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HOTEL ADR - ESSENTIAL GUIDE

Understanding ADR and other key metrics is an essential part of managing any Hotel.

ADR for Hotels – what does it mean?

 

What is the definition of ADR in hotels?

ADR stands for Average Daily Rate and it is a key performance metric widely used within the hotel industry. It measures the average revenue earned for an occupied room, thereby helping hotels and revenue managers to calculate and forecast their capabilities for generating revenue.

 

How do you calculate your hotel ADR?

To calculate the ADR, you simply divide the total room revenue by the number of rooms sold:

If a hotel generated $20,000 in revenue from room sales on a given day, from selling 100 rooms, the ADR would be ($20,000) / (100), giving an ADR of $200.

The resulting ADR figure can then be assessed historically, benchmarked versus competitors and forecasted for the future, to give the hotel a greater ability to predict future revenues.

 

What tools can be used to calculate your hotel ADR?

There are many PMS and RMS systems for hotels that will allow you to calculate your ADR with ease. The BEONx platform allows you to calculate your hotel ADR, whilst also allowing you to measure and benchmark your hotel’s quality with our unique Hotel Quality Index (HQi), as well as measure your hotel’s sustainability through our unique Sustainability Index. With our platform, you can easily calculate ADR and track trends over time, adjust pricing, forecast future revenue, and create effective revenue management strategies as a result.

Why is ADR important for Hotels?

 

Why is ADR an important metric for hotels?

ADR is an important metric for hotels because it factors in room pricing as well as the number of rooms sold. Analysing your ADR trends over time will allow you to test and learn different pricing strategies and assess how they impact your ADR and ultimately your hotel’s profitability. For example, reducing the price of your premium suites may result in an increase in room sales and a higher ADR for your hotel. Similarly, you may find that increasing the price of your premium suites has no impact on your room sales, therefore generating a higher ADR and profit margin for your hotel.

 

What are the benefits of calculating ADR?

Calculating your hotel’s ADR allows you to more easily assess the impact that different pricing strategies have on your room sales and revenue, which are key factors in determining your hotels’ profitability. Moreover, calculating your hotel’s ADR can be useful in assessing the performance of different distribution channels and booking tools, as it allows you to assess whether a tool is positively impacting your room sales and revenue metrics. Analysing your hotel’s historical ADR trends will also help you to more accurately forecast future hotel revenues and adjust pricing and revenue management strategies accordingly.

 

What methods can be used to increase ADR for hotels?

There are many different tools and strategies that hotel revenue managers can use to increase their hotel ADR. Firstly, onboarding a revenue management and profitability platform, like BEONx, will simplify the process of measuring and increasing your ADR. Using a platform like BEONx will give you a holistic view of all the different factors that contribute to your hotel’s ADR, such as competitor pricing, dynamic pricing, market demand, seasonal changes, channel performance, and many other factors. Adapting your pricing strategies based on the above factors, as well as offering specific promotions, can be used to measure and improve your hotel’s ADR performance.

 

What is the difference between ADR and REVPAR?

How do you calculate REVPAR in hotels?

RevPAR stands for revenue per available room, and it is one of the most important hotel metrics for a hotel revenue manager. The formula helps you understand how many rooms you have sold at any given time, and how much revenue your bookings are generating for your hotel. Tracking this metric can help you maximise your revenue per room and optimise your hotel’s overall performance.
There are two ways to calculate RevPAR.
RevPAR formulas:

1. Total room revenue / Total rooms available:
For example, if there are 90 sold rooms (90% of your availability) with an ADR of $100 gives you a total revenue of $9,000, divided by the 100 total available rooms, resulting in a RevPAR of $90.
$9,000 / 100 = RevPAR $90

2. Occupancy rate x ADR
For example, if there are 100 rooms available with an occupancy rate of 90% and an average daily rate of $100, the formula would be.
0.90 x $100 = RevPAR $90

What is the difference between ADR and REVPAR for hotels?

As we’ve seen from the above formulas, there is a key difference between a hotel’s ADR and its RevPAR. The key difference between the two metrics is that REVPAR takes into account all available rooms, whilst ADR only takes the number of rooms sold into account. RevPAR is a more robust metric to assess your hotel performance, as your hotel might have a high ADR but a low RevPAR, which would indicate that your revenue management strategies are not optimal.

Can REVPAR be lower than ADR in hotels?

Your RevPAR is almost always lower than your ADR, except when your hotel’s occupancy rate is 100%. For example, if your hotel had sold 50 rooms for $200 out of a possible 100 rooms available, your ADR and RevPAR figures would be as follows:

ADR = $10,000 / 50 = $200

RevPAR = 0.5 x $200 = $100

A large difference between your ADR and RevPAR figures is an indicator that your hotel’s occupancy rate is sub-optimal.

Summary

At BEONx, we understand that true, long-term success depends on creating the right conditions for your hotel revenue management strategies to succeed. This means having access to the right data for your team to analyse on a daily basis so that you can stay ahead of forecasted market trends, build the right organisational culture, and make data-driven decisions that leverage your hotel’s insights and help you create long-term profitability strategies built for success.

Unlock your potential

Speak with one of our dedicated hotel experts and get started on your journey to sustainable profitability.

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