February 9, 2021
How to Increase a Low ADR (Average daily rate)
Jos Schaap | ROOMDEX
ADR (Average daily rate) is a metric in the hotel industry that plays a defining role in increasing overall hotel revenue, which means hotels with a low ADR have a problem. Average daily rate is a critical representation of the average realized room rental rate each day. Paying attention to Average daily rate can identify challenges or successes with an overall revenue-generating plan.
Ideally, hoteliers should adopt a holistic outlook toward revenue generation, but many revenue managers do not understand how to increase a low ADR to boost profit margins. Incorporating upsell opportunities to improve business all around is a good start.
Since only the rooms rented to guests (fulfilled) are calculated in Average daily rate, innovative and thoughtful upselling is a great way to increase this metric. You may be paying a great deal of attention to occupancy levels and rates, which is good, but at some point rate updates based on occupancy don’t help much to increase a low ADR. The elasticity of supply and demand impacts your occupancy and rates in tandem, so focusing on upselling existing guests is the better option to increase a low ADR.
If you are wondering exactly how to increase a low Average daily rate, you need to concentrate on boosting revenue brought in by each guest. There are several ways to do this.
Set optimum pricing. Pricing (room rates) is one of the most important factors in successful hotel management. Every traveler has a different expectation for a hotel room. So, when analyzing your room rates, you must pay attention to the market and your potential customers’ ability to pay the set price. It is important to segment your audience to set an effective pricing strategy and keep in mind that you may need to implement a different approach to pricing – for each segment – to increase a low ADR.
Attract more direct bookings. General and revenue managers realize that giving away money to the OTAs in the form of commissions is not ideal. What is the solution, then, to capturing more room revenue and increasing a low ADR? Bringing in more direct bookings through a high-quality website with an integrated booking engine is key, as is investing in a user-friendly mobile app with a booking engine. Your booking channels should make it easy for guests to choose from a variety of room types and categories, and to upgrade to higher room types and categories after booking. OTAs are not so concerned with individual room types, so you can have a clear advantage here.
Upsell services and amenities. With third-party hotel upsell software applications like ROOMDEX Upgrade Optimizer, you can send pre-arrival emails to guests and ask them if they want to upgrade their rooms. Add upgrade options across your entire pre-arrival campaign and incorporate them again in your booking confirmation emails. Early check-in and late check-out are upsell options that also drive ancillary revenue and increase a low Average daily rate. After guests check-in, consider offering self-service options for upsell opportunities like daily breakfast, drink specials, spa packages, and tickets to local events.
When you want to increase a low ADR, you need to have the following in place:
- A PMS with integration capabilities
- An attractive booking engine
- Self-service upsell options
- An intelligent third-party hotel upsell software solution
- Data analysis tools to make informed business decisions
Increasing a low ADR is doable through a smart mix of creative upselling options, and with hyper-intelligent technology that integrates and provides a comprehensive solution to boosting revenue systematically. When you consistently work to improve your Average daily rate, you can also improve ROI year after year.