Average Daily Rate (ADR)

Average Daily Rate (ADR)

The average daily rate (ADR) is a key performance metric in the hospitality industry that measures the average revenue earned per occupied room per day. It helps hotels understand how much revenue they generate from rooms on a per-room basis and, when combined with occupancy data, provides insight into overall revenue performance.

Key takeaways

• ADR measures average rental revenue per occupied room per day.
• ADR = Rooms revenue earned ÷ Number of rooms sold (exclude complimentary and staff rooms).
• ADR should be used with occupancy rate to assess true revenue performance (RevPAR).
• Common ways to increase ADR include pricing strategies, upselling, cross-sales, and targeted promotions.
• ADR alone can be misleading; it doesn’t reflect occupancy, ancillary revenue, fees, or deductions like commissions and rebates.

How ADR works

ADR shows the average price guests pay for occupied rooms. A rising ADR indicates a hotel is earning more per occupied room, but it doesn’t reveal whether total revenue is up or down—occupancy may have fallen even as ADR rises.

Hotel operators manage ADR by:
* Adjusting pricing to match demand and market conditions.
* Using upsells and cross-sells (room upgrades, add-ons).
* Running targeted promotions for higher-rate segments.
* Comparing ADR to historical figures and to similar hotels to gauge performance and set rates.

Calculation

Formula:
Average Daily Rate (ADR) = Rooms revenue earned ÷ Number of rooms sold

Notes:
* Exclude complimentary rooms, staff rooms, and rooms not sold.
* Revenue from ancillary services (food, spa) is not included in ADR.

Practical example:
If a hotel earns $50,000 from 500 rooms sold:
ADR = $50,000 ÷ 500 = $100

Real-world example

A large hotel company reported an ADR of $202.75 in North America with an occupancy rate of 75.8%. To calculate RevPAR:
RevPAR = ADR × Occupancy rate = $202.75 × 0.758 ≈ $153.68

ADR vs. RevPAR

• ADR measures average revenue per occupied room.
• RevPAR (Revenue per Available Room) measures revenue generated per available room, regardless of whether it is occupied.
• Relationship: RevPAR = ADR × Occupancy rate
  Use ADR to understand pricing performance and RevPAR to assess how effectively rooms are being filled at those prices.

Limitations and considerations

• ADR does not reflect occupancy—higher ADR can coincide with lower occupancy and lower total revenue.
• It excludes complementary and staff rooms, and typically does not account for fees, no-show charges, commissions, rebates, or cancellations.
• ADR alone omits ancillary revenue streams (food, beverage, events, spa).
• Comparisons are most meaningful among properties with similar size, location, and customer mix.

Conclusion

ADR is a straightforward and valuable metric for tracking average room revenue and informing pricing strategy. For a complete view of performance, always analyze ADR alongside occupancy, RevPAR, and ancillary revenue to understand both price strength and overall revenue generation.