Average Daily Rate: Calculations, Formula & Example

Average daily rate (ADR)

Average Daily Rate (ADR) is a performance metric used in hotels to calculate the average revenue received per occupied room on a given day. It is computed by dividing total room revenue by total number of rooms sold during a given period, usually a day, week, month, or year.

Importance of Average Daily Rate (ADR)

ADR is a key metric for revenue management and strategic planning in the hotel industry. With the help of adr calculation alongside other critical data such as occupancy and RevPAR, hotels can fine-tune their pricing strategies, optimize revenue streams, and boost overall profitability.

ADR Calculation

Average Daily rate (ADR) = Total room revenue / No of rooms sold

To calculate ADR for a certain period, add the revenue produced by all room sales during that period and divide it by the total number of rooms sold during that period.

Example

Let's assume a hotel that generates $15,000 in room revenue by selling 50 rooms in one day. Its adr calculation would be -

Average daily rate (ADR) = $ 15,000/ 50 = $ 300

This hotel's ADR for the day is $300 per room.

What is a Good Average Daily rate (ADR)?

A "good" average daily rate (depends on a variety of criteria, including location, property type, market demand, and competitive environment. 

A higher ADR suggests that a hotel is effectively charging more for its rooms and maybe delivering high-value goods or services.

A successful ADR strikes a balance between maximizing revenue and maintaining high occupancy rates. A hotel with a considerably high ADR but low occupancy may be pricing itself out of the market, whereas a hotel with a lower ADR but consistently high occupancy may be missing out on revenue.

Difference between ADR and RevPAR

ADR just measures revenue generated per occupied room, whereas RevPAR takes into account both occupancy and ADR. RevPAR is determined by dividing total room revenue by total available rooms, whether or not they were sold. As a result, RevPAR gives a more complete picture of a property's revenue performance, considering both occupancy and pricing initiatives.

READ MORE: Calculating Property's Occupancy Rate - A Comprehensive Guide