ADR (Average Daily Rate) is the average rate you achieved per room sold: room revenue divided by the rooms you sold. The formula fits on one line. So does the mistake almost everyone makes — and it appears the moment you try to work out one ADR for the whole season.
The formula — and what goes below the line
Two things stay out, and both for the same reason. On top goes room revenue only: breakfast charged separately, the bar and the airport transfer are not the room rate. Below the line go rooms sold only. Empty rooms have no business there — put them in and you are no longer calculating ADR, you are calculating RevPAR.
Occupancy 70% → sold: 987 rooms
Room revenue: €84,882
ADR = 84,882 ÷ 987 = €86.00
RevPAR = 84,882 ÷ 1,410 = €60.20
Same figure on top, a different one below, two different questions: “how well did I sell the rooms I sold?” and “how much did every room I had bring in?”
Three months, one ADR — where the mistakes begin
So far it is easy, because we are looking at one month. The question without an obvious answer comes next: you have three months of season, each with its own ADR. What is the ADR of the season?
The obvious way — the average of the three — is wrong.
July: 1,150 × €85 = €97,750
August: 1,300 × €100 = €130,000
Total: 3,000 room nights · €258,000
Simple average: (55 + 85 + 100) ÷ 3 = €80.00
Weighted: 258,000 ÷ 3,000 = €86.00
Six euros on every room sold. The reason is simple: May sold 550 rooms and August 1,300, yet the simple average gives them exactly the same weight. It counts months, while ADR is a rate per room.
And here is the number that makes it hurt: plan the season on €80 and you expect 80 × 3,000 = €240,000. What came in was €258,000. That is €18,000 your plan cannot see — not lost, but invisible in the budget you make decisions with.
The error does not always go the same way
Here the simple average came out too low, because the most expensive month sold the most rooms. If the business had fallen in the cheap months — a big May, a modest August — the same calculation would have come out too high, and you would plan a season with revenue that was never going to arrive.
So do not keep a rule like “the simple average flatters you”. It would be wrong half of the time. The only safe rule is not to use it at all.
When both ways give the same number
When every period sold exactly the same number of rooms. Then the weights are equal and the weighted average is the simple one. It is worth knowing: test the calculation with three months of 1,000 rooms each and you will see two identical numbers and think something is broken. Nothing is broken — it is just that in a real season this never happens.
The same problem inside one month
Weighting is not only about months. It applies to every group you put together: days of the week, room types, guest segments. That is why ADR can fall without you cutting a single rate.
Picture two Augusts with exactly the same base rates. In the first you sold many suites; in the second it was mostly the Standard rooms that filled. No rate changed — but ADR will be lower, because the mix of rooms sold changed. The number is not lying to you; it is answering a different question from the one you think you asked.
So before you say “my ADR fell” and move your rates, look at what you sold and not only at what price. Often the answer is not in the base rate but in the rate difference between room types (in Greek).
Not the same weighting as in ARI
ARI (in Greek) also has a “weighted” version, and the two are easy to mix up. They correct different things. In ADR you weight by volume: how many rooms each period sold. In ARI you weight by quality: how comparable each nearby property is to yours. Same word, different job — and both corrections are needed, each in its place.
Did you know? Every screen in WisDom RM that shows an average ADR calculates it weighted — revenue ÷ rooms — from the monthly summary to the comparison with last year and the 7-day ADR in the Morning Report. An average of daily ADRs appears nowhere: there, a night with 3 rooms sold would weigh as much as a night with 45, and closed nights would drag the average down.
Try it free for 14 days →The limit: what ADR does not tell you
It tells you what you charged, not what you kept. It is a mixed number: inside it are direct bookings and OTA bookings, and it takes off no commission. WisDom RM does not know the channel of each booking — there is no such field — so it cannot tell you how much of your ADR went in commission either. An ADR of €86 is the same number whether the night was all direct or all OTA.
For what really stays with you there is another measure: CPOR (in Greek), the variable cost of each room sold. With an ADR of €86 and a CPOR of €14, each room contributes €72 — and that is before commission.
What to compare it with
Not with the previous month. July will almost always show a lower ADR than August, and that tells you nothing — except that August is August. The only comparison that means something is with the same period last year, and on the same day of the week: a Saturday is compared with a Saturday, not with the same date that was a Tuesday last year.
What to keep
Three things. ADR is room revenue divided by rooms sold — nothing else on top, nothing empty below. When you combine periods, never take the average of the ADRs: add up the revenue, add up the rooms, divide. And do not expect ADR to tell you what you earned — it tells you what you charged.
One thing worth trying: take the months of your last season, calculate the ADR both ways and see how far apart they are. The gap is the size of the error you are already carrying into next season’s budget.
Mathematician with studies in hospitality management and years of night shifts in hotels. WisDom RM — and this blog — were born on the night shift.
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