Net ADR (Net Average Daily Rate) is a hotel performance measure that expresses average room revenue after specified deductions, divided by the number of occupied rooms during the reporting period.
Unlike standard ADR, which is generally calculated using room revenue before distribution commissions and similar deductions, Net ADR accounts for the deductions included in the hotel’s chosen methodology.
The exact definition of Net ADR can vary between hotels and reporting systems. For meaningful comparisons, the deductions and revenue basis must be clearly defined.
How It Works
Net ADR is calculated by dividing net room revenue, as defined by the hotel, by the number of occupied rooms during the same period.
Formula:
Net ADR = Net Room Revenue ÷ Occupied Rooms
The calculation should use a consistent reporting period and compatible definitions for net room revenue and occupied rooms.
Practical Example
A hotel records the following results for one day:
- Gross room revenue: CAD 20,000
- Defined distribution commissions and other applicable deductions: CAD 2,000
- Occupied rooms: 100
Net Room Revenue = CAD 20,000 − CAD 2,000 = CAD 18,000
Net ADR = CAD 18,000 ÷ 100 = CAD 180
For comparison, standard ADR would be CAD 20,000 ÷ 100 = CAD 200, assuming the gross room revenue figure is the hotel’s standard ADR revenue basis.
How to Interpret It
Net ADR helps hotels evaluate the average room revenue retained after the deductions included in their calculation.
A hotel with a higher standard ADR may have a lower Net ADR if it relies heavily on channels with substantial commissions or other booking acquisition costs.
However, Net ADR is not a universal standardized metric. Hotels should document their methodology and avoid comparing figures that use different deductions.
Net ADR also does not represent overall hotel profitability because it does not necessarily account for housekeeping, utilities, payroll, or other operating expenses.
Related Terms
- ADR (Average Daily Rate): Average room revenue per occupied room.
- Net Room Revenue: Room revenue after specified deductions.
- Net RevPAR: A RevPAR-related measure that accounts for specified deductions, depending on the methodology.
- Distribution Channel: The channel through which a reservation is made.
- Contribution Margin: Revenue remaining after deducting the relevant variable costs.
- Room Revenue: Revenue generated from the sale of hotel rooms.