Boost Your Hotel’s ADR Today!
Trying to predict and attempt to foresee the future of the hospitality industry is a trend in itself, and it is such a significant challenge. The trends are consistently powered by evolving technology, new business theories, and changing consumer behavior. The way and how fast hotels capitalize on recent trends is core to the success of their business.
Focusing on increasing revenues through various innovative strategies and technology-driven tools defines growth and sustainability in the challenging competitive space. The average daily rate (ADR) is one such critical key performance indicator that determines the ability of the hotel to generate revenues. Increasing the ADR of hotels has gained much importance after the pandemic.
Increased customer awareness has also set new parameters for the hospitality industry, making ADR increases a challenge. To improve ADR for hotels, the owners must involve technology and aggressive marketing strategies to survive the tough challenge and cutthroat competition.
It goes without mentioning that the need to increase ADR in the hotel industry after the pandemic and ensuing economic downturn with some innovative responses was critical to the industry’s survival and the thousands of people attached to it.
Besides attempting to entice customers back and ensure safety, luxury, comfort, and convenience for holiday enthusiasts to enjoy a hotel stay, it was vital to innovate and introduce devices to increase ADR.
This blog will take you through various aspects of revitalizing a hotel’s revenues and discuss how to increase ADR in a hotel, what causes ADR to increase but RevPAR to decrease, and see the ADR hotel formula.
Why ADR Matters in the Hospitality Industry
A hotel’s ADR (Average Daily Rate) is a crucial indicator of how well a hotel generates revenues. The ADR number tells how much revenue the hotel generated on average for every day. It calculates the average price for a hotel room for a particular day.
The ADR of a hotel is the most popular index that measures its performance and standing against competitors. You can also compare your hotel’s revenues and commercial performance against peers to study key trends and new challenges and decide strategy if required. ADR can help you make appropriate strategic decisions and initiate promotions to boost occupancy and change prices to maximize revenue.
The average daily rate also acts as a parameter to check how well each competitor is performing in relation to revenue generation. For prudent comparison, you must choose a peer that closely matches in terms of location, size, and clientele. If your hotel generates a lower ADR than its peers, you can look deeper into the root cause of the problem.
The following are some of the benefits of increased ADR:
- Increase in profits
- It promises stability
- High job satisfaction
- Provides opportunities to enhance customer benefits
Understanding the ADR Formula
The ADR, or the average daily rate, is a metric that hotels use to measure the average revenue their hotel generates daily from each of its rooms when occupied. The ADR includes group rates, available rates, discounted rates, and price points per night.
A hotel must increase its ADR to take care of high operational costs, manage expenses, and maintain adequate inventory. You need to increase revenues gradually and hike the hotel ADR to run the hotel successfully and recover the cost incurred.
Before we discuss and calculate the average room rate formula and consider how to increase hotel ADR, it is necessary to understand that even by applying multiple rate updates to hike hotel revenue, at one stage, they won’t help in increasing the ADR. As supply and demand control the rates in the market, similar is the case of changing the tariffs according to the occupancy percentage. Therefore, you must focus on enhancing the revenue brought by each customer to increase the ADR.
How to Calculate Average Daily Rate (ADR)
As we have discussed, ADR is a key performance indicator that drives the average room price on any specific day.
The table below shows the data for a hotel and the room revenue to illustrate the ADR calculation:
|Room(s) Type||Rate||Available||Sold||Total revenue|
|Double Bed Suite||$100||5||3||$300|
To calculate the Average Daily Rate, the formula applied is:
Average Daily Rate = Rooms Revenue/ Number of Rooms sold
Therefore, the ADR based on the above data will be:
ADR: $1,100/17 = $64.70
Proven Strategies to Increase ADR in Your Hotel and Avoid Low ADR
The pricing policy and the marketing strategies have a significant impact on the ADR of a hotel. These two revenue-generating indexes of the hospitality industry differ from the other sectors. They do not follow other industries’ market trends but decide their revenue-generating strategies.
To increase ADR, the hotel must ensure comfort and luxury, proper accommodation, maintain cleanliness. Provide excellent room service to guarantee exceptional guest experience, and provide all amenities at a good location. A customer must get value for his money and time.
Some of the proven strategies to increase ADR to get the best return on investment are:
- Keep track of your competitors- It helps you to get the latest information and trends and identify opportunities to improve ADR. You can incorporate proactive marketing strategies to get more bookings by:
- mobile-friendly website
- SEO optimized site
- Incentives for making direct bookings
- Be present on social media
- Offer discounts to guests who stay for longer durations.
- Set Attractive pricing to entice customers to book a room. Implement demand and cost-based pricing strategies. Demand-based considers market trends, while price-based considers the cost of providing services.
- Upsell your services by introducing spa treatments, room upgrades, etc., to increase revenue.
- Offer packages and promotions as a marketing tactic to attract customers.
- Promote your brand at local events and tours.
- Provide complimentary services and amenities to guests beyond room service, such as:
- games and for kids
- bathroom and shower products
- Laundry service
- Use social media for your presence and reach
- Offer a personalized experience to the guests by understanding their needs and wants
But how to increase a low ADR
It is possible only when you keep track of the ADR of your hotel. It will also help you to increase the return on investment, thus boosting the profit ratio.
The Power of Upselling and Cross-Selling
Irrespective of the size of your hotel, there are numerous opportunities to cross-sell and upsell. It is several times more expensive to add new customers than to retain existing ones. Upselling and cross-selling are great tools to increase guest satisfaction and boost your ADR, revenue, and profitability.
The most common services or products that can help you generate additional income are:
- Through room upgrades: A guest can easily be convinced to upgrade to a better room from a room costing $80 to $100. The upgrade cost seems in comparison to the comforts of a good room
- Add special features to the rooms, such as a hot tub, terrace, or balcony.
- Offering unique services like additional room service, breakfast in bed, or afternoon tea to create memorable guest experiences
- Introduction of spa and other relaxation opportunities
- Provide transfers and parking services to help guests start their stay hassle-free.
Moreover, you can use the following marketing methods to upsell:
- Using attractive photos
- By displaying incremental pricing
- Promoting scarcity and urgency
The Importance of Regular ADR Analysis
For a hotel of any size or location, ADR is the most popular and critical index that measures its performance. It also determines the hotel’s standing against its competitors. By analyzing ADR regularly, you compare your hotel’s commercial performance and revenues against peers enabling you to study key trends, new opportunities, and challenges. You can also decide or change your marketing strategy to boost ADR. Regular analysis of ADR can help you make appropriate strategic decisions and initiate promotions to increase occupancy. The market trends from the analysis can help you change prices to maximize revenues.
The analysis of the average daily rate also indicates how well different competitors are performing concerning revenue generation. For a well-advised comparison, you must choose a competitor that closely matches your property in size, location, and clientele. If your hotel generates a lower ADR than the competitors, you can look deeper and decipher the root cause of the problem.
Maximizing Revenue from No-Shows
No-shows or last-minute (or late) cancellations are a big hassle for hotel owners worldwide. They must be appropriately managed to take care of ADR. As the name indicates, a no-show is when a guest does not arrive.
The best and easiest way is to charge the no-shows and cancellations to increase your revenue. Charge a significant no-show fee to ensure that guests keep their reservation or cancel or rebook within your cancellation period.
However, charging for no-shows can be tricky. To motivate them, it is always advisable to encourage front-office team members to set no-shows and late cancellations as part of their yearly bonus.
Improving Guest Satisfaction for Higher ADR
Guest satisfaction measures how satisfied your guests are with your hotel services. Personalized service, quality, and quickness are the prime factors contributing to customer satisfaction.
The early impression makes a significant impact on the outcome of customer satisfaction. To create memorable experiences for your guests, you must carry out timely interaction, provide quality services, and be dedicated to resolving issues before they discover them.
Referrals are significant indicators for measuring customer satisfaction. It helps you determine that your guests feel compelled to share your brand with their networks due to the quality of your services and interactions.
Online satisfaction scores posted by guests contain more valuable information. They provide accurate insights into what we can charge for our services and how well we are placed in the market compared to our peers. Maintaining customer satisfaction levels is a significant boost to enhance ADR and profitability.
Indeed, high guest satisfaction and rating are business drivers. If two hotels provide similar services and everything else is equal, a guest will invariably choose a hotel with a higher rating and better reviews.
The Future of ADR Increase: Tech-Powered Solutions
The evolution of the internet over the years has changed the concept of work in different environments and industries. The world is connected-most services are at your fingertips. The hotel industry is no exception; people can easily book hotels of their choice and at their favorite locations.
Various programs and software have revolutionized the concept of travel and holidays, ultimately boosting the ADR of hotels. From communication platforms to accounting software, online booking tools to posting reviews are all designed to provide hassle-free traveling and business transactions.
Hoteliers can track the behavior of customers and their online tracking history. Programs are available to provide data-backed information to help hotel owners design promotional campaigns and refine budgeting and pricing strategies.
Hospitality property management software is also available to show occupied and unoccupied rooms and get real-time information to handle customer queries. Technology in the form of CRM software, websites, mobile apps, and booking dashboards makes hotels around the world more accessible to guests and makes safe payments.
The Role of CRM and PMS in Boosting ADR
A close integration of the PMS (Property Management System) and CRM (Customer Relationship Management) is the most critical relationship in the hotel tech suite. A hotel can create memorable experiences for its guests by connecting data in these two systems, at every touch point.
A hotel property management system (PMS) manages the aspects of the operations, whereas Customer Relationship Management (CRM) builds and manages profitable relationships with customers
A hotel PMS replaces time-consuming, paper-intensive processes like booking reservations, guest movements and CRM is used to enhance customer service and increase their satisfaction.
Some benefits of PMS are:
- Easy check-in/checkout and provide anytime, anywhere service to your guests
- Improve housekeeping service
- Provide centralized and secure customer data
- Integrate and connect operations and financial processes
CRM benefits in the following ways:
- It is a powerful marketing tool to help industry target potential customers and increase their business.
- Helps to understand customer needs and expectations better
- It helps to increase profits by increasing conversion, serving customers better, and reducing costs.
- It helps in retaining customers for future business.
- Useful in collecting and analyzing customer data to identify their needs and expectations
The Benefits of Adding Live Chat on Your Website
Live chat is an excellent option for the customers to connect with the hotel at the exact moment to clarify or get answers to the questions or problems they might have that they can’t solve.
The following are the main benefits of the live chat feature:
- You can provide detailed responses to a potential customer.
- It helps you customize the bookings as it eliminates problems by providing real-time support.
- It adds a personal touch to your online presence
- Live chat allows potential guests to ask you specific questions and find answers they cannot find on the website.
- It improves bookings as you can engage directly with potential customers and provide them with all the necessary information.
- It offers real-time support, timing is everything for many people.
Live chat is a great tool to provide instant real-time support at a lower cost. It also helps to resolve urgent and last-minute issues. Live chat is also a user-friendly tool.
The Power of WhatsApp Marketing for Increased ADR
WhatsApp has come up as one of the main digital communication channels in the world. In the hotel industry, WhatsApp not only helps travelers to communicate with customers but also helps to convert direct bookings. It has become an integral part of a hotel’s sales and communication strategy.
Some of the reasons to adopt it in your strategy are:
- WhatsApp Business is a free and global application to meet the needs of businesses to showcase your products and services and Interact with customers using its features that classify, automate, and respond to messages quickly.
- It enables to connect with customers as they are already available on this platform
- It is an easy way for direct communication and an easy-to-use app. You can easily know your customers better and learn about their expectations.
- WhatsApp is a great tool to follow up with your potential guests and accompany them throughout their travel journey.
- Groups and broadcast lists features allow you to send messages to more than one person simultaneously:
The All-In-One Platform for ADR Increase:
Omnichannel inbox is the key feature of chatlyn- an AI-powered customer engagement platform which allows you to interact with your customers from one central location. It is a great tool that helps you in automating client communication thus reducing workload. chatlyn optimizes customer engagement to improve satisfaction boosting hotel ADR and the revenue. The Web chat widget also allows you to add live chat functionality to your website, helping your customers to get in touch with you easily.
Automating Customer Engagement for Better ADR
The AI-powered engagement platform chatlyn offers numerous marketing automation features to help you save time and increase leads and profits. Features like keyword detection automatically allow you to respond to customer inquiries based on specific terms. Thus, it eliminates the need to waste time answering the same question multiple times.
App chatlyn integrates with CRM, PMS, POS, and other systems, thus helping you understand and engage with your clients much better. It also allows you to access detailed analytics and reports that provide valuable insights into customer behavior and engagement. So it makes it easy to optimize your customer interactions and improve your overall performance.
The Omnichannel Inbox for Streamlined Communication:
App chatlyn is an AI-powered customer engagement platform. It is a great tool that helps in automating communication with clients, thus reducing workload. It also helps in optimizing customer engagement, improving customer engagement and satisfaction, thus boosting your revenue.
One of chatlyn’s key features is its omnichannel inbox. This allows you to manage all customer interactions from one central location. It helps integrating you communication on different communication channels including email, webchat, WhatsApp, SMS, Instagram, Facebook Messenger, Telegram and more.
You can also add live chat functionality to your website with the help of chatlyn, making it incredibly easy for customers to get in touch with you. Moreover, the WhatsApp newsletter feature allows you to send targeted, automated messages to customers via WhatsApp, thus helping you maximize client engagement, conversions, and revenue.
Unleashing the Power of AI to Boost Your Hotel’s ADR
Engagement platform, chatlyn is a powerful tool for the hotel industry to improve customer communication, deliver higher conversions, and ultimately drive more sales. It is 100% GDPR compliant, ensuring that you can use the platform without any concerns about data privacy. The web, iOS, and Android apps allow you to access your customer data anytime, anywhere. Integrations with CRM, PMS, POS, and other systems to help you better understand and engage with your clients.
You can also access detailed analytics and reports that provide valuable insights into customer behavior and engagement. As a result, you can optimize your customer interactions and improve your overall performance.
Take Your Hotel’s ADR to the Next Level with chatlyn
A hotel’s average daily rate is one of the most important metrics that a hotel owner needs to be, well, conversant with. Regular analysis of ADR can help boost occupancy and drive growth in the competitive hospitality industry.
ADR is a metric that denotes the average realized room rental each day. Tracking ADR in your financial statements or revenue collection records regularly can help you improve your commercial performance and adjust your pricing towards a more optimum rate per season. Managing ADR can help you get out of debt when needed.
The omnichannel inbox feature of chatlyn can help you manage all customer interactions. Its powerful ticketing system makes assigning and tracking client requests easy, ensuring no customer goes unanswered.
Moreover, chatlyn also offers several marketing automation features that will save you time and increase leads and profits. Some essential elements, like keyword detection, will help you automatically respond to customer inquiries based on specific terms, eliminating the need to waste time answering the same question multiple times.
Experience the Benefits of Increased ADR and Improved Customer Satisfaction Today
There are numerous indicators in the hotel industry that hotel owners should master, and ADR tops that list. It is one of the most critical KPIs that allow a hotel to increase its revenue and overall performance.
Hoteliers should focus on increasing hotel ADR to improve profitability. They should innovate methods and employ technology to focus on increasing the occupancy rate and the average daily room rate because higher ADR leads to an increase in profitability, and a higher occupancy rate translates into higher revenue.