What is ADR & how to identify opportunities to increase it

It is important for everyone in the hospitality industry to fully understand the meaning of key metrics and how to use them to your advantage. In our previous posts on RevPAR and the Net Promoter Score, we provided our readers with detailed definitions and examples of using these in practice.

What is ADR?

Average Daily Rate (ADR) is an important metric used in the hospitality industry to indicate the average rental income per paid occupied room in a given time period. ADR is one of the most important indicators for hoteliers to measure the operating performance of a property but they should monitor ADR, occupancy and RevPAR (revenue per available room) to have a more accurate picture of a hotel’s results.

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How is it calculated?

ADR is calculated by dividing room revenue by rooms sold and allows properties to measure how well the hotel has performed.

ADR = room revenue / rooms sold
Increasing your ADR

There are several opportunities for hoteliers to increase ADR and RevPAR at their property.

1. Effectively manage your online reputation

By improving guest satisfaction and managing your online reputation you can increase overall revenue and ADR. The Global Review Index™ is used to benchmark the online reputation of individual hotels or groups, compare results between properties or against competitors and track the evolution of a hotel’s performance over time. Hoteliers can use it to set quality objectives as well as optimize online pricing and distribution strategies.

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2. Create a unique experience

Nowadays it is not just about giving your guest a bed and a bath, it is all about creating an overall unique experience. People are more willing to pay a higher rate for a memorable stay with fresh product offerings and services which in turn will allow you to increase your ADR.

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3. Offer something extra

Many hotels offer extras to guests when booking online such as an airport shuttle or champagne in the room on arrival for special occasions. By being creative when encouraging guests to spend a little extra you can increase your ADR.

4. Know your guests

In an industry as competitive as this one, personalization is becoming more important than ever. Getting to know your guests allows you to market to them directly, based on their needs and interest, at different points of the travel journey.

5. Understand how you compare to competitors

ReviewPro’s Revenue Optimizer is the first solution to help increase ADR by classifying hotels into performance categories and providing specific, actionable insights to focus improvement efforts. For example, if price is low relative to competitors but guest satisfaction is high, a hotel should consider increasing rates as it indicates that guests would likely be willing to pay more.

6. Utilize big data

From historical booking information to newer consumer-centric data sets like web shopping behaviors and guest reviews, data sets can affect pricing. For example, take external factors into account such as local holidays or annual events when forecasting as high demand periods can allow you to increase rates. These are explained in more detail in our blog post with Duetto.

The Average Daily Rate at your hotel is a crucial metric for measuring a property’s performance. What are you doing at your hotel to successfully increase ADR?

See How The Radisson Hotel group increased the ADR in our case study