A hotel must monitor its metrics for efficient revenue management, thus increasing ADR or RevPar or Occupancy. To be precise, revenue management measures a hotel’s ADR performance relative to a combined group of hotels that is made up of a competitive set, a market, and a submarket.

What is ADR?

It is an index and when it is 100, there is a reasonable share compared to the combined group of hotels. When the ADR index exceeds 100, it includes more than a fair share of the group’s ADR performance. Conversely, an ADR rating below 100 represents less than a fair share of the total ADR return.

How to build ADR for existing hotels?

It can be built exclusively through revenue management and planned forecasting. While an assumption can drive both the variances and the forecast, a hotel’s ADR could affect the final profit and loss budget. As a result, one has to minimize budget disruptions regardless of site or currency. Some methods for making forecasts are as follows:

• Data related to the average daily rate can be collected daily, weekly or monthly.

• Reports published by leading research firms such as STR can be used in favor of the hotel’s interests. In terms of hotel revenue management, these reports have near-accurate occupancy, RevPAR, and ADR figures relative to competitors.

Also, comparing and learning all about the established stats is crucial to revealing the average differences in ADR. Some primary areas of focus may be quality, services, pricing, or distribution strategies across locations, for brand and customers. Also, trends in hotel average daily rates should ideally be reflected in the market.

• The macro economy: It is necessary to analyze the broader influences of the market in order to extract projections of supply and demand. Some hotel feasibility studies and client reviews of projects provide information on official inflation forecasts and drivers of tourism in the area.

Projecting an average daily rate for planned hotels requires the approach mentioned above. It is clear that the process relies heavily on primary competitive set data sources. Then, once all the aforementioned studies are completed and there is an inventory of data related to growth rate percentages, the monthly breakdown can be applied. This can be used to project monthly and yearly figures.
How to make an ADR forecast for a planned hotel?

Ways to increase ADR/RevPAR are described below:

• First, study competitors who are in a similar business in terms of number of rooms, clientele, quality of service, and target market. Their average daily rate forecasts can be modified to generate conservative figures.

• Second, weigh market segment averages by looking at potential competitor rate segments. To do so, high-quality segment data is required.

• Third, increase ADR by doing a bottom-up analysis that involves measuring operating costs as well as pricing required for profitability.

Therefore, to anticipate a hotel’s future performance in terms of demand, key metrics such as occupancy, ADR (average daily rate) and RevPAR (revenue per available room) must be analyzed. These figures not only help in efficient planning, but also strengthen the decision-making process in all departments, ultimately helping revenue growth.