What Is the Average Daily Rate?
The Average Daily Rate (ADR) is a key performance indicator that shows the average revenue that an occupied room can earn in a day. It’s one of the most common financial indicators used in the hospitality industry and an extremely useful tool for revenue management.
While ADR is key for any vacation rental business, it is also important to note that it does not factor in revenue from all sources or certain expenses like taxes. Nonetheless, it does give a general overview of how things are going and whether changes need to be made.
Why Is the ADR Important for Vacation Rentals?
The Average Daily Rate is crucial to any vacation rental because it allows the success of the business to be measured. Lodging properties have high operational costs so the only way to stay afloat is by generating enough income. Whether it’s being used to analyze key trends or difficulties, the ADR can help owners maximize their revenue by making the necessary adjustments.
The ADR also helps to compare your business to other vacation rentals in the area. This comparison only works if your competitors are similar in terms of clients, size, and location. As a vacation rental owner, if you’ve noticed that your ADR is lower than your competitors, it may be time to update your business strategy.
Keeping track of your Average Daily Rate can improve the way you manage your vacation rental both internally and externally. By knowing exactly what weeks or periods of time generated the most income and which generated the least, you can begin to map out problems within the business.
Keep in mind that ADR’s can fluctuate depending on the season or even the general economy. When analyzing these numbers, be sure to include all the factors that can affect them before panicking.
How to Calculate the Average Daily Rate
To calculate your Average Daily Rate, all you have to do is divide the Total Revenue Earned By Occupied Rooms by the Number of Occupied Rooms. It’s that simple!
Here’s an example: Let’s say you’ve rented out 100 rooms and the total revenue that day was $15,000. By dividing 15,000 by 100, you get an ADR of $150.
Depending on your needs, your ADR can also be calculated on a monthly, quarterly, or yearly basis.
How to Increase the ADR of Your Vacation Rental
As a vacation rental owner, there’s an endless list of ways you can increase your Average Daily Rate. To start off, you should perfect your prices by analyzing the market, your product, and what your target is willing to pay. Once you’ve set an efficient pricing strategy, you can start considering promotions, upselling and cross-selling services, improving guest satisfaction, offering discount packages, and working on your marketing and advertising.
Creating a bookable vacation rental website can also help improve your numbers by attracting new guests and ensuring an easy-to-use payment process. With the use of keywords, your vacation rental can rank higher on search engines, resulting in more bookings.