Imagine a situation where revenue managers can see what rates they can expect for a specific day of the week, a specific month, or even an entire season. Sounds amazing? It is precisely the monitoring of ADR that will enable hotels to increase revenues and overall profits in this way.
What is ADR?
Average Daily Rate (ADR) refers to a key measurable indicator that is most often used to manage revenue in the increasingly demanding hotel industry. A relevant metric of ADR is its ability to reveal the average revenue associated with rooms booked on a daily basis. In the long run, this is invaluable data for revenue management. This gives hotel owners a broader picture and insight to look at current operational performance, and compare their property to other competitors in the same category.
It is important to emphasize that he does not deal with other revenues that are collected in others
parts of the hotel. These are revenues related to free rooms and other premises that
are given free of charge and are not included in the final calculation.
How is it calculated correctly?
The formula for calculating the average daily rate is simple and reads as follows:
ADR = Earned income from booking / Number of booked rooms
Another important note, besides the free rooms being excluded from the calculations, neither the revenue earned from the room revenue nor the money that is not returned to the guests is counted.
Limitations that occur when calculating the average daily rate
The calculation itself does not tell the complete story about the hotel's income, i.e., it does not include expenses that booking sites or brokerage companies may charge if the guest does not show up. It also does not deduct items such as commissions and rebates that are subsequently paid to guests if a problem arises. This calculation has the solution to increase as a result of price increases, however, this provides limited information that remains in isolation. Let's say the occupancy rate could drop, and as a result leave the total income lower.
How can the BHC team help you with ADR implementation?
Many years of experience in the hotel industry with an emphasis on apart hotels, Balkan Hotel Consulting team helped to exclude all the parameters that could affect the misrepresentation of the calculation sum.