The Average Room Rate (ARR), often used interchangeably with Average Daily Rate (ADR), is one of the most critical Key Performance Indicators (KPIs) in the hospitality industry. It measures the average rental income per paid-occupied room during a specific time period. This calculator helps hotel managers, revenue strategists, and property owners quickly determine their ARR to assess pricing strategies and revenue performance.
Calculate Your Hotel's ARR
Enter the total revenue generated specifically from room sales (exclude food/beverage).
Enter the total number of paid rooms occupied for the period.
Calculated Average Room Rate
$0.00
The Formula to Calculate Average Room Rate
Calculating the ARR is straightforward, but it requires accurate data regarding room revenue and occupancy numbers. The formula ignores complimentary rooms or rooms occupied by staff, focusing strictly on revenue-generating units.
ARR = Total Room Revenue / Total Rooms Sold
Where:
Total Room Revenue: The gross income generated solely from selling rooms. This should exclude taxes, food and beverage sales, spa services, or other ancillary revenues.
Total Rooms Sold: The specific count of rooms that were paid for and occupied during the measured period (daily, weekly, monthly, or annually).
Why ARR is Crucial for Revenue Management
Understanding your ARR allows you to benchmark your property against competitors and track your own performance over time. While Occupancy Rate tells you how full your hotel is, ARR tells you how much value you are capturing from those guests.
ARR vs. RevPAR
It is important to distinguish ARR from Revenue Per Available Room (RevPAR). While ARR measures the average price of sold rooms, RevPAR measures revenue across all available rooms (including empty ones). A high ARR with low occupancy might result in a low RevPAR, indicating that while your prices are high, you aren't selling enough inventory.
Real-World Example
Imagine a boutique hotel has generated $45,000 in room revenue over a weekend.
During that same weekend, the hotel records showed that 250 rooms were booked and paid for.
Calculation: $45,000 / 250 = $180.00
The Average Room Rate for that weekend was $180.00.
Strategies to Increase ARR
Once you have calculated your ARR using the formula above, you may look for ways to optimize it:
Upselling and Cross-selling: Encourage guests to upgrade to suites or premium views during the booking process or at check-in.
Dynamic Pricing: Adjust room rates based on real-time demand. Raise prices during peak seasons or local events.
Length of Stay Restrictions: Implement minimum stay requirements during high-demand periods to reduce turnover costs and maintain higher average rates.
Targeting High-Value Segments: Focus marketing efforts on corporate clients or luxury travelers who are less price-sensitive.
Frequently Asked Questions
Does Total Room Revenue include taxes?
No. When calculating ARR, you should use the Net Room Revenue, excluding VAT, sales tax, or service charges, to get an accurate reflection of the income retained by the hotel.
Should I include complimentary rooms in the "Total Rooms Sold"?
Generally, no. Including complimentary rooms (comps) increases the denominator without adding to the numerator, which dilutes the ARR artificially. ARR is meant to track the average price paid by paying guests.
What is the difference between ARR and ADR?
Functionally, they are the same calculation. ADR (Average Daily Rate) is the term more commonly used in the United States, while ARR (Average Room Rate) is frequently used in Europe and Asia. Both measure the average income per paid occupied room.
function calculateARR() {
// 1. Get input values
var revenueInput = document.getElementById("totalRoomRevenue");
var roomsInput = document.getElementById("roomsSold");
var resultArea = document.getElementById("result-area");
var arrResult = document.getElementById("arrResult");
var arrExplanation = document.getElementById("arrExplanation");
// 2. Parse values to floats/integers
var revenue = parseFloat(revenueInput.value);
var rooms = parseFloat(roomsInput.value);
// 3. Validation Logic
if (isNaN(revenue) || isNaN(rooms)) {
alert("Please enter valid numbers for both fields.");
resultArea.style.display = "none";
return;
}
if (revenue < 0 || rooms < 0) {
alert("Values cannot be negative.");
resultArea.style.display = "none";
return;
}
if (rooms === 0) {
alert("Total Rooms Sold cannot be zero (cannot divide by zero).");
resultArea.style.display = "none";
return;
}
// 4. Calculate ARR Formula: Revenue / Rooms Sold
var arrValue = revenue / rooms;
// 5. Format Output (Currency)
// Using toLocaleString for currency formatting
var formattedARR = arrValue.toLocaleString('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
// 6. Display Result
resultArea.style.display = "block";
arrResult.innerHTML = formattedARR;
// Add contextual explanation based on the input
arrExplanation.innerHTML = "For every " + rooms + " rooms sold, your property earned an average of " + formattedARR + " per room.";
}