Use the ADR calculator to find the average daily rate for your hotel or vacation rental. The average daily rate or ADR is an essential metric for measuring business performance in the real estate and hospitality industry.

If you're a hotelier, or you offer vacation rentals on Airbnb, understanding ADR is crucial to developing an effective revenue management plan to boost your profit margin. This article will explain how to calculate the average daily rate for hotels and actions you can take to improve it.

With the ADR calculator, you can quickly find your ADR with ease, try different revenue scenarios when planning your budget, and glimpse the performance of your advertising and promotional strategies. If you have limited data to begin with, consider using the high-low method to estimate your fixed and variable costs of operations.

What is the average daily rate?

The average daily rate (ADR) is a performance indicator in the hospitality industry that measures the average revenue earned per room in a lodging rental such as a hotel, motel, resort, etc.

ADR reveals the average amount hotel guests are paying for each room occupied; therefore, the higher the ADR the better, since it reflects a high revenue earned per room.

Average daily rate calculator – How to calculate ADR?

The average daily rate formula is straightforward:

Average daily rate (ADR) = average revenue earned / number of rooms sold

  • Note: The number of rooms sold includes only the rooms generating revenue. It does not include complimentary or vacant rooms and rooms used by staff.

Average daily rate examples using the ADR formulas

Example 1:

Let's assume that a hotel earns $2,558,000 in revenue from renting out 100 rooms in six months. If the total number of rooms rented in that period is 18,047 rooms, the ADR calculation goes as follows:

ADR = $2,558,000 / 18,047 = $141.74

ADR is $141.74 per room.

What if there is no record of the number of rooms sold in the same period?

Then, we can estimate ADR based on the number of rooms in the property as follows:

Estimated ADR = (average monthly revenue / 30 days) / number of rooms in the property

Average monthly revenue = $2,558,000 / 6 months = $426,333.33

Estimated ADR = ($426,333.33 / 30) / 100 = $142 per room.

The advanced mode of the calculator allows you do perform this calculation.

Example 2:

Suppose you have a hotel with 100 rooms, and you made revenue of $5,000 in a day from renting out 50 rooms; the average daily rate for that day is $5000 / 50 = $100.

The ADR calculation is simple. But the calculation does not tell you how well the hotel is performing if you compare the ADR with another hotel having only 40 rooms and $4,000 in revenue.

Therefore, knowing how to calculate ADR is not enough. You need more information to interpret the results from the average daily rate calculator. A high ADR may signify growing revenue per room, but a high vacancy rate accompanying it is not a positive sign of revenue growth.

Lodging rentals combine ADR with occupancy rate to evaluate revenue per available room (RevPAR), which gives a more accurate view of revenue performance.

Ultimately, the goal is to increase your property's average daily rate high enough to boost total revenue and low enough to attract and retain customers.

How to increase your ADR?

Understanding your customers, location, and seasonality is key to knowing when and how to implement price and yield strategies to increase ADR. Some of the strategies that can increase your average daily rate are as follows:

  1. Create demand for your services by offering a unique experience to a specific clientele. A niche experience, e.g., a themed room, can command and justify higher daily rates.
  2. Set higher daily rates for rooms with unique features, e.g., an extra view or spectacular amenities like a jacuzzi. Guests should be willing to pay for the extra value.
  3. Offer discounts for additional night stays.
  4. Promote local events and tours and bundle services into a package on your website as a tourist marketing strategy. Providing the package and promos on your website will ensure customers book with your hotel directly, cut costs on commissions to booking agencies, and promote customer loyalty.
  5. Offer an engaging social media presence and encourage customers to give positive reviews.
  6. Optimize reservations for specific customer segments such as leisure guests, transient or business travelers, groups, etc.

Importance of average daily rate (ADR)

  1. Anyone can use the ADR formula to calculate the profitability for each occupied room in any lodging rental with multiple units.
  2. Investors use ADR to determine a particular hotel's level of profitability and growth, and compare relative performance with other hotels of similar characteristics, size, clientele, or location.
  3. Hotel operators measure historical ADR to look for emerging challenges and trends, such as seasonal impact or how successful specific promotions were, and determine when to change business strategy.
  4. ADR is vital in calculating RevPAR and adjusted RevPAR, which accounts for the operating expenses of running a hotel business. Hence, it helps provide a more accurate view of profitability.

Limitations of the average daily rate (ADR)

  1. ADR does not show the actual performance of a lodging rental's operation.
  2. In terms of revenue, ADR does not account for revenue from cancellation fees or caution fees charged to customers.
  3. Discounts, commissions, and rebates offered to customers don't get reflected in the ADR calculation.

FAQ

What does ADR mean?

ADR means the average daily rate. It is a key performance metric to calculate the revenue earned per room in a lodge or hotel.

What are the other performance metrics used by hotels?

Other performance metrics used by hotels include occupancy rate, revenue per available room, adjusted revenue per available room, the average length of stay, etc.

What is the difference between ADR and RevPAR?

The difference between ADR and RevPAR is that ADR determines the revenue earned per room occupied in a hotel, while RevPAR determines the revenue earned per available room.

How do I calculate RevPAR from ADR?

Once you know how to calculate ADR, multiply the calculated ADR by the occupancy rate to get revenue per available room (RevPAR).

When is the best time to calculate ADR?

Monthly. Calculating the ADR every day may be cumbersome, but presenting the results from a monthly report will help you understand the ADR trend and how it's impacted by seasonality.

How to calculate ADR in the hotel industry?

Use the average daily rate formula by dividing the total revenue earned in a specific period by the number of rooms sold.

average daily rate (ADR) = average revenue earned / number of rooms sold

You can use the ADR calculator as a hotel room rate calculator.

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Average daily rate (ADR)
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Number of rooms sold
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