How to Calculate Average Daily Rate

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Understanding Average Daily Rate (ADR)

The Average Daily Rate (ADR) is a key performance indicator (KPI) used primarily in the hotel and hospitality industry. It represents the average rental income earned per occupied room in a hotel over a specific period, typically a day, month, or year. ADR is a crucial metric for assessing pricing strategies, revenue management, and overall hotel profitability.

How is ADR Calculated?

The formula for calculating ADR is straightforward:

ADR = Total Room Revenue / Number of Rooms Sold

Let's break down the components:

  • Total Room Revenue: This is the total amount of money generated from the sale of all rooms within the specified period. It includes revenue from all room types, excluding revenue from food and beverage, spa services, or other ancillary offerings.
  • Number of Rooms Sold: This is the total count of rooms that were occupied and paid for by guests during the same period. Complimentary rooms or rooms occupied by staff are not included in this count.

Why is ADR Important?

  • Performance Measurement: ADR helps hotels understand how effectively they are pricing their rooms and managing their inventory.
  • Benchmarking: It allows hotels to compare their performance against competitors or industry averages.
  • Forecasting: ADR trends can be used to predict future revenue and make informed business decisions.
  • Pricing Strategy: By analyzing ADR, hotels can adjust their pricing to maximize revenue, especially during peak and off-peak seasons.

Example Calculation

Imagine a hotel had the following performance over a specific night:

  • Total Room Revenue: $15,000
  • Number of Rooms Sold: 100

Using the ADR formula:

ADR = $15,000 / 100 = $150

Therefore, the Average Daily Rate for that night was $150.

Calculate Your Average Daily Rate

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