Financial Metrics · Basic level · 3 min read ·
What is ADR (Average Daily Rate)?
ADR (average daily rate) is the average amount charged for each night sold in a lodging business. It is calculated by dividing room revenue by the nights sold. It shows the price at which nights were sold, but not how many nights stayed empty.
In 30 seconds
- ADR = room revenue ÷ nights sold.
- It only counts nights sold: empty nights are left out.
- It is read together with occupancy; the two combined give RevPAR.
Why should you care?
Occupancy tells you how much was sold. ADR tells you at what price. It is the second lever of a lodging business's revenue.
- You see whether the asset manages to charge more in high season.
- You spot when it filled up by cutting the price a lot.
- You understand the figure in each project's daily rate chart.
Think of it as the average price of a movie ticket
A theater sells tickets at different prices: matinee, evening, weekend. If you add up what came in and divide it by the tickets sold, you get the average ticket price. ADR is the same for a lodging business, with nights instead of tickets.
How does ADR work?
- 1
Add up room revenue
What was charged for stays in the period, without other services.
- 2
Count the nights sold
Only the nights when a paying guest was there.
- 3
Divide
Room revenue divided by nights sold gives the period's ADR.
- 4
Read it by season
ADR rises in high season and falls in low season; compare equivalent periods.
The formula
ADR = Room revenue ÷ Nights sold
- Room revenue
- = what was charged for the period's stays
- Nights sold
- = nights occupied by guests
An example with numbers
Illustrative figures for a short-stay apartment building in one month, unrelated to any project.
| Nights available | 120 |
|---|---|
| Nights sold | 90 |
| Room revenue | 18,000,000 pesos |
| ADR | 200,000 pesos |
Each night sold brought in 200,000 pesos on average. The 30 empty nights don't lower ADR, but they do lower revenue: that's why RevPAR is checked too.
Where do you see it at Circular Urban?
On the sheet of each lodging project in operation, the «How the operation is going» section shows average monthly ADR and a chart of how it has moved. In your portfolio, each participation's detail shows it month by month. These are figures from the actual operation, and they change with season and demand.
- The sheet of projects in operation, in «How the operation is going»: Average monthly ADR.
- The «ADR — Average Daily Rate» chart on the project sheet.
- Your portfolio, in each participation's detail: Monthly ADR.
What changes in your finances once you get it
You read price, not just demand
You know whether a lodging asset charges well for what it sells, not only how much it sells.
You recognize the seasons
You expect a higher ADR in holidays and a lower one in low season.
You combine indicators
A high ADR with low occupancy can bring in less than a mid ADR with high occupancy.
Common mistakes
- Myth
A higher ADR always means more revenue.
- In reality
If raising the price means selling far fewer nights, revenue can fall.
- Myth
ADR is calculated over every night of the month.
- In reality
Only over the nights sold. The indicator that spreads revenue across all available nights is RevPAR.
- Myth
ADR is what the project keeps for each night.
- In reality
It is what was charged, before cleaning, commissions, utilities and other costs and expenses.
Test yourself
A lodging business sold 60 nights in the month and its room revenue was 13,500,000 pesos. What was its ADR?
Keep learning
Helps to know first
What comes next
This content is educational. Every participation carries risks inherent to the project, including the possibility of partial or total loss, and results are subject to each project's actual performance.
