seasonal dips in occupancy. With that intel, they can plan special promotions to fill rooms during slower months and keep revenue more consistent year-round.
In manufacturing, capacity utilization highlights how much of the production line is actually in use. Operating at 60% might signal underused resources, while running near 100% could indicate it’s time to scale.
Service-based businesses apply the concept to billable hours. By tracking how much of each employee’s time is spent on billable work versus admin tasks, they can optimize project management and redistribute workloads. The goal? Use total available hours more efficiently.
Even retailers use this logic by monitoring inventory turnover and sales floor usage to guide merchandising decisions.
Whether you’re managing people, time, or space, capacity utilization, paired with smart time tracking and capacity planning, helps ensure you’re making the most of your resources.
Historical capacity utilization rates
Looking at historical capacity utilization rates can bring us valuable insights into economic trends and business cycles. These rates reflect the extent to which different industries have used their productive resources over time, providing a clear picture of periods of growth and, on the other end, recession.
Historically, capacity utilization rates have fluctuated in response to economic events. For instance, during periods of economic expansion, such as the post-World War II boom, rates often surged as factories and businesses operated at near full-capacity to meet rising demand.
Conversely, during economic downturns, like the Great Recession of 2008 to 2009, these rates plummeted as demand fell and production slowed.
In the manufacturing sector, specifically, capacity utilization has been a key indicator of the health of capitalist economies. In the mid-20th century, manufacturing capacity utilization in the North American economy often hovered around 85% to 90%. This high rate indicated robust industrial activity and a strong economy.
Yet, during slow economic cycles, such as the oil crises of the 1970s and the early 1980s recession, utilization rates dropped significantly, reflecting decreased industrial output levels and financial challenges.
The services sector, which has significantly grown (in both size and importance) over the decades, also shows variable capacity utilization trends.
Industries like hospitality and transportation went though cyclical fluctuations. For example, airlines and hotels typically see higher utilization rates during peak travel seasons and lower rates during off-peak times. Historical data from these industries has helped businesses anticipate demand and plan accordingly.
The key differences between capacity utilization and operational efficiency
As you now know, capacity utilization is an advanced inventory and pricing technique used to boost your profit margins.
It’s the relationship between potential maximum output and the actual number of tours or tickets you’re selling.
Measuring your capacity utilization can help you make decisions about your resources — such as knowing when to hire new staff or adjusting tour guide schedules to meet tour demands. If you run a food tour company and find that your capacity is reaching 100%, you’d likely need to add a new time slot and hire a new guide.
Operational efficiency, on the other hand, measures the relationship between your attraction’s output and the resources required to produce it. In other words, it’s about doing more with less, whether that means reducing non-billable hours, minimizing waste, or streamlining schedules.
This ties directly into resource management. A business that can increase output, say, more tours or higher guest capacity, while lowering inputs like staff time, equipment use, or capital, is improving its operational efficiency.
Take a museum, for example. After reviewing time tracking data, you realize that you have 15 team members scheduled on weekdays when foot traffic is low — the same number working on busy weekends. To operate more efficiently, you reassign a few employees from slow days to weekends. This shift reduces non-billable time during the week and supports higher traffic when it matters most.
By reallocating total available hours toward revenue-generating periods, you not only improve efficiency but also increase your attraction’s capacity to handle demand, without additional labor costs.
Over time, smarter scheduling and better resource utilization can lead to a leaner, more profitable operation.
Why should travel and tourism companies care about measuring capacity utilization?
Can you name your most popular tours or experiences off the top of your head? Now, can you tell us how often those tours or experiences are fully booked?
Xola’s capacity utilization report can put those insights at your fingertips.
Tracking your capacity utilization can show you how many of your listings were booked at or above 75% capacity in the last month. Perhaps more importantly, it can also show you how many were operating at less than 25% capacity.
For example, a zoo operator might run such a report and find that its afternoon shifts are running at near-full capacity, while no one is visiting in the morning.
After finding this out, the operator decides to open later in the day and keep the zoo open into the evening. In addition to that shift, the operator also launches a marketing campaign focused on driving more visits during the slowest hours.
Another benefit of measuring capacity utilization is being able to change your prices to match ongoing fluctuations in supply and demand.
For example, one might offer discounted rates for the slower morning slots every time someone lands on the website. This Lightning Deal might persuade more people to book the less desirable time slot.
The result? A business operating at full capacity.
Additional ways to calculate capacity utilization
It’s not always a one-size-fits-all scenario. There are different ways to measure your attraction’s efficiency, depending on how you operate and your end goals. Let’s review a few of them here.
Ideal Utilization Rate
Want to find out what’s the best capitalization rate for your particular attraction?
Some businesses look to industry benchmarks, but others calculate an ideal rate based on their actual business costs, pricing, and profit.
With this formula, you can more accurately determine the ideal utilization rate for your company to achieve its desired profit margin.
Ideal Utilization Rate Formula: ((Resource costs + overhead + profit margin) / Potential capacity x Billable hours rate) x 100.
Let’s see this play out in real life: You run an escape game company, and an employee costs you $50,000 per year, while the overhead costs for that employee amount to $500. The billable rate for this employee is $55 an hour, and they have the capacity to work 25 hours per week for 48 working weeks per year. Meanwhile, your ideal profit margin is 8%.
So, what’s your ideal utilization rate? ($50,000 + $500 + $4,040) / (1,200 hours x $55 an hour) x 100 = 82.6%
After plugging those numbers into the formula, your ideal utilization rate would be about 83%.
Calculating machine capacity utilization
Next up is machine capacity utilization — a common manufacturing metric that shows how well a company’s machinery is being used. It can be used to identify problems in a manufacturer’s production line, such as having too many or too few machines in operation.
You can calculate it by finding the actual output of a machine and dividing it by its potential output, then multiplying by 100.
If a manufacturer’s performance is found to be low, it may investigate whether one of its machines needs to undergo maintenance.
Calculating occupancy and utilization
Calculating your employee utilization rate also known as billable utilization helps you understand how effectively your current staff is being used. It’s a valuable part of resource management, especially when you’re deciding whether to hire new team members or simply revise existing schedules.
1. Start with the number of hours an employee is scheduled (their total available hours).
2. Then, calculate how many of those hours are spent on revenue-generating tasks — for example, how many hours a tour guide is actively leading tours.
3. Divide the hours worked by the total hours available.
This gives you a percentage that reflects how much of their time is spent on billable work and how much may be going toward non-billable time, or idle time.
Capacity utilization example for travel companies
Let’s say you run an adventure tour company offering extreme water sports. To maximize revenue and maintain an efficient operation, you track booking rates across all your tours using real-time data.
During the summer high season, your goal is to operate at 85% capacity — meaning 85% of your available tour slots are booked. This high capacity utilization rate helps spread fixed costs, such as equipment and team member wages, across more bookings. It improves profit margins while signaling strong demand and efficient use of resources.
But in the winter, bookings drop. If your average guest count per tour falls to 50%, your utilization rate drops too, and that increases your cost per guest. That’s where you might leverage project management tools to reschedule staff, adjust tour frequency, or run off-season promotions to drive demand.
By monitoring utilization across seasons, you can make informed decisions about pricing, staffing, and operations. Whether it’s hiring extra tour guides during peak periods or reducing non-billable hours in slower months, resource management powered by real-time insights allows you to adapt quickly and keep your business running efficiently.
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In conclusion, measuring your capacity utilization rate can help your attraction reach its full potential.
You can not only leverage Xola’s reporting features to see how maximize bookings and profits.
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FAQs about capacity utilization
What are capacity utilization benchmarks?
- While it varies by industry, most companies and economies aim for a capacity utilization rate of 85% to 100%. Headcount or employee utilization rates should be around 85% to 90%, according to HubSpot.
What’s the best formula for capacity utilization?
- The easiest way to find your capacity utilization rate is to divide the actual capacity of your tours by the total capacity, then multiply by 100.
Capacity Utilization Rate Formula: (Actual Capacity Being Used / Total Capacity) x 100
Any number under 100% indicates that your attraction is operating at less than its full potential.
