ADR is not the right metrics

ADR is not working… and why you should stop following it!

Let’s start with basic math: if your ADR is at 100 and your guest cost of acquisition is at 90 (hello Booking.com), you make less money than a property with an ADR at 50 with a cost of acquisition at 10! So far, everybody can agree on that calculation.

To expand the reasoning: in an ideal world, the occupancy rate will reach 100%, and you should be able to decline reservations. In this ideal world, guests will be ranked by ‘expected_spending,’ and you only accept guests with the highest spending (it will not always mean the richest guest but guests who have the most affinity with your brand).

So the important metric is not to know how much you can sell a bedroom, but how much profit you extract from each guest. Building a strong community is what will positively influence revenue the most: it decreases the cost of acquisition, encourages organic growth via referrals, and increases upselling opportunities.

Of course, this calculation is oversimplified, and many more dimensions should enter the mix. But as someone who was trained to fight OTA: I don’t see room price, I only see commission fees!