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In this guide What is average daily rate (ADR)?
Average daily rate (ADR) shows how much room revenue a hotel earned on average for each revenue-generating room night sold. It is often called average room rate outside revenue-management reporting. The calculation is:
ADR = room revenue ÷ paid room nights sold
This guide explains the formula, the input rules and the limits of the measure. You can also use the calculator and worked examples to check a daily, monthly or package-based calculation.
What is average daily rate (ADR)?
ADR stands for Average Daily Rate. It is the standard KPI hotels and revenue managers use to report achieved room rates, alongside occupancy and RevPAR. It expresses the average room revenue earned for each revenue-generating room night sold during a chosen period. Average room rate is the everyday phrase for the same calculation, so you will often see both terms used for one figure.
CoStar STR Benchmark is a widely used hotel performance benchmarking service. Its industry guidance defines ADR as room revenue divided by rooms sold and limits the measure to revenue-generating guest rooms.
Some systems use ARR, meaning Average Room Rate, for the same measure or for an average reported over a longer period. ARR is therefore a terminology note rather than a separate metric on this page. Check the source system’s definition before comparing reports.
ADR describes the achieved rate on sold rooms. It does not show how many rooms remained unsold, what it cost to acquire the bookings or how much profit the hotel made.
The average daily rate formula
Both inputs must cover the same period, segment and currency. If net room revenue is $6,000 and the hotel sold 40 paid room nights, the ADR is $150:
The denominator is not the number of available rooms. If a 50-room hotel sells 35 paid room nights on one date, divide the eligible room revenue by 35, not by 50.
How to calculate average daily rate step by step
Round only the final result. Recording the input definitions with the result makes later comparisons easier to reconcile.
ADR calculator
Enter the room revenue and paid room nights sold for the selected period. The calculator does not add or remove VAT, service charges or package elements, so enter room revenue on the net or gross basis you report on.
Worked examples using sample assumptions
The following figures are illustrative calculations, not industry benchmarks or customer results.
Simple daily ADR and channel cost
A hotel records $4,800 net room revenue from 32 paid room nights:
Suppose 20 room nights came through 20 separate direct bookings with an assumed $5 acquisition cost per booking, while 12 came through a third-party channel with an assumed 15% commission. ADR remains $150 when these costs are recorded as distribution expenses. Revenue after those sample costs would be $4,430, or $138.44 per sold room night. This is a separate channel-economics measure and should not be relabelled as ADR.
Monthly ADR, occupancy and RevPAR
A hotel records $117,000 net room revenue and 780 revenue-generating room nights during a 30-day month:
If the hotel had 1,200 available room nights, occupancy was 780 ÷ 1,200 = 65%. ADR and occupancy together produce RevPAR of $150 × 0.65 = $97.50. The measures are connected, but they answer different questions.
Package allocation
A $220 package allocates $160 to the room and $60 to dinner. For 10 paid room nights:
- Room revenue: 10 × $160 = $1,600
- ADR: $1,600 ÷ 10 = $160
Using the full package price would inflate the room-rate measure with dinner revenue.
Which data belongs in the numerator and denominator?
The formula is simple, but input rules can differ between the property management system (PMS), finance records and a benchmark provider. Document how each item is treated and apply the policy consistently.
| Item | Typical ADR treatment | What to check |
|---|---|---|
| Room revenue | Included in the numerator | Net or gross basis; treatment of taxes and service charges |
| Restaurant, spa and parking | Excluded from standard ADR | Whether revenue is posted to a separate department |
| Package rate | Room allocation only | Whether the split is documented and applied consistently |
| Paid room night | Included in the denominator | Whether revenue and room nights cover the same period and group |
| Complimentary or house-use room | Normally excluded | PMS, accounting and benchmark rules |
| No-show or cancellation fee | Depends on the accounting policy | Whether it is recorded as room revenue or a separate fee |
| Day-use room | Include only under a consistent rule | Whether it is recorded as a paid room sale |
| Refund or retrospective discount | May reduce room revenue | The period and accounting line in which it appears |
Standard market benchmarking and an internal management report do not always follow identical rules. That is manageable when every result is clearly labelled and comparisons use the same definition.
Gross and net ADR can both be used, but they should not be mixed. Comparisons require consistent treatment of VAT, service charges, package allocation, currency and reporting period. If revenue in different currencies is combined, use a documented exchange rate and exchange-rate date.
How ADR, occupancy and RevPAR work together
ADR shows the average room revenue achieved on sold rooms. Occupancy shows the share of available room nights that were sold. Revenue per available room (RevPAR) combines the effect of both:
Use occupancy as a decimal in the formula. If monthly ADR is $150 and occupancy is 65%, then $150 × 0.65 = $97.50 RevPAR.
RoomRaiser Business Intelligence brings these measures into one view instead of leaving teams to assemble separate reports: ADR, occupancy, RevPAR and booking trends can be followed together, making it easier to investigate what sits behind a change.
A higher ADR with much lower occupancy can still produce less room revenue. RevPAR captures the unsold capacity, but it does not include distribution or operating costs. The hotel revenue management guide explains how to read these measures within a wider pricing and distribution process.
Limits and common pitfalls
There is no single “good ADR” for every hotel. Compare the result with like-for-like periods and read it alongside occupancy, RevPAR, room and guest mix, channel costs and profitability. A higher ADR does not automatically prove better performance.
For market comparisons, first choose a genuinely relevant competitive set; our hotel competitor analysis guide explains how to approach it.
Is ADR growth healthy or only apparent?
| ADR movement | Possible explanation | What to check |
|---|---|---|
| ADR, occupancy and RevPAR rise | Strong demand supports a higher achieved rate | Net revenue, acquisition cost and comparable stay dates |
| ADR rises while occupancy falls | The higher rate may not replace lost room nights | Total room revenue, RevPAR, booking pace and price sensitivity |
| ADR rises as room-type mix changes | More higher-category rooms were sold | ADR and volume by room type |
| ADR rises after a definition change | The movement may be a reporting effect | Taxes, fees and package allocation |
| ADR is unchanged while commission rises | Less revenue remains after acquisition cost | Cost and net value by channel |
ADR describes one part of the achieved result, not the full quality of a pricing decision. Before changing rates, reconcile the source data first, then examine room and guest mix, followed by the demand context.
Common ADR calculation errors
- dividing by available rooms instead of paid room nights sold;
- counting bookings or guests rather than room nights;
- including restaurant, spa or other non-room revenue;
- comparing gross revenue with net revenue;
- treating the full package value as room revenue;
- changing the treatment of complimentary rooms between periods;
- mixing periods, currencies, segments or channels;
- returning zero or Infinity when no rooms were sold;
- rounding intermediate values too early;
- treating ADR as profit or as a target that should be maximised in isolation.
Frequently asked questions
What is the difference between ADR and ARR?
ADR means Average Daily Rate and is the standard revenue-management abbreviation used throughout this guide. ARR means Average Room Rate. Many hotel reports use the terms for the same calculation, while some use ARR for an average over a longer period. Check the source system's definition before comparing figures.
Should ADR use gross or net room revenue?
Either basis can work if it is labelled and applied consistently. Compare only figures that use the same treatment of VAT, service charges and package allocations.
Are complimentary rooms included in ADR?
Under the cited industry definition, complimentary rooms that are not connected to a promotion or contract are excluded from revenue-generating rooms sold. Internal reports should follow a documented, consistent rule.
What happens when no rooms are sold?
ADR cannot be calculated when rooms sold is zero. Show the result as unavailable rather than zero, Infinity or an error value.
How does ADR relate to RevPAR?
ADR measures the average rate achieved on sold rooms. RevPAR also reflects unsold capacity and can be calculated as ADR multiplied by occupancy expressed as a decimal.
Use ADR as part of the wider performance picture
ADR is most useful when every comparison follows the same room-revenue, tax, package and room-night rules. The phrase average room rate describes the same core calculation, while ARR remains a system-dependent alternative label. Calculate ADR alongside occupancy and RevPAR, then investigate room mix, guest mix and channel cost before drawing conclusions or adjusting prices. If you would like to review these metrics in the context of your own property, request a free revenue review.
