Hello Momo,
"Occupation" could be a synonym of "occupancy " and both mean:
The act of occupying or taking possession of a building.
However they have distinct meanings as well :
"occupation" could mean a job or the principal activity in your life that you do to earn money.
"His occupation as a photographer requires a lot of traveling ."
"occupancy" in the sense of the period of occupying a certain room,building or hotel room in particular.It is characterized by short term in comparison with "occupation".
"to be in occupation of a house" means to live in the house , occupy it and inhabit it for longer time.
So the correct word to use in your example is (b) "occupancy".
San Diego's hotel occupancy is generally quite high and it may be stressful to find a place to stay.