New Delhi, July 6, 2025 — In the competitive landscape of the global hospitality sector, Average Daily Rate (ADR) and Average Room Rate (ARR) have emerged as critical metrics for analyzing hotel revenue performance. These indicators guide pricing, positioning, and strategic decisions for hotel operators and investors alike.
What is ADR? A Deeper Look at Average Daily Rate
Definition:
ADR reflects the average revenue earned per sold room per day, offering a snapshot of pricing effectiveness.
Formula:
ADR = Total Room Revenue / Rooms Sold
Example:
If a hotel earns ₹12,00,000 from selling 100 rooms in one day:
ADR = ₹12,00,000 / 100 = ₹12,000
Key Significance:
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Indicates how well a hotel is selling its rooms relative to price.
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Useful for comparing seasonal performance or with competitors.
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Helps shape short-term promotional pricing.
“ADR is an essential barometer for pricing precision and profit forecasting.” – STR Global
Limitations of ADR:
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Ignores rooms that remain unsold.
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Does not account for non-room revenue.
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Can be skewed by premium room sales.
Understanding ARR: The Broader Pricing Perspective
Definition:
ARR includes all available rooms (occupied and unoccupied), giving a broader view of average pricing.
Formula:
ARR = Total Room Revenue / Total Rooms Available
Example:
A hotel with 150 rooms and ₹12,00,000 in revenue would have:
ARR = ₹12,00,000 / 150 = ₹8,000
Key Significance:
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Evaluates potential income across full inventory.
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Helps in forecasting and budgeting at a macro level.
Limitations of ARR:
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Does not reflect actual occupancy.
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Affected negatively by unsold rooms.
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Excludes services like F&B, spa, and events.
ADR vs ARR: A Comparative Analysis
| Metric | Focus | Formula | Purpose |
|---|---|---|---|
| ADR | Occupied Rooms | Room Revenue ÷ Rooms Sold | Measures room sales performance |
| ARR | All Available Rooms | Room Revenue ÷ Total Rooms Available | Evaluates overall inventory efficiency |
