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ADR: What is It and How Does It Affect You?

Let’s say you have your event all set. You have your date, your venue, your guest list, invites have been sent out. That is all great, but then you realize a lot of people on the guest list are from out of town. You speak to the hotel sales manager about a block of rooms and are directed to the sales department where they calculate a group rate based on the dates and rooms you anticipate.

In order to get the best rate possible for your attendees, you need to think like a hotel sales manager. This means you should know all of the factors that go into deciding the discounted group rate.

First of all, you need to keep in mind that, like any other business establishment, the hotel’s number one goal is to make money. The three main criteria they will be focusing on are: average daily rate, occupancy, and revenue.

Average Daily Rate

Average daily rate (ADR) takes into account all of the rates offered per day and averages them. Most people do not think about how many different rates a hotel offers. If you look at a hotel’s website, you can see that different room types (Kings, Doubles, Suites, etc) have different rates. However, price differentiation does not end here. Within these room types, there can be more rates. Some examples are special rates for rewards members, rates that include a nonrefundable deposit, rates that include breakfast, military rates, etc. At the end of the day, all of these rates are averaged and a hotel can gauge how well they are doing in their area based on these numbers. The higher the ADR, the better the hotel looks compared to its competition.

So, the takeaway from this is that the hotel wants your business, but it does not want to lower its ADR too much. The best advice is to go onto the hotel’s website, select your dates, and look at what the base rate is. The base rate is usually the rate that does not require a deposit and is cancellable up until 24 hours. Look at this rate, and compare it to the rate the hotel offers you. A typical hotel will offer a 15-25% discount. So, if they offer any less of a discount, it may be beneficial to negotiate further. Keep in mind that privately-own or smaller hotels tend to have more flexibility with negotiating.

Occupancy

Every hotel’s goal is to sell out every night. This is important if you have a large group that will need rooms. If you can guarantee a large number of rooms, this can help you lower your group rate. However, if the hotel is near capacity for those dates, they may not necessarily need your low rated business, because they may be able to fill those last few rooms at a higher rate. Keep any local events or holidays in mind!

Revenue

The final factor is a combination of the two formers. The occupancy multiplied by the ADR yields the total revenue. Why does this matter to you? If the hotel has low occupancy, you can negotiate for a lower rate, because they want to fill the rooms with whatever they can. But if the hotel is nearing capacity, it may be more difficult to negotiate rate because their occupancy is already so high.

An expensive room rate can be the deciding factor that prevents prospective attendees from registering for your event, and it won’t help much to lower your attrition rate. Understanding how to effectively negotiate the best room rate for your attendees is essential to keep costs down and keep your audience coming back year after year.

July 25, 2018

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July 25, 2018

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