Average Daily Rate (ADR) is a commonly used financial indicator in the hotel industry to measure your hotel’s statistical performance compared to your competitor’s and to measure your hotel to itself (year over year). The number represents the average rental income per paid occupied room in a given time period. ADR along with the property’s occupancy are the foundations for the property’s financial performance.
Combined with other key performance indicators (KPIs) you can determine your revenue per available room (RevPAR). All of these are used to measure the overall operating performance of a lodging unit.
Why is knowing your ADR important?
While your hotel’s ADR does not tell the whole story of your hotel’s operating performance, it is a key indicator that helps manage supply and demand in the industry.
For example, it’s common for the ADR to gradually increase year after year bringing in more revenue. ADR itself, however, does not include all possible performance measurements.
Understanding your ADR, occupancy, and RevPAR will help you build a comprehensive data-based strategy on hotel performance and goals.
How to Calculate your Average Daily Rate (ADR):
Calculate ADR by dividing the rooms revenue earned by the number of rooms sold (with house use rooms and complimentary rooms excluded from the denominators).
- ADR Formula: ADR = Room Revenue / Rooms Sold
The ultimate goal should be to increase ADR through effective pricing and promotions, to maximize your income during the peak times of the year and to manage assets during the quieter times.
Understanding your ADR and its meaning in the hotel/hospitality industry, and developing other measurement data should be a significant part of your revenue management strategy.
Contact our THLA Team for more information.
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