Average Daily Rate (Hotels)

Average Daily Rate captures what a hotel actually charges for rooms that are sold, as opposed to the rack rate (the listed price before discounts) or RevPAR (which spreads revenue across all available rooms including empty ones). ADR reflects the effective pricing power of the hotel given its demand environment, brand positioning, competitive set, and revenue management practices.

The formula divides total room revenue by total rooms sold during the period. A hotel that sells 8,000 room nights in a month and generates $1.6 million in room revenue has an ADR of $200. This figure is straightforward to calculate but contains multiple overlapping price points — corporate negotiated rates, leisure promotional rates, group and meeting rates, last-minute discounts, and rack rates — all averaged together.

Marriott uses ADR alongside occupancy and RevPAR in its quarterly operational reporting. Premium urban full-service brands like the JW Marriott or Ritz-Carlton operate at significantly higher ADR than select-service brands like Courtyard or Fairfield. When Marriott reports blended ADR, investors should understand that the mix of brands and markets within the reporting period affects the number substantially.

ADR growth is a positive indicator when it exceeds the rate of inflation because it signals genuine pricing power. During periods of strong travel demand — following major sporting events, during peak summer vacation periods, or in markets with constrained supply — hotels can push ADR significantly above prior-year levels without sacrificing occupancy. This pricing leverage is one reason high-quality hotel assets in supply-constrained urban markets trade at premium valuations.

The tension between ADR and occupancy is managed through revenue management systems that set pricing dynamically. A hotel revenue manager facing weak mid-week corporate demand might lower ADR to attract leisure travelers and maintain occupancy, sacrificing rate to fill rooms. The same manager facing a sold-out city during a major conference might restrict discounted rates and hold a high ADR even knowing that some rooms will go unsold, because the potential revenue from those rooms does not justify discounting given strong demand from other segments.

Analysts studying hotel companies track ADR on a comparable-property and constant-currency basis to remove the distortion of acquisitions, dispositions, and foreign exchange movements from period-over-period comparisons. Consistent ADR growth on this basis, particularly when paired with stable or improving occupancy, is a sign of a healthy lodging operating environment.