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Hospitality Finance: What is ADR?

1.) What is ADR? How is ADR calculated? Why is ADR important in the hospitality industry? Please explain answer.

2.) Which of the following financial ratios, occupancy, room sales to total sales, profit margin, or average daily rate (ADR), is the most important to a hospitality organization? Why?

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Hospitality Finance

1.) What is ADR? How is ADR calculated? Why is ADR important in the hospitality industry? Please explain answer.

ADR is the measure of the 'average daily rate' paid for hotel rooms - calculated by dividing the revenue gained by the paid room which is calculated by the following formula: ADR - room revenue/ rooms paid).

ADR is important in the hospitality industry because it measures performance and profitability. It can be calculated by groups of rooms or groups of hotels. An ADR index is the measurement of the hotel's ADR performance. The performance is measured against market, submarket divided by tract, and competition. An ADR Index greater than 100 means it is more than a fair share of the aggregated group's ADR performance (The HNN editorial staff, 2010). The ADR Index is calculated by the following formula: ADR Index = (ADR/Aggregated ...

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