Average Daily Rate, or ADR, is calculated by dividing the total revenue by the total number of nights that were booked. These figures include the cleaning fee set by the host.
In the AirDNA platform, you can track monthly ADR performance over three years for any market worldwide.
How do we calculate ADR?
When determining the income for a short-term rental listing, we include the cleaning fee, as this can be a revenue stream for many hosts and property managers.
If a property was booked for 5 days at $250 per night, and the cleaning fee for those 5 nights was $200, the ADR would be $290. As we include the cleaning fee in the ADR, it is also included in the total revenue figures.
At the market level, ADR is calculated by dividing the total revenue generated during the period by the total number of booked nights. For individual properties, ADR is shown for the last 12 months and is calculated by dividing the property’s annual revenue by the number of booked days.
For example, below, this listing had an ADR of $2.6K over the last 12 months.
Seasonality and RevPAR
The time of year can impact the ADR in a market. In ski town markets, for example, you’re likely to see an increase in the daily rate charged in the winter and a decrease in the summer, whereas in beach markets, you’re likely to see the opposite due to higher demand and hosts being able to increase their rate and capitalize on an influx of guests to the market.
Although ADR provides valuable insight into how much other hosts charge in your market, it is not a sufficient indicator of overall performance and should not be managed in isolation. Looking at occupancy and the ADR is essential to understand a property’s or market’s performance. Take, for example, a vacation rental whose ADR increased month-over-month but occupancy dropped, resulting in lower total revenue.
Market seasonality and booking lead time indicators help property managers and hosts set more intuitive pricing by providing historical market RevPAR (Revenue Per Available Rental) and future market demand. Managing and analyzing ADR within the context of occupancy is the best approach for those seeking to gain an edge over the competition.