Average Daily Rate (ADR) is a key performance metric in the hospitality industry that helps hoteliers understand their revenue per occupied room. It plays a crucial role in pricing strategies, revenue management, and overall profitability.
How is ADR Calculated?
ADR represents the average revenue earned per occupied room in a given period. The formula is:
- ADR = Total Room Revenue Ă· Number of Rooms Sold
For example, if a hotel earns $10,000 from 50 sold rooms, the ADR = $10,000 Ă· 50 = $200.
Why is ADR Important?
- Measures Revenue Performance: ADR helps hoteliers gauge the effectiveness of their pricing strategy.
- Optimizes Pricing Decisions: Helps set competitive rates based on demand and market trends.
- Boosts Profitability: A higher ADR increases total revenue without necessarily increasing occupancy.
- Enhances Market Positioning: Comparing ADR with competitors helps in adjusting pricing strategies.
By tracking ADR regularly, hoteliers can maximize revenue, improve financial planning, and make data-driven pricing decisions to ensure business growth.