Definition
ADR is the average price of the rooms a hotel actually sold, calculated as room revenue divided by rooms sold — it measures pricing power and says nothing about how many rooms went unsold.
Also called: Average Daily Rate · Average Room Rate
How it is calculated
- ADR = Room Revenue ÷ Rooms Sold
In practice
ADR answers one question: how much am I charging? It is the most widely quoted hotel metric and the one most managers can explain without notes — ask a GM or an owner their ADR and why it sits where it does, and you will usually get a confident answer.
Its limitation is the denominator. Because ADR divides by rooms sold rather than rooms available, it is blind to the rooms that stayed empty. A hotel that sells five suites at a high rate and leaves ninety-five rooms dark has an excellent ADR and a poor business.
ADR is also largely market-driven. What a hotel can charge is set by its segment, product, location and competitive set far more than by its own ambition — which is why opening-rate positioning is such a consequential decision, and why raising rates later is harder than starting at the right level.
Why it matters to an owner
ADR is the right metric for judging pricing power and rate positioning, and the wrong one for judging commercial performance. Read it next to occupancy, and manage the pair through RevPAR.
Frequently Asked Questions
ADR divides room revenue by rooms sold, so it reflects only the rooms you actually let. RevPAR divides by every room you have, sold or not, so it reflects both rate and volume.
Because what a hotel can realistically charge is set by its segment, product quality, location and competitive set. A hotel positioned a segment above what its market rewards spends its life discounting to fill rooms.