What is the formula for calculating ADR?

The Average Daily Rate (ADR) is a key performance indicator in the hotel industry that measures the average revenue earned per sold room over a specific period. The formula for calculating ADR is:

ADR = Total Room Revenue / Number of Rooms Sold.

In this formula, "Total Room Revenue" refers to the revenue generated from room sales, excluding other income sources (such as food and beverage) and discounts. "Number of Rooms Sold" is the total number of rooms that were rented out during the same period. This means that the calculation focuses solely on the income derived from the rooms that were actually occupied, providing a clear insight into how effectively a hotel is managing room sales.

This metric is vital for hotel management as it helps in assessing pricing strategies, understanding market conditions, and benchmarking against competitors. By dividing total room revenue by the number of rooms sold, hoteliers can determine the average rate that guests are paying for accommodations, which informs decisions on pricing and marketing strategies.

Other choices suggest different computations that do not accurately reflect the definition of ADR. For example, total expenses or available rooms do not provide a measure of the actual income from sold rooms, which is essential for understanding average pricing in the hotel sector.