What Is the Average Daily Rate (ADR)?

The average daily rate (ADR) is a metric widely used in the hospitality industry to indicate the average revenue earned for an occupied room on a given day. The average daily rate is one of the key performance indicators (KPI) of the industry.

Another KPI metric is the occupancy rate, which when combined with the ADR, comprises revenue per available room (RevPAR), all of which are used to measure the operating performance of a lodging unit such as a hotel or motel.

Understanding the Average Daily Rate (ADR)

The average daily rate (ADR) shows how much revenue is made per room on average. The higher the ADR, the better. A rising ADR suggests that a hotel is increasing the money it’s making from renting out rooms. To increase the ADR, hotels should look into ways to boost price per room.

Hotel operators seek to increase ADR by focusing on pricing strategies. This includes upselling, cross-sale promotions, and complimentary offers such as free shuttle service to the local airport. The overall economy is a big factor in setting prices, with hotels and motels seeking to adjust room rates to match current demand.

To determine the operating performance of a lodging, the ADR can be measured against a hotel’s historical ADR to look for trends, such as seasonal impact or how certain promotions performed. It can also be used as a measure of relative performance since the metric can be compared to other hotels that have similar characteristics, such as size, clientele, and location. This helps to accurately price room rentals.

Calculating the Average Daily Rate (ADR)

The average daily rate is calculated by taking the average revenue earned from rooms and dividing it by the number of rooms sold. It excludes complimentary rooms and rooms occupied by staff.


$\text{Average Daily Rate} = \frac{\text{Rooms Revenue Earned}}{\text{Number of Rooms Sold}}$Average Daily Rate=Number of Rooms SoldRooms Revenue Earned​

Example of the Average Daily Rate (ADR)

If a hotel has $50,000 in room revenue and 500 rooms sold, the ADR would be $100 ($50,000/500). Rooms used for in-house use, such as those set aside for hotel employees and complimentary ones, are excluded from the calculation.

Real World Example

Consider Marriott International (MAR), a major publicly traded hotelier that reports ADR along with occupancy rate and RevPAR. For 2019, Marriott’s ADR increased by 2.1% from 2018 to $202.75 in North America. The occupancy rate was fairly static at 75.8%. Taking the ADR and multiplying it by the occupancy rate yields the RevPAR. In Marriott’s case, $202.75 times 75.8% equates to a RevPAR of $153.68, which was up 2.19% from 2018.

The Difference Between the Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR)

The average daily rate (ADR) is needed to calculate the revenue per available room (RevPAR). The average daily rate tells a lodging company how much they make per room on average in a given day. Meanwhile, RevPAR measures a lodging’s ability to fill its available rooms at the average rate. If the occupancy rate is not at 100% and the RevPAR is below the ADR, a hotel operator knows that it can probably reduce the average price per room to help increase occupancy.

Limitations of Using the Average Daily Rate (ADR)

The ADR does not tell the complete story about a hotel’s revenue. For instance, it does not include the charges a lodging company may charge if a guest does not show up. The figure also does not subtract items such as commissions and rebates offered to customers if there is a problem. A property’s ADR may increase as a result of price increases, however, this provides limited information in isolation. Occupancy could have fallen, leaving overall revenue lower.

What is Autarky?

Autarky refers to a nation that operates in a state of self-reliance. Nations that follow a policy of autarky are characterized by self-sufficiency and limited trade with global partners. The definition of autarky comes from the Greek—autos, meaning “self” and arkein, meaning “to ward off” and “to be strong enough, to suffice.” A fully autarkic nation would be a closed economy and lacking any sources of external support, trade or aid. In practice, however, no modern nation has achieved this level of autarky, even when subjected to punishing sanctions. This is because the global supply chain has made true economic isolation difficult, so any policy of autarky is a matter of degrees rather than a complete isolation.

Understanding Autarky

Autarky can be thought of as an extreme form of economic nationalism and protectionism. The motivation behind a policy of autarky is usually a combination of securing the supply of important goods and a desire to reduce the dependence on other nations in general. Depending on the type of political structure in a nation, the goal of reducing dependence on outside nations may be related to reducing the influence of competing political and economic systems. At various points in history, however, autarky has been proposed by groups all across the political spectrum. When framed in terms of keeping domestic spending at home or stopping the transfer of wealth to bad political actors, autarky touches populist themes and appears to make practical sense.

In practice, however, autarky has economic downsides that are not immediately apparent in the populist arguments. Autarky was first questioned by economist Adam Smith, and then David Ricardo. Smith suggested that countries should engage in free trade and specialize in goods they have an absolute advantage in producing, in order to generate more wealth. This is one of the core arguments Smith made in favor of free trade in The Wealth of Nations. Ricardo amended this argument slightly, saying that countries should also produce goods in which they have a comparative advantage. By leveraging comparative advantages, countries are able to work together to create more wealth in the global system of trade.

Put another way, opting out of global trade in favor of doing it all domestically has a high opportunity cost for nations, just as it does for individuals. For example, a family preoccupied with sewing their own clothes, building their own furniture, and growing their own food will necessarily have less time to work outside the home for wages. This will likely result in less income for the household and less workers for nearby employers – and, ultimately, a smaller economy due to the high degree of self-sufficiency being practiced. This is true on a global scale as well.

Real World Examples of Autarky

Historically, autarkic policies have been deployed to different extents. Western European countries deployed them under mercantilist policies from the 16th to the 18th century. This spurred economists like Smith, Ricardo, and Frederic Bastiat to refine free-market and free-trade philosophies as counter arguments.

Nazi Germany also implemented a form or autarky to ensure the strategic supply needed for its war efforts. Today, North Korea stands as the main example of a policy of autarky. North Korea’s economic isolation is a mixture of intentional self-reliance to reduce international political influence and imposed self-reliance due to being cut out of international trade through sanctions.

Autarky and the Autarkic Price

A related term, autarky price or autarkic price, refers to the cost of a good in an autarkic state. The cost of producing in a closed economy must be covered by the price charged for the good. If the cost is higher relative to other nations, then the autarky price is a dead loss for that national economy. The autarkic price is sometimes used as an economic variable when roughly calculating where a nation’s comparative advantages are. In practice, however, comparative advantages are discovered through market mechanisms rather than an economic model.