Average Daily Rate

Average Daily Rate (ADR) is a key performance index used in the hospitality industry. It represents the average rental income generated per unit of an occupied room within a period. The ADR with other indices is the basic yardstick for measuring a hotel’s financial performance. It measures the performance of a hotel against that of competitors and its previous years.
A hotel with a good financial performance experiences a steady increase in its ADR over a given period. To calculate the ADR for a hotel of any size and class, the total revenue generated from the rooms sold is divided by the total number of rooms sold.

If a hotel sold 50 rooms in a month and generated $1,000, then the ADR for the period is

When calculating the ADR, the rooms occupied by the hotel staff are not included in the calculation. Because of the importance of ADR to hotels operators, they innovate to ensure that the rate increases.
In conclusion, the reading the average daily rate of a hotel in isolation does not show the true financial position of the hotel. Other factors like discounts, commissions and charges are not included. Hotels can have a high ADR only because its prices are high and not because of service delivery.

Others viewed also:

Best Available Rate (BAR)
Conjoint analysis
Cost of Walk (COW)
Discriminatory Pricing (Price Discrimination)