Revenue Management Glossary

Average Daily Rate (ADR)

Definition

The Average Daily Rate (also known as ADR) is a performance metric that monitors the average room rate for each occupied room during a given period of time.

How to use it

When used in conjunction with occupancy, ADR is a valuable metric as it helps hoteliers understand whether their revenue management strategy is effective. If a hotel sees that their occupancy is very high but their ADR is low, the property should increase their room rate to maximise profitability; if occupancy is very low and ADR is very high, the property should decrease their rates to drive more bookings.

ADR is also useful for performance benchmarking, enabling a property to compare its performance to that of its compset – again, making it easier to identify opportunities to increase bookings and revenue, and/or address potential shortfalls in the current pricing strategy.

Formula

ADR is calculated by dividing the total room revenue by the number of rooms sold.

Related Terms

ADR, RevPAR, Occupancy, Revenue Management, Revenue Management Strategy, Dynamic Pricing, RMS, Revenue Management System
“Revenue managers should monitor their property’s ADR and occupancy on a very regular basis to ensure that their pricing decisions are driving them towards accomplishing their short- and long-term business and profitabilty goals.”

Hendrik Niehues

Hendrik Niehues
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