Do you know how to calculate your hotel’s ADR (average daily rate)? If you’re looking to develop an effective revenue management strategy and improve profits, understanding your hotel’s ADR is important. Beyond just knowing your ADR, you must understand what action you should take to improve it.
Average Daily Rate Explained
You’re probably somewhat familiar with ADR, but just for a quick refresher, ADR is the average rental income brought in by a paid and occupied room during a specific time period. You can calculate ADR by dividing room revenue by number of rooms sold. Just remember to exclude any complimentary rooms or rooms occupied by staff members. ADR is important because it is one of the primary metrics that will help you gauge the success of your hotel and how you measure against your competition.
ADR = Room revenue/number of rooms sold
6 Ways to Increase ADR
To increase ADR, you’ll need to focus on increasing the revenue brought in by each customer. There are several ways to do this.
Offer Packages and Promotions
Promotions can be a great way to both improve your ADR and ensure that your hotel stays full. One easy promotional tactic is the seasonal promotion, which allows you to offer deep discounts during the slow season and then increase rates and potentially terms (such as length of stay minimums) in the prime season.
Similarly, offering vacation packages can help you attract and then convert customers who are looking for a greater value. The key in creating effective packages is understanding your guests. For instance, if you notice that you have a lot of families coming to stay with you, tailor your package to their needs. Maybe you are close to an amusement park or a ski mountain, which is why you attract so many families. You could offer a package that includes discounted tickets to these attractions. Or perhaps you are located in a popular wedding destination. You could create wedding and elopement packages for couples. The options are limitless. The key is to know your customers and tailor your packages appropriately.
To encourage direct bookings, you can also opt to offer these packages only on your site, when customers book with you.
Talk About Local Events and Promote Tours
Events can be great marketing opportunities for your hotel. If there is something going on in your city, promote it on your website and social media and you’ll naturally get your hotel name in front of travelers interested in visiting your city (and likely in need of lodging). You can also put together specific event packages tailored for these travelers.
Similarly, you can promote and partner with local tour companies. For instance, if you are an independent hotel in Utah you may consider promoting and partnering with local guides who can take your visitors on guided river trips or biking through the canyons. Not only can you then become a source of information for your visitors, helping them find their next adventure and connect with local guides, but you can create lucrative packages and partnerships that help to increase your ADR.
Offer Discounts for Additional Night Stays
If your hotel is not at full occupancy, offering your guests a discount on additional nights can help you ensure higher occupancy and bring in revenue that would otherwise be lost. If guests have flexibility in their schedule, your offer may be too much for them to pass up.
Provide Complimentary Services
Providing guests with a little extra, by offering a few services for free can go a long way and endear guests to you and your brand. Offering complimentary services is an effective strategy for providing customer service that guests will go home and tell their friends about — or better yet, share on social media. It can be as simple as offering a free shuttle to the airport or to local attractions.
Deliver a Unique and Personalized Experience by Leveraging Customer Data
Delivering a unique guest experience is often created through personalization. To personalize the guest experience in a meaningful way your hotel should store, analyze and share guest data across systems, properties and channels — which means moving away from fragmented systems and implementing a CRM (customer relationship management) or similar tool that can automate and streamline this process.
The Ritz Carlton Uses CRM to Improve ADR, Guest Experience
A CRM is an important tool that can help even the smallest of hotels understand how customers choose products based on the context of their travel, which will then allow you to deliver a unique and personalized experience.
Other ways to provide a unique guest experience could be to leave a small welcome gift in each room, offer free refreshments and empower your staff to provide outstanding service (The Ritz Carlton is a good case study in employee empowerment and its effects on ADR, customer experience and overall brand perception.)
For instance, if you have a couple that is celebrating their anniversary at your hotel, consider leaving a bottle of champagne or chocolate covered strawberries for them upon arrival. It’s a small gesture that they will likely remember for some time to come.
Balance Room Blocks and Associated Rates for Group Business
To optimize ADR during times of peak transient demand, your hotel will need to evaluate how many rooms are allocated for groups vs. for transient guests and what the optimal corresponding rate structure should be. For example, if a large event takes place in your city every year the second week of March, you’ll want to limit how much group business you commit to during this time, since you’ll likely be able to fill the property with transient travelers at a higher rate.
How a CRS, PMS and CRM Can Help Improve ADR
Technology is changing the hospitality business. Today there are several tools — including PMS, CRS and CRM — that can help properties of every size and across every segment improve ADR and win business in an increasingly competitive atmosphere.
A PMS or property management system can help you calculate your property’s daily revenue and assist with financial reporting. Many of today’s PMS systems are secure, scalable, cloud-native and can integrate with your other third-party systems.
A CRS or central reservation system will offer a high-level, real-time view of all your properties and customers to help you create better and more unified experiences, generate additional revenue and quickly react to market dynamics as new trends, behaviors and consumer demands emerge.
A CRM or customer relationship management system lets you store customer contacts and details so that you can create deeper relationships with guests and deliver personalized offers.
Improving ADR by implementing the strategies discussed above can have a significant effect on your bottom line. If you would like to talk about additional ways to increase ADR through leveraging the latest hotel technologies such as PMS, CRS or CRM, contact the team at Amadeus.
Topics: Sales & Catering