Hotel Revenue

Average Daily Rate: Importance And Formula To Calculate ADR

Prerna Aditi
  2022-02-04  6 min

ADR, also known as Average Daily Rate, helps define the increase in the hotel revenue. It is one of the most popular terms in the hospitality industry. It helps in understanding the average realized room rental for every single day. Hotel owners often work on ADR to devise appropriate revenue management for their hotel rooms to generate high revenue and profit.

Today through this article, we will talk about the importance of ADR, how to calculate ADR in hotels, and strategies for the same.

Importance Of ADR

  • It would be no wrong to say that ADR acts as a revenue blueprint for hotel owners.
  • It works as a performance indicator by telling the average price of the hotel rooms for a specific day.
  • ADR helps in recovering the cost incurred in running your hotel business.
  • It defines the increase in hotel revenues and thus measures the success of your hotel.
  • It is an important financial index that measures the performance of any hotel.
  • It helps manage the inventory maintenance, operational, and other expenses related to the hotel business.
  • With the help of ADR, hotel owners can bring a hike in the profit of their hotel business.

ADR Formula In Hotel Industry

Average Daily Rate = Rooms Revenue/ Number of Rooms sold

However, it is necessary to understand that ADR doesn’t include:

  1. Complimentary or vacant rooms
  2. Canceled bookings or charges levied
  3. Rooms used by hotel staff
  4. Rooms whose deposit has been forfeited.

Methods Of Increasing The ADR

1. See What Your Competitors Are Doing

You need to be aware of your competitors’ strategies and move if you want your ADR to increase. These days there are various tools and websites by which you can check on your competitors’ pricing strategies. Once you know the prices your competitors have set for their hotel rooms, you too can decide the pricing accordingly.

2. Promote Your Hotels To Local People

Promoting hotels to your local people and attracting the same is also another way of increasing the ADR of your hotel. Also, whenever there is an event or local festival, you can promote local tourism to attract more and more bookings for your hotel. You can also send newsletters to your previous guests and motivate them to book hotels during the festivals.

3. Work On Setting Optimum Pricing

Deciding the pricing is one of the most important things when running a hotel business. The key to deciding the pricing of your hotel rooms is by analyzing the market trends, customers’ expectations, and the paying capacity of your guests. Analyzing these parameters can help you segment your target customers and formulate optimum pricing. You can increase your ADR by setting an optimum price for each segment.

4. Give Discounts And Special Offers

Let’s get this straight, guests always look for discounts and offers before completing any booking. They will for sure prefer the hotel that is giving them discounts. So, if you are trying your level best to increase your ADR, it is important to give more and more discounts and offers to your guests. Let them know that you are giving them the best deal at a nominal price. During the peak season, you may not be willing to give a discount and that’s fine. However, during the off-season, you need to give some attractive discounts to encourage more and more bookings.

5. Emphasize On Direct Bookings

Direct bookings can affect the ADR of your hotel in a positive manner. For this, you will need a website so that your potential guests can complete their booking on their own. On top of that, you need to ensure that your website ranks on the Google search result page. So that when a user puts a query, they can see your hotel on the search result page. This way customers will come to your website and confirm a booking.

6. Give Complimentary Facilities To Your Guests

Giving complementary facilities to your guests is one of the ways of increasing the ADR. for this, you can give complimentary breakfast, extra blankets, heater, massage, or spa during their stay at your hotel.

You can also think of giving them complimentary service once a year in the form of Sunday sightseeing during a holiday season or free pickup from the airport, bus or railway station. This way, your previous guests will be more likely to confirm a booking at your hotel and thus this will increase your ADR.

7. Customize Packages For Your Guests

The best thing about providing customized packages to your guests is that it allows you to give a unique experience to guests. For this, you need to store the data of your guests and take their demands into account. For example, if your guests are coming for a family holiday, you can give them a package comprising a family dinner or a place for kids to play and enjoy. Once you provide customized packages to your guests, it will automatically increase your ADR. This is because then your guest won’t cancel the booking and it will be a benefit.

8. Encourage Guests For An Extended Stay

What could be better than knowing that your guests are willing to extend their stay at your hotel? In such a case, you can give them an option to extend their stay at an exciting discount. There could be guests who may want to stay for another day to explore more places. Once you give them a waiver, they will feel happy and write good reviews about your hotel. This way you will be able to increase ADR.

9. Don’t Forget To Upsell Services

Upselling your add-on services is one of the ways of increasing the ADR. For example, you can send messages and/or emails to your guests, suggesting an upgrade to their room or package. These add-ons can be arrival pickup, daily breakfast, sightseeing, camping, etc. When your guests checkin at the hotel, you can offer extra amenities at nominal/optimum charges.

In addition to this, you need to utilize the technologies in the best possible way. You can build a strong and SEO-rich website for your hotel. In addition to this, you can set up an online review management system that can help you build a positive image of your hotel among the target customers. When followed in a dedicated and religious manner, these tips can surely boost your ADR.

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