What is ADR or Average Daily Rate

Definition

ADR (Average Daily Rate) is the metric that shows the average price a guest pays per occupied room night. It is one of the cornerstones of revenue management because it measures, directly, the hotel's ability to sell its rooms at a strong price, leaving aside the rooms that stayed empty.

Unlike RevPAR, ADR is not affected by occupancy: it only counts rooms that were actually sold. That is why a high ADR does not guarantee strong profitability if occupancy is low, and it should always be analyzed together with occupancy and RevPAR.

ADR is key to spotting pricing and positioning issues, evaluating the impact of discounts, and comparing the real value the hotel achieves against its direct competition.

A crucial distinction is gross ADR versus net ADR. Gross ADR is the price the guest pays; net ADR is what the hotel actually keeps after the channel commission. Example: a room sold for USD 100 on Booking with an 18% commission leaves a net ADR of about USD 82, while that same room sold on the direct channel keeps the full USD 100 (minus a small payment-gateway cost). Looking only at gross ADR can create a false sense of a strong rate when the real margin is far smaller.

Formula

Only occupied (sold) rooms are counted, not available rooms. Net ADR = gross ADR − channel commission. Example: a gross ADR of USD 100 on an OTA with an 18% commission = a net ADR of USD 82.

Industry benchmark

Illustrative example of how the same USD 100 rate turns into a different net ADR depending on the sales channel. The direct channel keeps the most revenue.

How to improve it

• Implement dynamic pricing that raises rates during demand peaks and special events.
• Upsell higher room categories at the time of booking or before check-in.
• Reduce reliance on aggressive discounts and opaque rates that erode price.
• Prioritize direct bookings to protect net ADR: the same rate yields more without the OTA commission.

Related terms