Definition — Average Daily Rate (ADR)
– Average Daily Rate (ADR) measures the average room revenue a lodging property earns for each occupied room during a chosen time period (day, week, month, etc.). It is expressed in currency per room-night.
– Jargon: “occupied room” or “rooms sold” excludes complimentary (comp) rooms and rooms used by staff.
Why ADR matters
– ADR is a core performance metric in hotels and other lodging businesses. It tells managers how much, on average, they are charging and collecting from guests who pay for rooms.
– ADR is used with occupancy rate (the share of available rooms that are occupied) to produce Revenue Per Available Room (RevPAR), a broader measure of revenue performance.
How to calculate ADR (formula)
– ADR = Rooms Revenue Earned ÷ Number of Rooms Sold
– Rooms Revenue Earned: total revenue generated from paid room nights (do not include food & beverage, spa, or other outlets).
– Number of Rooms Sold: count of paid occupied rooms (exclude comps and staff rooms).
Step-by-step calculation (short checklist)
1. Define the period you want to measure (e.g., single day, month, trailing 12 months).
2. Sum all room revenue for that period (exclude non-room revenue).
3. Count the number of rooms actually sold (exclude complimentary and staff-occupied rooms).
4. Divide room revenue by rooms sold to get ADR.
5. Compare ADR to historical levels, competitor benchmarks, and RevPAR to interpret results.
Worked numeric examples
– Simple example:
– Rooms revenue = $50,000 for the day
– Rooms sold = 500
– ADR = $50,000 ÷ 500 = $100.00 per occupied room-night
– ADR → RevPAR example:
– ADR = $202.75 and occupancy rate = 75.8% (express occupancy as decimal 0.758)
– RevPAR = ADR × Occupancy = $202.75 × 0.758 = $153.68 per available room
How to interpret ADR
– A rising ADR indicates higher average revenue per occupied room, which can come from higher rates, different guest mix, or more upsells.
– ADR alone doesn’t show whether total revenue is higher—occupancy could be falling even if ADR rises. Always evaluate ADR together with occupancy and RevPAR.
– Use ADR for pricing decisions, rate segmentation, and to test the effect of upsells (e.g., adding paid upgrades or packages).
Common uses in hotel operations
– Benchmarking against similar properties or market averages.
– Evaluating the impact of promotions or rate changes.
– Informing dynamic pricing and distribution channel strategies (e.g., adjusting rates sold through OTAs vs. direct channels).
Limitations and caveats
– ADR excludes non-room revenues (food, events, parking) and does not net out commissions, rebates, or cancellation fees. Those items affect total profitability but not ADR.
– Complimentary stays and staff rooms are not counted in rooms sold; omitting them can distort per-room metrics if the number of comps changes significantly.
– ADR does not account for cost side (operating expenses); a higher ADR does not automatically mean higher profit margin.
– For cross-property comparisons, ensure similar accounting rules, time periods, and market contexts.
Quick checklist for analysts
– [ ] Confirm period and currency
– [ ] Aggregate room-only revenue
– [ ] Verify count of paid rooms sold (exclude comps/staff)
– [ ] Calculate ADR (revenue ÷ rooms sold)
– [ ] Calculate RevPAR if needed (ADR × occupancy)
– [ ] Compare to historical data and market peers
– [ ] Note any special events or rate channels that could skew results
Reputable sources for further reading
– Investopedia — Average Daily Rate (ADR): https://www.investopedia.com/terms/a/average-daily-rate.asp
– STR (Smith Travel Research) — industry data and definitions: https://str.com/
– Marriott International — Investor Relations (company reporting of ADR, occupancy, RevPAR): https://investor.marriott.com/
– Cornell University — Center for Hospitality Research: https://sha.cornell.edu/centers-institutes/chr/
Educational disclaimer
This explainer is for educational purposes only and is not individualized investment or business advice. Use your own judgement and consult qualified professionals before making financial or operational decisions.