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The average daily rate (ADR) is a widely used key figure in the hotel industry that indicates the average revenue for an occupied room on a particular day. The average daily price is one of the industry’s most important key performance indicators (KPIs).
Another KPI is the occupancy rate, which together with the ADR forms the revenue per available room (RevPAR), which in turn is used to measure the operating performance of an accommodation unit such as a hotel or motel.
The average daily rate (ADR) shows how much revenue is generated on average per room. The higher the ADR, the better. A rising ADR indicates that a hotel is earning more money by renting out rooms. To increase ADR, hotels should look for ways to increase the price per room.
Hotel operators are trying to increase ADR by focusing on pricing strategies. This includes upselling, cross-selling campaigns and free offers such as a shuttle service to the local airport. The general economic situation is a big factor in pricing, with hotels and motels trying to adjust room rates to current demand.
To determine the operating performance of an accommodation unit, the ADR can be compared with the historical ADR of a hotel to identify trends, such as seasonal influences or how certain promotions have performed. It can also be used as a measure of relative performance as the metric can be compared to other hotels with similar characteristics such as size, clientele and location. This helps to price room rentals accurately.
The average daily rate is calculated by taking the average revenue from rooms and dividing it by the number of rooms sold. This excludes free rooms and rooms occupied by employees.
Average daily rate = room revenue / number of rooms sold
If a hotel has €50,000 room revenue and 500 rooms sold, the ADR would be €100 (€50,000 / 500). Rooms intended for internal use, such as those reserved for hotel employees and free of charge, are excluded from the charge.
