ADR

What does "ADR" mean in real estate?

ADR (Average Daily Rate) is a core revenue metric used in real estate and hospitality to measure the average income earned per rented unit (room, apartment, short‑term rental, or commercial workspace) per day. In short, ADR shows the average price charged for each rented unit during a specified period — excluding vacant or complimentary units.

Core definition & formula

ADR is calculated with a simple formula:

ADR = Total Rental Revenue ÷ Number of Units or Nights Sold

Use the same time period for both revenue and units (day, week, month). ADR reflects pricing strength but does not factor in how many units are empty — that’s why it’s usually analyzed with occupancy rate and RevPAR.

Why ADR matters in real estate

• Pricing insight: Helps owners and managers set nightly or daily rates based on actual revenue performance.
• Performance benchmarking: Compare ADR across properties, competitors, markets, or historical periods.
• Investment decisions: Identify underperforming assets that may need renovation, repositioning, or better marketing.
• Revenue forecasting: Combined with occupancy, ADR helps estimate realistic daily, monthly, or annual income.

How to calculate ADR — step by step

1. Choose a time period (day, month, quarter).
2. Sum total rental revenue for that period (exclude complimentary nights or free units).
3. Count the number of units or nights sold (occupied nights).
4. Divide total revenue by units/nights sold.

Example formula: If total revenue = $10,000 and nights sold = 40, ADR = $10,000 ÷ 40 = $250 per night.

Real-world examples

• Short-term rental: A 7‑night booking earns $2,100 → ADR = $2,100 ÷ 7 = $300/night.
• Apartment building: 20 units, 50% occupancy, $62,000 monthly revenue in a 31‑day month: occupied units = 10; daily revenue = $62,000 ÷ 31 = $2,000; ADR = $2,000 ÷ 10 = $200 per unit per day.
• Hotel: 100 rooms sold for $50,000 revenue in one day → ADR = $50,000 ÷ 100 = $500.

Strategic uses of ADR

• Pricing optimization: Raise or lower rates seasonally, during events, or to match demand without harming occupancy.
• Competitive benchmarking: Compare ADR to nearby properties to understand market positioning.
• Investment analysis: Use ADR differences to flag properties that need capital improvements or marketing changes.
• Combined metrics: Pair ADR with occupancy rate and RevPAR to get a complete picture of revenue and profitability.

Limitations & what ADR does not show

• Doesn’t include vacant units — a high ADR can coincide with low occupancy and weak total revenue.
• Ignores ancillary income (parking, F&B, cleaning fees) unless you include them in total revenue intentionally.
• Can be skewed by outlier bookings (very high or very low rates) unless averaged over a suitable period.

How to improve ADR

• Segment pricing — offer tiered rates for different unit types or amenities.
• Use dynamic pricing tools to respond to demand in real time.
• Package deals & upsells — offer add‑ons (late checkout, cleaning, experiences) that increase average spend per booking.
• Invest in upgrades and marketing to attract higher‑paying guests.

Quick FAQs

Is ADR the same as RevPAR? No. ADR measures average price per sold unit, while RevPAR (Revenue Per Available Room) factors in occupancy and divides total revenue by all available units.

Should I track ADR daily or monthly? Both. Daily ADR helps with short‑term pricing; monthly or quarterly ADR smooths out anomalies and shows trends.

Do I include taxes and fees in ADR? You can, but be consistent. Many operators report ADR based on rental revenue only (excluding taxes/mandatory fees) to keep comparisons accurate.

Bottom line

ADR (Average Daily Rate) is a practical, easy‑to‑calculate metric that reveals the average price you’re earning per rented unit. Used with occupancy rate and RevPAR, it’s essential for pricing strategy, benchmarking, forecasting, and investment decisions across hotels, short‑term rentals, apartments, and commercial rental properties.