How is the average daily rate (ADR) calculated?

The average daily rate (ADR) is a crucial metric in the hospitality industry, specifically for hotels, as it measures the average revenue earned per occupied room within a specific period. The correct calculation for ADR involves taking the total rooms revenue generated and dividing it by the number of rooms sold during that same period.

This approach provides insight into pricing strategies and helps hoteliers assess their performance in terms of revenue management. By dividing the total revenue by the rooms sold, one can determine the average income per room occupied, which is essential for understanding overall business profitability and guiding future pricing decisions.

The focus on revenue collected from sold rooms ensures a clear and accurate calculation of how well the property is performing in terms of generating income relative to its occupancy. This metric is valuable in evaluating competitive performance and making strategic decisions for pricing enhancements or marketing efforts.