Why average daily rate (ADR) matters to a first-time founder
Average daily rate (ADR) shows the average room revenue earned for each paid occupied room night. Hotel founders use it to assess pricing and results for different customer groups, but it says nothing about unsold rooms. The percentage of rooms occupied and the revenue earned across all available rooms provide essential context.
Examples of average daily rate (ADR)
A hotel earns R$180,000 of room revenue included under its reporting rules from 900 paid occupied room nights during a month. ADR is R$200: R$180,000 divided by 900. Food, spa and other revenue are normally excluded. Treatment of free rooms and taxes depends on the stated reporting rules.
Common misunderstanding
ADR is specific to hotels in this context and is not total revenue divided by calendar days. A higher ADR does not automatically mean better performance if the percentage of rooms occupied falls sharply. Treatment of packages, service charges, cancellations, free rooms and taxes can vary, so definitions must match.
When to use it
Use ADR for hotel pricing, budgeting and comparisons by property, booking channel or customer group. State the period, currency, which room revenue is included and how occupied rooms are counted. Compare similar properties and pair ADR with the percentage of rooms occupied, revenue across all available rooms and booking-channel costs before changing prices.