Average Daily Rate (ADR)

In summary, the Average Daily Rate describes the average revenue per paid occupied room in a specific period of time.

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You can easily calculate your ADR here:

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Explanation — How to calculate your ADR

By using a hotel software Can you record your ADR and determine how your performance has developed over a certain period of time. It is also used to compare with other hotels. However, you should be careful when making a direct comparison with other hotels. The average daily rate does not include hotel occupancy in the calculation. For a competitive comparison, the RevPAR or TrevPAR is better. If you want to make an economic comparison, you should look at ARPAR.

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For example, a hotel with 5 exclusive rooms could have a rate of 150€. In contrast, a hotel with 100 rooms would only have one Average daily rate from 70€. Still, the 100-room hotel is more likely to generate a larger gross profit and profit.

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A rising rate indicates that a hotel is generating more revenue by renting out rooms. You can increase the rate, for example, through upselling or cross-selling actions. Another issue is that no fees are included for no-shows. For example, a hotel can have higher sales in one day, but these are not included in the calculation.

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Dynamic pricing

The average daily rate allows you to see the development of dynamic prices. In the past, there were often seasonal prices or annual prices. As a result, the average daily rate barely changed and was always the same. But as soon as a hotel with dynamic pricing works, conclusions can be drawn about demand at the high and low points of the ADR. A high ADR means that the market had high demand early on. You can adjust the price accordingly. With a low ADR, demand was weaker than expected and the price was reduced. This means that the average daily rate plays at Yield Management and the price optimization a big role.

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ADR calculation procedure

You add the rates all overnight stays for the respective day and divides this value by the number of nights.

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Example invoice:

15 rooms were booked via booking.com for 100€. The rooms sold on their own website were 90€ and were sold 20 times.

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This results in sales of 1,500€ and 1,800€. The total turnover on this day was 3,300€.

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Now the total turnover must be divided by the number of rooms sold: 3,300 €/35 rooms = 94.30€.

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The average rate on this day was €94.30.

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For the development of the average daily rate in the hotel, this value can be considered a good comparative value for future rates. In order to make an economic forecast, ARPA should be preferred. The ARPA is also considering additional sales and income from F&B, wellness treatments, banquets and other sales. In addition, variable costs are deducted so that a comparison can be made from a business perspective. With all KPIs, however, it should be noted that advertising costs or commission payments are often not considered. Commission payments to booking.com, hrs, Expedia, etc. reduce the turnover of bookings.

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ADR index

The index compares its own ADR with that of the competitor.

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ADR index = ADR/ADR competitor x 100

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Example of how to calculate the ADR index:

Your hotel has an average daily rate of 100€. The average competitor rate is 90€.

100€/90€ x 100= 111.11

This means that the hotel has a higher ADR than its competitors.

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