What is average daily rate (ADR)?

Average daily rate, commonly referred as ADR, is a metric utilized in the hotel industry to measure the average price customers are paying per room per night on a given period of time.

How is average daily rate (ADR) Calculated?

Average daily rate is calculated by dividing room revenue by the total rooms sold on a given period of time:

Example:

Room revenue in January: 100,0000
Rooms sold in January: 750
Average daily rate in January: 133,33 (100,000 / 750)

Why is average daily rate important?

Average daily rate (ADR) is an important indicator because it reflects the average price that customers are paying for hotel rooms on a given period of time. This metric has a direct impact in a hotel´s revenue. However, ADR should never be analyzed in isolation. A common mistake in hotel management is to associate a high ADR with good performance. This can lead to incorrect decision making when setting prices. A hotel can have a high ADR, but if that may not be beneficial if it leads to a very low occupancy levels. The secret is to find the level of occupancy and ADR that maximizes the hotel profitability. See RevPar definition.