What is ADR for Revenue Management in Short-Term Rentals and Hotels

Your nightly rates look competitive, but you’re not sure if you’re actually making money. Or maybe you’re fully booked but barely breaking even. The problem isn’t just what you charge — it’s knowing whether those rates are working. ADR (Average Daily Rate) shows you the real picture. It’s the metric hotels have used for decades to track revenue per booking, and it’s become essential for short-term rental managers once you’re past managing a single property. It’s is a core component of vacation rental revenue management and works alongside other metrics to give you a complete picture of your property’s performance.

Here’s what ADR is, how to calculate it, and how to use it to boost your rental income.

 

What is ADR (Average Daily Rate)

ADR is a performance metric that measures the average income per occupied room in hotels. Airbnb property managers use it to calculate the average amount guests spend on booking a night. Average rates are highly informative for your vacation rental pricing strategy, as they allow you to see whether your price is profitable and competitive.

 

Formula of ADR for revenue management

To calculate the average daily rate, you need to know the total revenue and the number of properties or nights booked. For short-term rentals, knowing the number of occupied nights is enough since you usually rent the whole property. For hotels, managers need to track the number of rooms sold.

 

How to calculate ADR for short-term rentals

To find the average daily rate for an Airbnb, add up the revenue from booked nights and divide it by the total number of nights reserved. It’s better to exclude cleaning fees and other extras. Even though some property managers include extras, these calculations don’t allow for accurate benchmarking and comparison against competitors. You can only account for all fees if you use ADR for internal tracking.

 

ADR = Total Room Revenue ÷ Number of Booked Nights

 

How to calculate ADR for hotels

For a hotel ADR, calculate the revenue from booked rooms and divide it by the number of booked rooms. You should exclude the F&B, spa, parking, and other charges from the total revenue.

 

ADR = Total Room Revenue ÷ Number of Booked Rooms

Note: You can gather the data to measure ADR manually or retrieve it from analytics. Experienced property managers running multiple units use PMS software to track the revenue. Monthly ADR tracking is the most common approach as it lets you see changes in seasonality and respond quickly.

 

Examples of calculating the ADR

Measuring ADR should be easy, even if you’ve never done it before. Here are some practical examples to help you calculate the ADR for revenue management.

 

ADR for short-term rentals

Suppose you run an Airbnb that was booked in July for 19 nights. You’d turned on dynamic pricing for vacation rentals in Airbnb, and the price for each day varied. The total sum earned, excluding cleaning fees and extras, was $2,603.

• Total booking revenue = $2,603
• Number of nights booked = 19
• ADR = $2,603 ÷ 19 = $137

 

ADR for hotels

Calculating ADR for hotels can be more challenging due to the varying types of rooms and turnover rates. Let’s say you run a hotel with single and double rooms. On August 22, you sold 6 single rooms and 7 double rooms for $240 and $310, respectively.

Divide the total single room revenue ($240) by the number of single rooms booked (6 rooms) to learn that the ADR on that day was $40.

Repeat the same for the double rooms by dividing the total revenue ($310) by the number of occupied rooms (7 rooms) to measure the ADR, which is $44.

Note: Separate ADR for different types of rooms lets property managers customize the pricing strategy for vacation rental revenue management. Alternatively, you can calculate the overall ADR of the hotel if it’s more convenient for tracking.

 

Why track the ADR and who should do it

ADR revenue management is among the key responsibilities of STR property managers and hoteliers. If you’re a host who runs one or multiple properties, you can also track average daily rates to ensure your pricing strategy is effective. ADR may also be a helpful metric for sales and marketing teams looking to see how their efforts affect revenue.

Here are the key benefits you can get from tracking the ADR:

• Know the daily revenue. ADR revenue management shows how much you earn from a booked day on average.
• Compare yourself against competitors. Property managers can calculate ADR for similar properties to benchmark against competitors and adjust their pricing accordingly. A big difference between your rates and those of your competitors may mean you undercharge or overcharge guests.
• Track the impact of dynamic pricing tools. Hosts and property managers who rely too heavily on dynamic pricing software or fail to configure it properly can start losing revenue. ADR tracking allows you to spot such issues and adjust the settings.
• Analyze your rental strategy. Fluctuations in average daily rates indicate whether changes in rental strategy benefit revenue.
• Report to property owners or investors. Property managers should track KPIs, including the ADR, to make their work transparent and prove its efficiency to stakeholders.
• Know seasonality. Changes in average daily rates show shifts in demand due to seasonality, local events, and other external factors, helping you to forecast the future.
• Monitor guest quality impact. Properties that consistently attract verified, quality guests can maintain higher ADR since these guests typically leave better reviews and cause less damage.

 

Is low ADR always bad?

No. If your ADR is lower than expected, don’t get upset right away. ADR needs to be used in a broader context, taking into account other KPIs like RevPAR and occupancy. Low ADR with high occupancy may be enough to generate revenue. Or maybe you’re going through a low season, and the ADR will naturally improve in one or two months.

However, even good ADR numbers can be misleading if you’re not accounting for hidden costs. Unexpected expenses from problem guests – like damage repairs, excessive cleaning, or lost bookings during repairs – can make profitable ADR figures turn into actual losses.

ADR is one of multiple KPIs to track, not the only source of truth. You need to monitor it along with other metrics for a prolonged period to see how different external factors (like seasonality, demand, economic trends) and your pricing strategy affect the revenue.

 

ADR vs. RevPAR vs. other KPIs

The average daily rate is often used with RevPAR for a complete picture of revenue management. RevPAR (Revenue per Available Room) shows the average revenue for all the rooms or nights available. It’s based on occupancy and, therefore, is usually lower than ADR. However, if the difference between ADR vs. RevPAR is too big, it may signify that you’re losing money because too few people book your place.

Some other rental KPIs to track along with ADR include occupancy, guest satisfaction score, average length of stay, response rate, and conversion rate. They provide a deeper understanding of whether your market strategy works and whether people like the offering.

Now that you understand what ADR means and how it compares to other metrics, here’s how to improve yours.

 

5 ways to increase your ADR

To reach the ADR that generates maximum profit, make sure the property is worth the rates and offer quality rental services. Here are five practical tips to follow.

 

1. Build your reputation

Encourage people to leave positive reviews about your property by being nice to them and offering good amenities at your place. You should be the first to leave a positive review after someone checks out. Guests looking for a place to stay often check the rating. 5-star reviews will increase your listing’s popularity and allow you to charge more, increasing the average daily rate.

Quality guests who’ve been properly screened tend to leave better reviews since they’re less likely to have unrealistic expectations or cause problems that lead to negative experiences.

 

2. Analyze competitors to see what works for them

Check 10-15 similar properties in your area and calculate their ADRs. You may find that they charge more than you do due to extras like free breakfast, city tour discounts, shuttle service, parking, or access to the gym and swimming pool. Consider expanding the services you offer to make your listing more attractive and valuable for potential guests.

 

3. Optimize your property management approach

Review your current rental strategy and find areas for improvement. Better services and lower costs can help you both bring in more guests and increase profitability.

Unaddressed property damage is a common issue that results in budget leaks. Without reliable property damage protection, you may need to pay for every breakage out of your pocket. Damage protection services can cover repair costs up to $1M, so you avoid such expenses and protect your income. This is especially important for maintaining higher ADR since expensive repairs can quickly eat into your profits.

 

4. Focus on direct bookings over platform-based

OTA platforms like Airbnb, Vrbo, and Booking.com charge up to 20% commission per booking, taking a big chunk of your revenue. Although it may not be noticeable from your gross ADR, these fees directly affect the net income.

Focusing on direct bookings instead of using platforms, you can increase the actual revenue from short-term rentals. There are multiple convenient website builders to create a custom website with online payment and booking functionality. You can also implement guest screening to replace the verification by OTA platforms and filter out risky requests. These tools gather and analyze guest information to flag bookings done with fake names and disposable emails.

 

5. Use dynamic pricing software wisely

Never expect dynamic pricing tools to do all the work for you. Choose the right settings for each property, depending on historical data, including your current ADR. You need to set the minimum rate that covers additional costs (cleaning, utilities, and platform fees) and configure the maximum rate based on market research.

Regularly analyze the efficiency of dynamic pricing tools and make manual adjustments. Manual changes are particularly effective in the case of major local events that increase the need for short-term rentals or sudden demand drops affecting the revenue.

 

Protect the revenue behind your ADR

Understanding your ADR is crucial, but protecting the revenue behind it is equally important. The best ADR in the world won’t help if you’re constantly dealing with problem guests, unexpected damage costs, or poor reviews that hurt your future bookings.

Smart property managers don’t just track their ADR — they protect it. This means Guest Screening before they arrive to avoid fake bookings and problem guests, and having Damage Protection in place to cover repair costs when accidents happen. When you consistently host quality guests and avoid unexpected expenses, you can maintain the higher rates that drive strong ADR performance.

 

Ready to protect your ADR and maximize your rental revenue?

Truvi’s guest screening attracts quality guests who pay premium rates and leave better reviews. Our damage protection (up to $1M) covers unexpected costs that hurt your bottom line.

Safeguard your investment today.

FAQs

What is ADR in revenue management?

ADR, or average daily rate, is used in hotels and short-term rentals to measure the average revenue per booked room or night. It shows the average price people pay to stay in a unit, allowing property managers to evaluate the effectiveness of their pricing approaches.

What’s the difference between ADR and RevPAR?

ADR measures the average daily revenue only for the rooms or nights booked, while RevPAR covers all the available booking slots, both booked and unbooked. RevPAR rates depend on the occupancy and are typically lower than ADR.

What is the ADR formula for revenue?

To calculate the ADR, divide the total revenue for the measured period of time by the number of booked rooms or nights. Exclude additional fees and charges from the total revenue to make the ADR more informative.