The ADR calculator can help you discover the average daily rate (ADR) for vacation rentals or hotels. This is one of the key metrics to measure business performance. It is used in the hospitality and real estate industry.
The average daily rate is very useful for those offering vacation rentals and hoteliers. It helps them create a good revenue management plan that can increase their profit margin. If you are one of those people, then you should understand how to calculate ADR and what you can do to improve your profit margin.
This is where the ADR calculator comes in. It allows you to realize your average daily rate quickly and easily. It will give you a quick insight into the performance of different promotional and advertising strategies. When you plan your budget, try various revenue scenarios. To estimate the variable and fixed costs of your operations with limited data, use the high-low method.
What’s the Average Daily Rate (ADR)?
ADR is one of the most important performance indicators in the hospitality industry. Basically, it is used to estimate the average revenue made per room.
It also shows the occupancy of resorts, hotels, motels, or other lodging establishments for a given time period. The average daily rate can reveal how much guests pay on average for hotel rooms occupied. Thus, if the ADR is high, this means revenue per room is high as well.
ADR Calculator Formula: How to Compute the Average Daily Rate?
The ADR is calculated by dividing the total revenue from room rates by the total number of rooms sold during that period. So, the formula for ADR is straightforward:
ADR = average revenue earned / number of rooms sold
It should be noted that the number of rooms sold does not include rooms that don’t generate revenue. Likewise, it doesn’t include rooms that staff uses as well as vacant or complimentary rooms.
The following are two examples of how the ADR is calculated. It will shed some light on the Average Daily Rate Calculator.
ADR Examples Using the Average Daily Rate Formula
If an establishment with 110 rooms sold 100 rooms during a single day and earned $10,000 from room rates, then their ADR would be $100 per night ($10,000/100).
Assuming that a resort earns $2,000,000 in revenue by renting out approximately 2,000 rooms in 10 months. If there is a total of 20,000 rooms rented during that period, then the ADR is as follows:
ADR = $2,000,000 / 20,000 = $100, meaning the Average Daily Rate is $100 per room.
As you can see, the Average Daily Rate can easily be calculated if you have a record of how many rooms are rented during a certain period of time. But what if there’s no record? In that case, you should consider how many rooms the property comprises when estimating ADR. Use this formula:
Estimated Average Daily Rate = (monthly revenue on average / 30 days) / the total number of rooms
In our example, average monthly revenue is $2,000,000 / 10 months = $200,000; Estimated ADR = ($200,000 / 30) / 110 = $60.6 per room.
This calculation can be performed using the advanced mode of the ADR calculator.
Tips on How to Boost Your ADR
Now that you know how to calculate ADR, you should also have an idea of how to increase it over time. When implementing a High-Yield Instructional Strategy and price, you should understand your seasonality, customers, and location. This will help you improve your average daily rate.
Here are a few tips on how to boost ADR:
- Increase daily rates for rooms that offer special amenities or unique features like extra views and a Jacuzzi. Some guests will certainly be interested in paying for the extra value.
- Provide a specific clientele with a unique experience. Themed rooms, for example, can justify and command increased daily rates.
- Allow your customers to get a discount on accommodation when extending their stay by one night.
- Encourage guests to leave positive social media reviews and provide them with an interesting social media presence.
- Promote bundle services consisting of different tours and events on your business website. The promos and packages can boost customer loyalty and reduce commission fees besides increasing the chances of people booking directly.
- Get the reservations optimized for particular customers like groups, business travelers, leisure guests, and the like.
ADR Limitations
- As far as revenue is concerned, ADR excludes earnings gained from caution or cancellation fees.
- ADR doesn’t reveal the actual performance when it comes to operations of lodging rentals.
- Rebates, discounts, and commissions that customers enjoy do not reflect in the calculation of the Average Daily Rate.
Why Is ADR Important?
While it is helpful to know how ADR is calculated, it’s not enough. Aside from that, you should also use other data when interpreting the results. Despite the fact that high results for ADR generally indicate increasing revenue per room, if the vacancy rate is also high, this isn’t a positive revenue growth sign.
When it comes to lodging rentals, the occupancy rate is often combined with ADR to provide an evaluation of RevPAR (revenue per available room). This way you can estimate your revenue performance accurately. The average daily rate of the property should be low enough to draw and retain clients but still high enough to increase total revenue.
- ADR helps investors determine the growth and profitability of hotels. Also, it allows them to compare it with hotels whose location and characteristics are the same or similar.
- This is a good way to calculate the profitability of occupied hotel rooms.
- The Average Daily Rate plays a role in computing RevPAR.
- Based on historical ADR, hotel operators can keep track of new trends or challenges and change their business strategies accordingly.
FAQs
How Often ADR Should Be Calculated?
Once a month. Monthly reports provide the results that can help you find out how seasonality affects your ADR each month.
What’s the Difference Between RevPAR and ADR?
While RevPAR shows the earnings per available room, ADR is intended to determine the revenue per hotel room occupied.