In addition to occupancy and Revenue per Available Room (RevPAR), Average Daily Rate (ADR) is a crucial metric used in hotel revenue management for measuring hotel performance.
It’s the average rate paid per occupied room over a specific time period. ADR is quickly calculated by good hotel management software, and your hotel’s rate is affected by multiple factors. Naturally, the economy and room pricing of your competitors plays a role in what you can charge for a room. But there are other effective hotel revenue management techniques you can put into motion that will boost your ADR.
Stimulate incremental business
Rather than simply increasing your room rate and risking less demand, present well-targeted packages, promotions and special offers at strategic points within the booking process. Email customers promotional discounts that encourage repeat stays. And offer extras such as romance packages, Champagne breakfasts, tickets to popular local events or airport shuttle service to create a better traveler experience and bring in more revenue.
Accommodate flexible guests
If your hotel isn’t at full occupancy, guests with more flexible schedules may be persuaded to stay an additional night if you provide a discount off that extra night, thus ensuring higher occupancy and boosting ADR through incremental revenue you would have otherwise lost out on. When you take this approach, a further tip is to apply “the rule of 100.” Wharton Marketing Professor Jonah Berger, presents the psychology behind this concept in his book, Contagious: Why Things Catch On.
The rule states that when a product’s price is greater than 100 (regardless of currency) use “absolute value” rather than percentages to market the discount. And vice versa when a price point is below 100.
For example: A $40 bottle of wine seems more appealing when it’s promoted as 10% off as opposed to $4 off. And a discount on a 3-night package for a $500/night hotel room, normally totaling $1500, is much more attractive when presented as $150 off, versus 10% off. The discount is exactly the same, but the way the offer is framed can make it more enticing.
Improve guest experience
With the predominance of online review sites, and the growing number of consumers relying on those reviews before booking a hotel room, ensuring an exceptional guest experience is a key to increasing your ADR. A Cornell University study revealed that even a 1% increase in a hotel’s online reputation score leads to an increase in ADR. The study further noted that if a hotel increases its review scores by 1 one star, the hotel could increase room price by 11.2% and still maintain the same occupancy or market share.
Interested in learning more ways your hotel revenue management system can help you increase your ADR?