If you’ve been in the hotel business for a while, you most likely know what ADR stands for; however, those new to the industry deserve a quick rundown of all of the terms, jargon, and acronyms used. Therefore, we’ve put together a brief guide to understanding one of the most important concepts and datasets in this field.
ADR, or rather, Average Daily Rate, is directly tied to your hotel’s performance and profit; it takes a screenshot of how your revenue looks depending on the rooms that are occupied. If a property manager wants to know the success rate from a certain week, month, or even year, then the ADR can provide the information they need in order to calculate that.
In this article, we’ll be looking at how to generate the ADR, increase it, and use it to boost your overall revenue. The concepts tend to build on each other, so hopefully this article will enlighten you on more subjects than just the ADR as well!
Calculating ADR
The Average Daily Rate can be manually calculated through this simple formula:
Revenue per Room ➗ Rooms Sold = Average Daily Rate
Once you’ve found your ADR, you can use that knowledge in order to expand this formula over a period of time (although there are other acronyms out there that cover this):
Daily Revenue over a Month’s Time ➗ Rooms Sold in a Month = Average Daily Rate for that month
You certainly don’t have to do this by hand or with a calculator; there are PMS software that can do this for you within seconds (like ours!) in order to help you save even more time and money. Not to mention that other revenue-related acronyms and formulas are needed in conjunction with your ADR in order to fully understand your hotel’s financial performance. For instance, ADR goes hand-in-hand with ARR (Average Room Rate); you can use ADR in order to determine more daily calculations, while ARR focuses on a larger period of time, particularly during busy seasons.
Even RevPAR (Revenue per Room) uses ADR in order to generate data. To determine the average revenue per room, you have to multiply the ADR with the Occupancy Rate. As mentioned earlier, all of these datasets and formulas work together in order to give you the bigger picture, so try to lessen the amount of work and calculations on your end by utilizing an online system.
Significance of ADR
Knowing what your ADR is can help you determine whether you’ve picked the right rates per room, if there should be more of a focus on marketing, or even if there is a seasonal significance to note. Figuring out your hotel’s financial performance can lead to a lot of potential revenue solutions.
First, you can increase your ADR by planning out some marketing campaigns in combination with strategic room rates. If you can determine what room rate is best for a certain time period or even customize the room rate with a package deal for returning guests, you can send out personalized email campaigns in order to entice your past guests (and future guests) to stay with you.
If you’ve collected data on your guests, use that information in order to provide a more appealing deal for them. This data can include past preferences, services that they’ve shown interest in, new updates that concern them, and promotions that you know they won’t be able to say no to. Spa packages, restaurant gift cards, or even discounts on surrounding businesses are specific examples that guests tend to gravitate towards. Putting time and energy into your marketing strategies will definitely help your ADR, and guests will reward you for paying attention to their likes and dislikes.
By combining your room rate with a special offer, you can convince your customers to pay the room rate you want; this will definitely increase your ADR to what you would prefer. Take a look at what your competitors are offering, and see if you can still maintain your revenue per room while offering better deals and prices than your competitors in order to gain more customers (and bump up that ADR in the process).
Another tip to help your ADR is to invite your customers to extend their stay with offered discounts. While it may not be the exact revenue per room that you want, you can still receive more revenue with extended stays, particularly if you weren’t expecting more guests to stay on those days.
All in all, there are several various factors, including ADR, that work together in order to help you not only take a look at your hotel’s financial performance but also plan in order to move forward and increase that ADR. Don’t let this overwhelm you; take full advantage of the Booking Ninjas PMS software so that you can make knowledgeable decisions and proceed with the best plans possible.