Average Daily Rate: Understanding ADR and its Calculation

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In the hospitality industry data is very important especially when you are speaking of room rates or revenue generation. Speaking of data to measure hotel’s revenue, three of the most popular KPIs are: Occupancy Rate, RevPar and ADR. These 3 metrics together help the hoteliers measure the operating performance and success rate of the property. In this article, we are going to discuss ADR, its calculation, and its effect on hotels.

What is ADR?

ADR stands for Average Daily Rate. It is the metric used in the hospitality industry to measure the average revenue generated per room sold per day. It shows you the average revenue earned for each guest room sold on a given day. Hotel’s ADR includes discounted rates, group sales, corporate rates, package deals and all other price points.

The formula for calculating ADR

Average Daily Rate = Total revenue generated by occupied rooms/ No. of rooms occupied

*Key point: Only the number of rooms sold on a given day is taken into consideration and not the total number of rooms in the property.

Understanding Average Daily Rate

For example, you own a hotel named “ABC” with 100 rooms. On the 20th of October, 80 rooms are sold. To avoid any confusion, let’s consider all the rooms belong to the same category. The total revenue generated on 20/10/2022 is $10000. Let’s see what’s the ADR on that day:

ADR = 10000/ 80 = $125

Now you know that your average daily rate per room sold is $125. But the question is what are you going to do with this data? There is no point in calculating ADR if you do not know the daily rate of the previous day or the revenue earned per room sold by your competitor.

Scenario 1: Suppose we know that the ADR of the previous day was $90. Then you can compare the data to see how effectively your rooms are generating revenue. But, if the ADR of the last day is $150, then we need to find out the difference in the room rates or selling strategy for the revenue lost.

Scenario 2: Let’s consider your next lane competitor hotel ‘B’ has an ADR of $175 on 20/10. Then it’s a clear indication that they are performing better than you. So, we need to find out the reason for this. Probably it’s the cause of 2 reasons: low occupancy rate or higher room rates.

The next question is what should you do to compete with the ADR of hotel B: reduce your occupancy rate or increase the price of the rooms. Before that, it is necessary to understand the effect of both.

Which is good: High ADR/ Low ADR?

  • Average Daily Rate takes into consideration the total number of rooms sold on a given day unlike the total number of rooms in a property in RevPar calculation.
  • Running a hotel involves various fixed costs: like lease rent, employee salaries, management charges, etc. A lower occupancy rate means less revenue. Irrespectively, the high-end fixed will affect the profit as it cannot be avoided.
  • Increasing the room rates is not always an option. There is a possibility that Hotel B has a competitive advantage against your hotel for which it is able to charge a high price for the room. Increasing the price of the room as per them you might lose on your booking, reducing your occupancy rate in turn.

Therefore, your goal should not be for an ADR towards the higher end or the lower end. You should opt for a strategy that provides optimal revenue leading to profit maximization.

Role of ADR in Revenue Maximization

The end goal of every hotel is to earn maximum revenue and that is only possible when all the rooms are sold. This can only happen when the hotel has a clear understanding of the maximum price the guests are willing to pay for a particular room. When a hotel is able to track this, you will set the best room price for your property that will get the apt occupancy rate and you will be making the maximum profit.

To achieve the optimal occupancy rate and ADR, it is essential for you to understand the role of ADR in benchmarking your room rates. Remember, ADR is never the same for 2 days. It varies for room types, different days of the week, seasonal demand, vacation time, market trends, and other macroeconomic conditions.

Having a direct relationship with market demand, guests’ preferences and other price points ADR plays a vital role in benchmarking room rates.

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Tips to Revenue Management: Use Your Data Points to its Maximization

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tips to hotel revenue management blog by ratetiger

Every traveler has a maximum amount that they are willing to pay for their accommodation. Whether you run a 5-star hotel or a boutique villa, the goal of all hoteliers is the same – Revenue Maximization. Apprehending this value as closely as possible is the hallmark of a successful hotel. For which you implement various revenue management techniques and strategies to upscale yourself in an inclusive, responsible and sustainable way. However, the key to scoring a goal in revenue management is direct bookings.

We all know that the way to this is by customizing your booking engine, digital marketing strategies, and website optimization. But we tend to miss the power of data in achieving direct bookings. For this, you just do not need to have the right data source. It is equivalently important to analyze the data in its true sense to understand its importance and market value.

Data from the booking engine essentially helps you to understand market trends, analyze past experiences and give a competitive advantage of pricing strategy. In short, data from the hotel booking engine is not only a source of direct bookings but also shows you the way to strategize your marketing efforts directly to the guests.

Benefits of Booking Engine Data Points

The data from Hotel Booking Engine is a source of both direct and indirect revenue. Your booking engine is not only the most profitable source of direct booking but also the most trusted source of data. Directly, the booking engine brings direct booking to your hotel saving you from the commission paid to 3rd parties like OTAs, GDS and metasearch. Indirectly, this data educates on customer behavior and booking patterns guiding you to strategize your marketing efforts in the right way.

Let us have a look at how the data points in Booking Engine help in optimizing Revenue Management.

Key Data Points in Booking Engine

  1. Customer Segmentation

Guests are the foremost important part of hotel marketing and room pricing. Defining groups of travelers who visit your hotel and avail services can enable you to understand their different needs and preferences. Data that tells you what age, location or purpose of travel your guests have, opens up opportunities to target quality leads and convert potential guests into confirmed bookings.

The major different segmentation of guests could be:

  • Geographic data: location of guests
  • Demographic Data: age, gender, marital status
  • Purpose of Travel: business, sport event, family vacation
  • Traveler status: new or returning
  • Stay duration

Each and every group of guests bring an added opportunity of revenue with itself. Keeping a close tab on customers visiting gives you an idea of who your loyal customers are, which section of the customers opt for maximum cancellations or people of which category makes the reservation in advance. You can give special offers to pre-bookers and regular customers to have them revisit.

The more you analyze the customer data better you can create your marketing strategy and direct your ads to the right segment.

2. Market Analysis

Speaking of market analysis, you need to be updated with both what the guests are looking for and what your competitors are offering. When guests feel like they are getting an optimized value of service for the amount they paid, they are ready to spend more and go there. To increase occupancy through the booking engine it is crucial to understand the customer’s perspective.

This, for a hotel, serves as a basis for choosing the right distribution channels, setting the right prices, engaging more guests by promoting quality content and launching the right campaigns to drive more direct bookings. If your past record shows that during a particular time of the year or season or festival the number of visitors in the city increases, then it’s the time to get the situation to your advantage with exciting room packages.

3. Demand Forecasting

Guest demands are always fluctuating depending on different factors like events in the area, seasons, festivals, etc. Analysing information as to when the demand is more enables you to set room rates accordingly.

For example, if the maximum bookings your hotel receives from your website is on a particular day of the week, and it becomes a trend then it can be a good move to offer special offers for that day.  Analysing the data to create a personalised experience is an effective way of optimizing revenue. Predicting when the demand will increase or decrease as per your past records can help hotels develop effective marketing, pricing and distribution strategies for maximum revenue.

4. Data Source

Speaking of online bookings, what matters the most is convenience and flexibility. In this digital age where everything is at your fingertips, it is essential to have a mobile-friendly website to give people the ease to book their stay from anywhere and everywhere.

Keeping a record of the device and platform used by travelers for hotel reservations, your boking engine data source gives you the percentage of people using which device. Approximately, 72% of US travelers book their hotel on their mobile via the hotel website or mobile app.

It can tell you about the sources from which guests are making their reservations – it could be your hotel app or any ad featured on a nearby attraction page. Knowing the source from where your hotels get the maximum booking helps you strategize your sales plans accordingly.

5. Lead Time

Lead time is the number of days between the date of booking and the date of arrival at the hotel. The lead time depends largely on the purpose of travel. For example, the lead time for a business traveler maybe 10 days but for a leisure traveler it could be two months. Knowing the lead time for reservations helps hotels to start planning and marketing upsells targeting a specific group of travelers. Let us take the example of the leisure traveler. By knowing the lead time, you can plan out special packages or personalized services that will enable you to earn that extra revenue.

6. Guest Profiling and Loyalty

A direst booking allows hoteliers to own the guest booking journey and information. Once a guest completes a stay, a profile is created in the hotel system. Keeping a record of the guests and their visits to your property or the properties within your hotel chain helps you know which clients are coming back. Guest profiling also helps in understanding their behavior, booking patterns, and service expectations. A loyal guest helps hotels reduce guest acquisition costs, making it the most profitable booking source.


The data alone is of no use until you know how to use it. You may have all the data you need but to maximize revenue, you must be aware of what to do with that data. Now that you have the data plus you know to read it, it’s time to bring value out of the stored Booking Engine data points and maximize your revenue.

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Art City Inn Vilnius recommends RateTiger Channel Manager & Booking Engine for Revenue Growth

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hotel art city inn press release ratetiger
Vilnius, 6 October 2022

Experiences strong recovery and expansion in online bookings

Lithuania-based upscale property Art City Inn has been leveraging RateTiger Channel Manager and Booking Engine for optimizing and expanding online distribution. The property has experienced excellent growth in bookings by adding new source markets through RateTiger’s wide network of demand channels as well as driving direct bookings from their brand website.

As per European Travel Commission’s forecast, Europe is expected to recover 70% of the pre-pandemic travel revenue by end of 2022. It is important for hotels to spread out their inventory across multiple distribution touchpoints to attract guests and increase market share.

Art City Inn with 128 rooms is using RateTiger Channel Manager to dynamically manage rates, inventory and restrictions across all their connected channels from one central dashboard. A popular choice of accommodation for travelers from across the world, Art City Inn has increased its visibility by tapping into RateTiger’s seamless connectivity with over 450 global & regional OTAs, metasearch, and GDS channels to develop new markets and guest segments.

Edvinas Bingelis, Front Office Manager, Art City Inn Vilnius commented “We are working with RateTiger for the last 2 years. I have been looking for a Channel Manager that can monitor and help manage all our OTAs. When I saw the features and functionalities of RateTiger Channel Manager, I was really impressed. RateTiger Channel Manager helps us control room inventory and prices over different OTA platforms in a single click. We can create various Promotions for OTAs through RateTiger directly. We are able to quickly adapt our rooms and prices according to market changes which give us an edge over competitors.”

“RateTiger offers a wide network of demand channels and is connected to most OTAs, metasearch, and other travel sites. With a few clicks of the mouse, we can implement our sales strategy globally across all online channels. Further, RateTiger Booking Engine helps implement our rate strategy on our website in real-time helping improve direct booking opportunities. The best thing about RateTiger solutions is that they are technologically advanced while being easy to use. The support they provide is efficient, quick and responsive which adds to our overall experience,” summed up Edvinas.

Since partnering with RateTiger, the property has improved its online exposure considerably by expanding its distribution mix. Check out the video where Mr. Edvinas Bingelis shares his experience with RateTiger.

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