Average Daily Rate (commonly referred to as ADR) is a
statistical
Statistics (from German language, German: ', "description of a State (polity), state, a country") is the discipline that concerns the collection, organization, analysis, interpretation, and presentation of data. In applying statistics to a s ...
unit that is often used in the
lodging
Lodging refers to the use of a short-term dwelling, usually by renting the living space or sometimes through some other arrangement. People who travel and stay away from home for more than a day need lodging for sleep, rest, food, safety, shel ...
industry. The number represents the
average
In colloquial, ordinary language, an average is a single number or value that best represents a set of data. The type of average taken as most typically representative of a list of numbers is the arithmetic mean the sum of the numbers divided by ...
rental income per paid occupied room in a given time period. ADR along with the property's occupancy are the foundations for the property's financial performance.
ADR is one of the commonly used financial indicators in
hotel industry
A hotel is an establishment that provides paid lodging on a short-term basis. Facilities provided inside a hotel room may range from a modest-quality mattress in a small room to large suites with bigger, higher-quality beds, a dresser, a refr ...
used to measure how well a
hotel
A hotel is an establishment that provides paid lodging on a short-term basis. Facilities provided inside a hotel room may range from a modest-quality mattress in a small room to large suites with bigger, higher-quality beds, a dresser, a re ...
performs compared to its competitors and itself (year over year). It is common in the hotel industry for the ADR to gradually increase year over year bringing in more
revenue
In accounting, revenue is the total amount of income generated by the sale of product (business), goods and services related to the primary operations of a business.
Commercial revenue may also be referred to as sales or as turnover. Some compan ...
. However, ADR itself is not enough to measure the performance of the hotel. One should combine ADR, occupancy and
RevPAR (
revenue
In accounting, revenue is the total amount of income generated by the sale of product (business), goods and services related to the primary operations of a business.
Commercial revenue may also be referred to as sales or as turnover. Some compan ...
per available room) to make a sound judgment on hotel performance.
Factors Affecting ADR
ADR can vary significantly due to external factors like seasonal demand, local events, or economic conditions. Understanding these variables can help hotel management make more informed pricing decisions.
Formula
ADR is calculated by dividing the rooms revenue earned by the number of rooms sold, with ''house use rooms'' and ''complimentary rooms'' excluded from the denominators.
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