Average rental income earned per paid occupied room over a specified period, calculated as total room revenue divided by number of rooms sold (paid occupied rooms). It measures the realized room rate for occupied nights and does not by itself reflect occupancy, costs, or revenue from non-room sources.

Principle

ADR is a per-occupied-room average: for a fixed number of rooms sold, ADR moves in direct proportion to room revenue; conversely, for a given revenue level, changes in rooms sold change ADR inversely.

Demonstration

Illustrative scenario → Situation: A hotel records total room revenue of $10,000 for a night and sold 200 rooms. → Recognition: The manager computes ADR = $10,000 ÷ 200 = $50. → Action: The revenue manager compares ADR to targets and decides whether to change rates or distribution. → Consequence: ADR provides a quick measure of realized pricing per occupied room but does not indicate whether occupancy is high or low.

Misapplication

Mistaking ADR for RevPAR by dividing room revenue by available rooms instead of rooms sold, or treating ADR as a profitability measure. The error is using ADR’s denominator (rooms sold) interchangeably with available rooms or interpreting revenue per occupied room as net profit.

Consequence

When used correctly, ADR informs pricing, channel and discounting decisions. Misused as a standalone profit indicator, it can cause incorrect operational or investment choices because it omits occupancy and cost information.

Reversal

ADR’s interpretive value is limited when room revenue includes bundled non-room items that are not separable (e.g., packages) or when comparing properties with different pricing or distribution accounting practices—then ADR comparisons can be misleading without standardized revenue definitions.

Boundary

Clearly within: total room revenue attributable to paid occupied rooms divided by number of paid occupied rooms in the same period. Boundary case: package rates where some revenue is allocated to ancillary services—whether that revenue is treated as room revenue affects ADR. Clearly outside: metrics that divide by available rooms (RevPAR) or that measure profit per room (GOPPAR).

Semantic Tension

ADR ↔ RevPAR — ADR isolates realized price per occupied room while RevPAR combines price and occupancy; optimization of one can conflict with the other.

Synthesis

ADR is the canonical measure of the average price actually obtained for occupied rooms; to guide operational or strategic decisions it must be interpreted alongside occupancy and cost-based metrics.