What Is ADR (Average Daily Rate)?

ADR — average daily rate — is the average revenue a hotel earns per occupied room, calculated as room revenue divided by rooms sold. It is one of the three core hotel performance metrics alongside occupancy and RevPAR, and it measures pricing power: what guests are actually paying to stay.

How ADR Is Calculated

ADR = Room Revenue ÷ Number of Rooms Sold

Illustrative example: a hotel sells 2,000 room nights in a month and collects $260,000 in room revenue. Its ADR for the month is $130.

Complimentary rooms and out-of-order rooms are excluded from rooms sold; only paid occupied rooms count. ADR reflects room revenue only — food and beverage, parking, and other income are excluded.

What ADR Tells an Investor

ADR indicates where a hotel sits in its market's pricing hierarchy and whether management is capturing available rate. Compared over time, it shows pricing trend; compared against the competitive set (via the STR report), it shows whether the hotel commands a premium or trades at a discount to its true peers.

A rising ADR with stable occupancy generally signals strengthening demand or improved revenue management. A rising ADR with collapsing occupancy may just mean the hotel is pricing itself out of its market.

ADR vs. Occupancy vs. RevPAR

ADR and occupancy each tell half the story — a hotel can run high rates at low occupancy or full houses at discounted rates. RevPAR combines both into a single measure of room revenue productivity, which is why investors underwrite from RevPAR while using ADR and occupancy to diagnose why RevPAR is what it is. See What Is RevPAR?.

ADR in Underwriting and Valuation

Buyers analyze ADR by segment (transient, group, contract) and by season to understand revenue quality. Rate-driven revenue is generally more profitable than occupancy-driven revenue, because each additional occupied room carries incremental cost (housekeeping, supplies, utilities) while each rate dollar flows largely to profit. That flow-through directly affects net operating income and therefore value — see How Are Hotels Valued?.

Key Takeaways

• ADR = room revenue ÷ rooms sold; it measures pricing power, not overall performance.
• Always read ADR alongside occupancy and against the competitive set.
• Rate growth typically converts to profit at a higher rate than occupancy growth.
• Underwriting starts with RevPAR; ADR explains its composition.

Frequently Asked Questions

What is a good ADR for a hotel?
There is no universal number — a strong ADR is one at or above the hotel's true competitive set for its segment and market, verified through the STR report.

Does ADR include taxes and fees?
Standard practice excludes occupancy taxes. Resort or facility fees may be reported separately from room revenue depending on the hotel's accounting, which matters when comparing properties.

How do hotels increase ADR?
Through revenue management (pricing by demand), segment mix shifts toward higher-rated business, product improvements that justify rate, and reduced reliance on discounted distribution channels.

Why can two hotels with the same ADR be worth different amounts?
Because occupancy, expense structure, and revenue mix differ. ADR alone does not determine net operating income.

Is ADR the same as room rate?
No — published or quoted rates vary by night and channel. ADR is the realized average across all rooms actually sold.

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