ADR Calculator – Average Daily Rate for Hotels

ADR (Average Daily Rate)

If you want your hotel to achieve full profitability and maximize revenues, tracking the right metrics is vital. One of these metrics is the ADR, which is a vital measure of hospitality performance. What does it stand for? The average daily rate and it tracks the average revenues that are generated from each occupied and paid room on a daily basis.

You can calculate it with a particular formula, with a higher ADR indicating stronger pricing power and profitability. On the flipside, a lower ADR for your hotel indicates discounted prices or lower demand.

How Can You Calculate the ADR?

You can use this formula to calculate the ADR:

Total revenue from rooms / total number of rooms sold.

In this case, your total room revenue is the revenue from only the sold rooms, excluding food and beverages, spa, and other categories. The total number of rooms sold does not include any out-of-order rooms and complimentary rooms. This is something you should note.

So, to take an example, suppose your total room revenue stands at $20,000 and a hotel manages to sell around 100 rooms on any given day. In this case, your ADR will be the following-
$20,000/100 = $200

Why ADR Is An Important Metric for Your Brand

Here are some reasons why ADR is a crucial metric that you should consider:

• It helps you measure the strength of the revenues that are generated. You can analyze it with the RevPAR and occupancy rate to get a full picture of your hotel performance.
• A stronger ADR indicates that your pricing strategy is actually working, i.e. you are filling up rooms at the right rates.
• The ADR also helps you get a wider picture of the hotel’s revenue management. In case your ADR is high, but the occupancy is low, then your rooms may be overpriced.
• Alternatively, in case your occupancy rate is high and the ADR is low, then your rooms may be underpriced.
• In fact, you can use the ADR for benchmarking as well. You may compare it against other similar properties in your destination or category. This will help you identify opportunities for repositioning prices as per the trends in the market.
• ADR helps you understand seasonal patterns in terms of demand or dynamically adjust the rates.
• You can understand segments, channels, and other packages that help you generate the highest-paying bookings for your hotel.

Limitations of ADR You Should Know About

While ADR is a useful metric for any hotel, it does have its share of limitations:

• The ADR may only narrate a part of the whole story. It does not account for how many rooms you actually sold from your overall inventory.
• The metric cannot show you revenue that you’ve lost from unsold rooms.
• ADR may sometimes be misleading when you compare it across multiple properties with varying levels of occupancy.
• ADR does not show you revenues from other sources, such as spa services, food and beverages, and other ancillary offerings.
• It does not account for staff-occupied rooms or complimentary rooms that do not generate revenue for your hotel.
• The metric does not account for the operating costs linked to running your property.

How RevPAR Complements the ADR for Your Hotel

RevPAR stands for the Revenue Per Available Room and it fills up the gaps that come with ADR to give you a broader picture. This is because the metric accounts for both occupancy and pricing, thereby helping you get a more complete view of the room revenue performance. Hence, it is a useful metric to take into account along with the ADR at your end.