What is Average Daily Rate (ADR)?
Your average daily rate is the average rental income per paid occupied room in a given time period.
It is used alongside RevPAR (revenue per available room) and occupancy rate as a key success metric.
You can increase your average daily rate (ADR) and revenue per available room (RevPAR) by using yield management strategies, such as…
Forecasting demand by customer segment:
Hoteliers must strive to match their guests’ timings and service characteristics to their willingness to pay, to ensure they receive the best guest experience.
The key is to use your data to understand your different customer segments and their sensitivity to pricing, and combine that information with seasonal demand. For example, business travellers tend to be less price-sensitive than leisure travellers.
Using your demand forecasts, you will have information on how to set your booking limits – that is, the number of rooms you wish to sell at a discounted price to leisure customers, and the number of rooms you wish to reserve for full-price business customers.
Understanding your property business mix is critical to better forecasts and more strategic pricing strategies.
Increasing your revenue based on demand:
Seasonality, special events and high demand can allow hotel properties to alter their rates in order to increase revenue.
Again, the idea isn’t to simply increase rates or occupancy but, rather, to analyse your different segments so you can attract the right customer at the right time.
For example, a business traveller who normally books during the week will likely be indifferent about weekend or holiday discounts.
However, conversely, price-sensitive leisure travellers may be lured by multi-night discounts and seasonal promotions.
As such, consider review pricing and marketing tactics for products such as:
- Special rates on multi-night stays
- More valuable rooms or upgrades for long-stay guests
- Bundling, package and excursion deals (e.g. Valentine’s Day)
- Special room rates for members of tour groups, conferences, and recurring airline or business customers.
Based on an analysis of your customer segmentation and booking trends, you can create different revenue options for rooms by incentivising your preferred target market with personalised promotions and discounts.
Finding the right mix of room rates and incentives as part of an ongoing yield management strategy will, of course, involve doing your market research and testing your hypothesis against your desired metrics.
Many marketers believe in A/B testing to constantly improve offers for target prospects and channels.
Comparing your live minimum/maximum rates against your competitors’, based on length of stay (LOS):
With a pricing intelligence tool like Prophet, hotels have the ability to analyse their local competition and respond to demand – up to one year in advance.
Know how competitive your pricing and reputation is, or when there’s low stock available in the market, so you can make changes that count and increase your chances of being booked online.
Watch this video to see how such a tool works
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