The Average Daily Rate or ADR in the hotel industry is one of the most important metrics for every hotelier. ADR is closely related to the occupancy rate in the hotel industry. Hoteliers are constantly reinventing their revenue management strategies to work around their hotel’s ADR. Since profits are directly related to ADR, the importance of occupancy rate in the hotel industry cannot be ignored. In today’s times, with the right resources, independent hoteliers can also improve the ADR with a few simple tricks.
First things first – let’s understand what does ADR mean in the hotel industry and how to calculate your hotel’s ADR and why your hotel’s room occupancy rate should be an important metric for you.
What does ADR mean in the Hotel Industry?
The Average Daily Rate, also known as ADR is a term popular among hoteliers. It acts as an indicator of the hotel’s overall performance and profits. ADR helps hotel owners determine the average rate of the rooms sold over a specific period of time. This duration can be variable – it may be 30-days, a quarter, or even a year.
How to Calculate Hotel ADR?
A hotel’s average daily rate gives a clear picture of the overall income generated. It takes into account all the transactions that were successfully carried out against the total number of rooms. ADR is the total revenue generated from the total number of occupied rooms for a particular duration.
If you find yourself wondering exactly how is ADR calculated in the hotel industry, just divide the earned hotel revenue by the number of rooms sold i.e,
ADR = Total Revenue ÷ Rooms sold
In order to maximize your revenue, you will have to focus on the occupancy rate of your hotel. As an independent hotel owner, you can use some simple tactics to maximize your property’s revenue.
Here are a few tips from the experts at Hotelogix:
5 Tips on How to Increase ADR for Independent Hotels
ADR is a direct result of pricing. Therefore, it is important to have your pricing strategy in place if you want to increase your average daily room rate. You can use a combination of these handy tips to help you achieve your revenue goals and optimize ADR for your hotel property.
1. Package it Right
If you’re looking to increase hotel revenue, take time to curate packages that will trick your guests into thinking they are getting more for less. Have an in-house dining area? Offer complimentary breakfast. Is there an event in the city? Offer free tickets at the time of booking to increase your revenue per customer. Start with a basic package that includes an add-on option for your guests. During the season, you can customize deals depending on the kind of guests your independent hotel caters to. Talk to your guests and you will identify potential opportunities. Making travel arrangements to and from the airport is a great way to display your hospitality even before your guests have arrived. Adding personalized services is another way to nudge your guests to spend a little extra. Better occupancy rate automatically will lead to an increase in ADR.
2. Focus on Online Reputation Management
The Internet plays a critical role in influencing a travellers’ decision at the time of booking a hotel. 91% of young travellers (18 – 35 years of age) trust online reviews just as much as personal recommendations. Review sites and social media channels act as the first point of contact at the time of making the booking decision. Online reputation of independent hotels matters the most to arriving guests. Online reviews are a great way for guests to know what they can expect during their stay. By improving your guest satisfaction levels, you can easily work on your brand’s online reputation management. A healthy reputation online will increase your revenue and ADR. Encourage guests to share feedback online, get more referrals, offer online promo codes.
3. Keep a Watch on Competitor
“Lower rates leads to higher revenue for every available room” – this is a popular belief among hoteliers. However, a 10-year study of 4,000 hotels in Europe proves the contrary. The online study revealed a completely different picture. Hotel owners who had priced their hotel rooms higher than their direct competitors generated higher revenue per available room. What does this mean for you?
ADR is what drives RevPar and certainly not room occupancy as a sole factor. A high occupancy should not be considered as the only parameter that optimizes ADR. Instead, you can use your occupancy reports to create a well-defined revenue management strategy for better profits without focusing only on your hotel’s occupancy levels. If the guest satisfaction levels are higher for your independent hotel, you can demand a higher room rent.
So, it pays to watch what your competitors are doing without directly competing with them. Don’t fall for the common belief of lowering room rates to increase your revenue and fill rooms quickly. Position your brand as a premium property, and offer value for the price you charge. Ensure your hotel’s operations are streamlined with the appropriate use of technology to turn the focus entirely on guest satisfaction.
4. Personalize your Service, Build Relationships
You can improve a hotel’s room occupancy rate with the help of technology. As mentioned earlier, enhancing guest experience should be your prime focus and personalization gets you there faster. Using a cloud-based property management system like Hotelogix will enable you to capture and store guest data. You can use this data to understand your guests preferences and more. As a hotelier, focus on building relationships not only with your guests but also with your partners and operators. Ensuring a guests’ requests are carried out even before his/her arrival ensures you will give you brownie points for guest satisfaction. Make the best of the data available to target your potential guests. You can modify your marketing strategy based on the regions or purpose of the journey.
5. Offer Discounts for Extended Stays
For those arriving for the first time (or returning ones) are often drawn to extending their stays if you offer lucrative discounts. This is particularly targeted at leisure travellers or backpackers since they are seeking to explore the region on a budget. For example you can fix a certain percentage as a discount for the third night at your hotel property.
Using this, you can boost your revenue per customer while maintaining a stable occupancy for your hotel property.
The Average Daily Rate or the ADR is certainly the most important factor that determines your hotel’s success rate. We hope you’ve found our ADR management tips useful. Have thoughts to share on your hotel’s occupancy rates? Do share your comments below.
