Little Hotelier Resource Hub

Handy business resources for small accommodation providers

How to calculate and use your B&B’s average daily rate effectively

Wednesday, July 11th, 2018

When it comes to measuring the performance of your revenue management strategy, the average daily rate (ADR) at your B&B is one of the most important metrics to consider.

ADR is a key performance indicator, and it’s important that you know what your ADR is and how to use it effectively as part of your overall pricing strategy.

How is ADR calculated?

The ADR is a powerful metric, so one might assume that a complex formula is used in order to come up with this pivotal number. However, it’s actually a simple calculation. ADR is calculated by dividing the amount of room revenue earned by the number of rooms sold at the property.

Why is ADR important?

The ADR allows you to see how your B&B is performing during a specific period of time. By understanding where your ADR is at during peak seasons and slow seasons, you can create promotional campaigns that can help drive traffic and increase revenue during these periods. It also provides insight into how you stack up against the local competition.

Ultimately, ADR plays a pivotal role in your B&B revenue management strategy.

Strategies for using ADR to drive B&B revenue

Here are the most common ways ADR can be used to inform strategies:

  • Release new packages enticing travellers to spend more during their stay
    Travellers often feel that packages offer them more value during their stay, and many will select the package option versus the standard room rate. Packages you might consider include a local experience package in which the guest receives a customised tour or learning experience during their stay, or a romance package which includes wine, cheese and crackers upon arrival.
  • Offer extended stay discounts
    Your ADR will increase significantly the longer an individual guest stays at your property. In order to encourage longer stays versus quick weekend visits, you may want to offer extended stay discounts. For instance, you might offer someone a 20% discount if they book for seven nights or more.
  • Create promotions that coincide with major local events and festivals
    Whether there’s a major sporting event planned for your region in the coming year, or your destination always hosts a week-long festival, you will want to capitalise on the influx of travellers who will be visiting the area during these peak times. Offer promotions that will encourage guests to stay with you instead of the local competition.
  • Sell local products in your B&B
    B&B guests appreciate authentic experiences and local goods, so they are likely to purchase a souvenir from you if they know it was created by a nearby artist or entrepreneur.

Along with other key performance indicators, such as revenue per available room (RevPAR), the ADR can be used to determine the overall success of your B&B. Monitoring these key performance indicators and metrics will allow you to create dynamic online marketing campaigns and effective distribution strategies for your business.

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