How to Effectively Calculate Your Hotel’s ADR (Average Daily Rate)

If you’re a hotel manager or owner, understanding how to calculate and improve your ADR is a vital way of analyzing the performance of your property.

It is a crucial KPI (key performance indicator) alongside RevPAR, Occupancy Rate and RGI.

If you’re looking to improve your revenue growth strategies and find ways of maximizing profits, you should be able to recognize your hotel’s ADR and utilize methods of increasing it. 

Let’s get into it.

What is ADR? 

ADR, Average Daily Rate, is the average income you generate per paid room in your property over a specified 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). 

How To Calculate ADR: An Example

In order to calculate your hotel’s ADR, you need to take the average revenue earned from your rooms and divide it by the number of rooms sold.

ADR = Revenue Earned from Rooms / Number of Rooms Sold

Suppose you have a hotel generating £3000 a day from storing bags with help from Stasher. If they generated this amount from 30 rooms, their ADR would be £100.

Important Point: These rooms do not include complimentary rooms or rooms used by staff; they only have rooms used for the specific service

4 Effective Ways to Increase Your ADR

To increase your ADR, you’ll need to concentrate on growing your income gained by each customer.

Way #1: Provide a Unique Customer Experience 

Offering a unique experience to customers is achieved through personalizing 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 complimentary refreshments, leaving a welcome gift in each room for the customers, or even encouraging your staff to provide an excellent service.

For instance, if a family is celebrating a birthday, you can leave a box of chocolates in their room or decorate it.

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. 

Way #2: Extra Services

Providing additional services and hotel amenities to guests when they book online can be a significant positive for the customers and 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, increasing your ADR. 

Way #3: Packages and Promotions

Offering packages is an excellent 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 customize the packages to their needs.

Similarly, if the hotel is 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 and 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 an expert on a specific topic you love, you can create promotions centered around it. For example, suppose you’re passionate about chocolate cakes (yes, we love chocolate!).

In that case, you could write an article about different types of chocolate cake and then tie this into taster session promotion. 

Way #4: Know What Your Competitors Offer

Understanding the market and what competitors are offering is essential in determining how you should price your services and 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. 

Final Thoughts

Increasing your ADR by utilizing the formula above and the strategies suggested above will have a positive effect on your hotel.

For more insightful information, check out our other blogs!

Always remember to try and find new and creative ways to increase your revenue per hotel room to maximize your ADR and better customer satisfaction.