The hotel must monitor its indicators for effective revenue management, thereby increasing the ADR or RevPar or occupancy rate. To be precise, revenue management measures the ADR performance of a hotel relative to a hotel portfolio consisting of competitive venues, markets, and submarkets.
What is ADR?
It is an index, and when it is 100, the share is reasonable compared to the combined hotel group. When the ADR index exceeds 100, its proportion exceeds the reasonable share of the group’s ADR performance. In contrast, ADR indexes below 100 account for insufficient share of total ADR performance.
How to build an ADR for an existing hotel?
It can be specifically constructed through revenue management and planned forecasting. Although the assumption can drive both changes and forecasts, the hotel’s ADR may affect the final profit and loss budget. As a result, budget changes must be minimized regardless of site or currency. Some methods for making predictions are as follows:
• Data related to the average daily rate can be collected daily, weekly or monthly.
• You can use reports from well-known research companies such as STR to protect the hotel’s interests. In terms of hotel revenue management, these reports have almost accurate occupancy rates relative to competitors, RevPAR and ADR data.
In addition, comparing and understanding all relevant aggregate statistics is essential to reveal the average difference in ADR. For brands and customers, some of the main areas of concern can be cross-regional quality, service, price or distribution strategies. In addition, the hotel’s average daily room rate trend should be ideally reflected in the market.
• Macroeconomics: A broader market impact needs to be analyzed to arrive at a forecast of supply and demand. Some hotel feasibility studies and customer reviews of related projects provide insight into official inflation forecasts and tourism drivers in the region.
The above method is required to predict the average daily cost of planned hotels. Obviously, this process relies heavily on the main competing dataset data sources. Therefore, after all the above studies are completed, and there is a list of data related to the percentage growth rate, the monthly breakdown can be applied. This can be used to forecast monthly and yearly figures.
How to make ADR forecast for the planned hotel?
The method to increase ADR/RevPAR is as follows:
• First, research competitors with similar businesses in terms of number of rooms, customer base, service quality and target market. They can adjust their average daily house price forecasts to arrive at conservative figures.
• Second, weigh the average of market segments by analyzing the price segments of potential competitors. For this, high-quality segmentation data is required.
• Third, increase ADR through a bottom-up analysis that involves measurement of operating costs and pricing required for profitability.
Therefore, in order to predict the future performance of the hotel based on demand, key indicators should be analyzed, namely occupancy rate, ADR (average daily room rate) and RevPAR (revenue per available room). These numbers not only help in effective planning, but they can also empower cross-departmental decision-making processes, ultimately contributing to revenue growth.