Average daily rate (ADR)

Average daily rate (ADR), known in French as the prix moyen, is a hotel’s rooms revenue, net of VAT, for a given period divided by the number of rooms sold over that period. It measures the price actually achieved per room night, after discounts, across all segments and channels. Distribution channel commissions are not deducted from it: they are costs.

Calculation

• ADR = net rooms revenue ÷ rooms sold

A fictitious, rounded example: a 40-room hotel sells 10,220 room nights in a year for rooms revenue of €1,226,400 net of VAT. Its ADR is €1,226,400 ÷ 10,220 = €120. With an occupancy rate of 70%, its RevPAR is €84.

Several conventions need to be stated: net or gross of VAT, breakfast included or split out when sold as a package, and the treatment of complimentary and house-use rooms (usually excluded from rooms sold). Two ADRs calculated on different conventions cannot be compared.

In a transaction

ADR reflects pricing strategy and business mix: corporate, leisure, groups, meetings. A buyer reads it by segment and by channel over several years, and separates growth driven by the market from growth driven by the asset (refurbishment, repositioning, a change in star rating). In an information memorandum, ADR by room type supplements the overall average.

It should always be read with occupancy: cutting rates fills the hotel without necessarily improving RevPAR, or EBE, the French measure of EBITDA.

Not to be confused with

• The rack rate, or published rate, a ceiling rarely achieved across all sales.
• RevPAR, which divides rooms revenue by rooms available rather than rooms sold.

For a valuation based on operating data: hotel valuation.