If you’re a hotel manager or owner, then understanding how to calculate and improve your ADR is a vital way of analysing the performance of your property. It is one of the KPI (key performance indicators) alongside RevPAR and Occupancy Rate. If you’re looking to improve your revenue growth strategies and find ways of maximising profits, you should be able to recognise your hotel’s ADR and utilise ways of increasing it.
What is ADR?
Your ADR, Average Daily Rate, is the average income you generate per paid room in your property over a specified time period, often 30 days. It is calculated as shown by dividing the total revenue generated across all rooms by the total number of rooms (excluding rooms not used for this service).
Example of ADR Calculation
Suppose you have a hotel generating £3000 pounds a day from storing bags with help from Stasher (yes, we’re shamelessly plugging our own service). If they generated this amount from 30 rooms, then their ADR would be £100.
Important Point: These rooms do not include complimentary rooms or rooms that are used by staff; they only include rooms that are used for the specific service.
4 Ways of Increasing ADR
In order to increase your ADR, you’ll need to concentrate on increasing your income gained by each customer.
Provide a Unique Customer Experience
Offering a unique experience to customers is achieved through personalising their experience; this involves tailoring the occasion to fit the customers wants. Guests are more likely to pay higher rates if they are offered an unforgettable experience with new product offerings and services as this will increase your ADR.
You can create a unique experience for your customers by offering free refreshments, leaving a welcome gift in each room for the customers or even encouraging your staff to provide a great service. For instance, if there’s a family celebrating a birthday you can leave a box of chocolates in their room or decorate the room. Gestures like this will create a memorable stay for the customers and will make them more likely to return to your hotel and give it a positive public image in addition to a better ADR.
Providing additional services to guests when they book online can be a major positive not only for the customers but also for your brand. These complimentary services can be simple such as an airport shuttle service. Finding new and creative ways to provide extra services to the customer can encourage customers to pay more which will increase your ADR.
Packages and Promotions
Offering packages is a great way of attracting customers to your business. The essence of making an effective package is to know your customers; if you receive large families at your hotel, then you can customise the packages to their needs. Similarly, if the hotel is located near a cinema or an amusement park, you can offer families ticket discounts. You could also create a shopping package that includes a map of all the shops in the area along with some discount coupons, or a map of different tourist attractions.
For an insight on things you can do in other cities, for example London, check out our blog about things to do in London!
Promotions can also enhance your ADR. An easy way of doing this is by offering seasonal promotions; this involves offering discounts during the slow season and then increasing rates during the peak season. Another type of promotion is expertise promotions; if you’re on expert on a specific topic you love, you can create promotions centered around it. For example, if you’re passionate about chocolate cakes (yes we love chocolate!) you could write an article about different types of chocolate cake and then tie this into taster session promotion.
Know What Your Competitors Offer
Understanding the market and what competitors are offering is important in determining how you should price your own services and will subsequently help increase your ADR . For instance, if the price you offer is low relative to your competitors but your customer satisfaction is high, you might want to consider increasing rates as guests would still be willing to pay more.
Increasing your ADR by utilising the formula above as well as the strategies suggested above will have a positive effect on your hotel. Always remember to try and find new and creative ways to increase your revenue per hotel room in order to maximise your ADR and better customer satisfaction. For more insightful information check out our other blogs!