To achieve your profit goal, your Required Average Daily Rate (ADR) is:
function calculateRoomRate() {
var annualCosts = parseFloat(document.getElementById('annualCosts').value);
var targetProfit = parseFloat(document.getElementById('targetProfit').value);
var otherIncome = parseFloat(document.getElementById('otherIncome').value) || 0;
var numRooms = parseInt(document.getElementById('numRooms').value);
var occupancyRate = parseFloat(document.getElementById('occupancyRate').value);
if (isNaN(annualCosts) || isNaN(targetProfit) || isNaN(numRooms) || isNaN(occupancyRate) || numRooms <= 0 || occupancyRate <= 0) {
alert('Please enter valid numbers for all required fields.');
return;
}
// Total Revenue needed from all sources
var totalRevenueRequired = annualCosts + targetProfit;
// Revenue specifically needed from rooms
var roomRevenueRequired = totalRevenueRequired – otherIncome;
// Total annual room nights available
var annualRoomInventory = numRooms * 365;
// Actual sold room nights based on occupancy
var soldRoomNights = annualRoomInventory * (occupancyRate / 100);
// ADR Calculation (Hubbart Formula logic)
var adr = roomRevenueRequired / soldRoomNights;
var resultDiv = document.getElementById('roomResult');
var adrDisplay = document.getElementById('adrValue');
var breakdownDisplay = document.getElementById('breakdown');
if (adr < 0) {
adrDisplay.innerHTML = "Other Income Covers All Costs";
breakdownDisplay.innerHTML = "Your non-room revenue exceeds your total costs and profit goals.";
} else {
adrDisplay.innerHTML = "$" + adr.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
breakdownDisplay.innerHTML =
"Required Annual Room Revenue: $" + roomRevenueRequired.toLocaleString() + "" +
"Projected Room Nights Sold: " + Math.round(soldRoomNights).toLocaleString() + " nights/year" +
"Room Nights per Day: " + (soldRoomNights / 365).toFixed(1);
}
resultDiv.style.display = 'block';
}
Understanding Room Rate Calculation: The Hubbart Formula
In the hospitality industry, setting the right room rate is the difference between a thriving hotel and a struggling one. The Hubbart Formula is a "bottom-up" approach to pricing. Instead of looking at what competitors charge first, it starts with your financial requirements and works backward to determine what you must charge to stay profitable.
Key Factors in Room Pricing
Operating Expenses: These include everything from payroll and utilities to marketing, maintenance, and insurance.
Desired ROI: Hotel owners and investors expect a specific return on the capital they have invested in the property.
Occupancy Rate: A hotel rarely runs at 100% capacity. You must account for seasonal dips and weekday lulls by calculating based on a realistic average (usually between 60% and 80%).
Non-Room Revenue: Revenue from spas, restaurants, and conferences reduces the amount of income the rooms themselves must generate.
Example Calculation
Imagine a boutique hotel with 10 rooms. The owner wants to make $50,000 in profit after covering $200,000 in annual expenses. They expect a 70% occupancy rate.
Total Revenue Needed: $200,000 (Expenses) + $50,000 (Profit) = $250,000.
Required ADR: $250,000 / 2,555 nights = $97.85 per night.
Why ADR Matters
Your Average Daily Rate (ADR) is one of the most critical KPIs (Key Performance Indicators) in hospitality. While it tells you what you are charging on average per occupied room, it should be used in conjunction with RevPAR (Revenue Per Available Room) to understand how effectively you are filling those rooms at those rates.
By using this calculator, hotel managers and Airbnb hosts can establish a baseline price that ensures financial sustainability before applying dynamic pricing strategies based on market demand.