Average Daily Rate or ADR is a term that is quite popular among the hoteliers worldwide.
NB: This is an article from eZee Absolute
ADR plays a great role in defining an increase in hotel or chain of hotel revenue.
Briefly, it is a metric to indicate the average realized room rental per day. And, working on ADR helps you devise revenue management blueprint that systematically gives your hotel business a hike in profit.
Going through this, you get an idea as to where you need to put efforts to realize your goal.
To get a clear idea, I’ve mentioned few rooms or instances that doesn’t come in ADR:
- Vacant rooms or complimentary rooms
- Rooms occupied by hotel staff or the owner himself
- ‘No shows,’ and deposit forfeited
- Canceled bookings and charges levied for the same
Excluding the above options or incidents, only rooms rented out to guests are calculated for deriving the ADR. The hotel ADR can also be calculated on a monthly, quarterly and yearly basis, depending upon your requirement and plan feasibility.
Here is how hotel’s Average Daily Rate is calculated
The below table mentions hotel data and rooms revenue:
| ROOM/S TYPE | RATE | AVAILABLE | SOLD | TOTAL REVENUE |
|---|---|---|---|---|
| Standard Room | $ 60 | 10 | 8 | $ 480 |
| Deluxe Chamber | $ 90 | 10 | 6 | $ 540 |
| Double Bed Suite | $ 120 | 5 | 3 | $ 360 |
| Total/Amount | 25 | 17 | $ 1,380 |
As per Average Daily Rate formula:
Average Daily Rate = Rooms Revenue/ Number of Rooms sold
ADR: $ 1,380/17 = $ 81.17.
Here your hotel ADR is $ 81.17.
Now as you are aware of the term ADR, you ask:
Why an increase in hotel ADR, irresistible?
The answer is high operational cost, inventory maintenance and other expenses to manage a hotel is at peak.
Thereby, to run your hotel successfully and to recover the cost incurred, your business has to have an increase in revenue gradually and a hike in hotel ADR. So, when you keep track of your hotel ADR, consequently the return on investment on your hotel business rises year-on-year, finally boosting the profit ratio.
Before discussing the tips to increase hotel ADR, I would like to brief you with a scenario.
You may be applying multiple rate updates in a day as per the occupancy levels for a hike in hotel revenue, but at one point of time, multiple rate updates don’t help much in increasing the ADR. Just as the elasticity of supply and demand affects the rates of any product or services, similar is the case of changing tariff rates as per the occupancy percentage at your hotel.
So, apart from applying the rate updates, you can follow the below strategies that’ll help you increase your hotel ADR:
#1: Set optimum pricing
Pricing is considered one of the most important factors. Whenever a looker is browsing your website and wants to book a room he scans through various OTA sites, meta-search engines and even goes to your hotel website searching for an attractive offer. For this, you ought to consider yield management that increases and decreases the rates as per the occupancy level in seasons, at weekends or festivals. Thus, maintaining a consistent flow and more often increase your hotel ADR.
#2: Offer packages and promotions
Guests are in search for the best deal when they book a hotel room. In this scenario, when your hotel gives a competitive advantage in the form of package or promotions, it attracts many folks. You create a buzz among people who would in turn book with you to avail the hotel discounts and take advantage of promotions. This way you build a great reputation that’ll create a goodwill to your hotel business propelling your hotel ADR and occupancy rates.
#3: Keep vigil on competitors
Studying your competitors’ strategies manually is a thing of the past. A competitor tool aids in setting up aggressive pricing of the inventory you list. The tool analyses all the data sourced from the OTAs that help you to identify the pricing of competitors. Thus, you’ve got an interesting aspect of studying the competition and beating it.
#4: Personalize services with guest self-service portal
Whether you consider or not, a guest self-service portal is trending with more guests using this option. With a higher penetration of smartphones, guests are demanding more services that are handy, save their time and offer a digital aspect to it.
A guest portal allows your guest to create the profile, fill in personal information, opt for pickup-drop off services, apply booking modifications and identify their favorite choices. This personal information helps serve your guests better at every stage of interaction, i.e. pre-arrival, at arrival, during the stay and post stay.
#5: Extended stay discount for guests
Your guest has booked with you for 3 nights, on the 3rd night he requests to extend the stay. What do you do? Here you need to understand that many of your guests or travelers are on exploring mission. This requires them to stay for long so that they get to know all the interesting places, history and commercial importance of the city or tourist place.
To win the heart of your guest, you can offer them extended stay discount that could come as a surprise to them. This waiver will certainly boost your hotel ADR and increase the occupancy rate too.
#6: Grant them complimentary services
Creating an ultimate experience for your guest includes giving out complimentary services. For e.g.: Offering them a complimentary spa service or salon or massage services once in a year or at the time of festivals.
This induces the interest of your guest in being loyal to you gaining your services for a long time or may visit you and stay at your hotel just to chill out with family during the festivals.
#7: Promote local tourism and events
Events, festivals, and celebrations happen around the world. Many festivities are often sponsored by the government or corporate bodies. These events play a vital role in catering your guest with a momentous experience. This way you can book their tickets and inform them prior to the events that are happening in your nearby areas or venues. Your guests are ready to pay extra bucks for entertainment, and this is what adds to your hotel ADR.
#8: Attract more direct bookings
Hoteliers like you are keen to get ample number of direct bookings. For a high flow of direct bookings, you must have your hotel website [integrated with booking engine] that is high in rankings, having a good SEO and listed on various meta-search engines. The point here is that when your hotel website has an excellent SEO it attracts more bookings from local as well as the global visitors.
Additionally, if you decide to spend few bucks, then Google Hotel Ads is the best option for you. Your revenue rises with an increased profit ratio and hotel ADR.
Remarkably, when you’ve finally decided to improve the Average Daily Rate, you ought to have the following automation in priority:
- A Property Management System keeps you updated on the operations and streamline your hotel business.
- Central Reservation System plays a major role for your hotel chains managing inventory, attract direct bookings, run promotions and more
- Monitor your hotel performance through business Data Analysis Tool – Innalytics and take informed hotel business decisions.
- Online Reputation Management system allows maintaining the hotel rankings.
Having your requirements answered from the above checklist and once you have executed it, will definitely allow you to get higher bookings, spurring your hotel ADR and occupancy too.
