Many hotels consider ADR (Average Daily Rate) one of the key indicators of room sales performance. For example, a hotel’s average room rate is IDR 1,000,000 per night. At first glance, this may seem like a strong result.
However, does the hotel actually receive IDR 1,000,000 for every room sold? Not necessarily. When bookings come through Online Travel Agencies (OTAs), hotels typically pay commissions based on each platform’s terms and conditions. This means the reported ADR does not always reflect the actual revenue the hotel receives.
This is where Net ADR becomes important. By understanding Net ADR, hotels can measure how much room revenue remains after accounting for distribution costs, particularly OTA commissions. This metric can also help hotels make better pricing decisions, evaluate sales channels, and develop hotel marketing strategies focused on profitability rather than simply maximizing bookings.
What Is Hotel Net ADR?
Net ADR is the average net room revenue a hotel receives per room night sold after deducting distribution costs or sales commissions. In simple terms:
Net ADR = Room Revenue After Distribution Costs ÷ Number of Room Nights Sold
For example, a hotel sells a room at an average rate of IDR 1,000,000 per night through an OTA. If the OTA commission is 18%, the calculation is as follows:
ADR: IDR 1,000,000
OTA commission: IDR 180,000
Net room revenue: IDR 820,000
The hotel’s Net ADR is therefore approximately IDR 820,000. Although the sales report shows an ADR of IDR 1,000,000, the hotel actually receives IDR 820,000 before deducting other operating expenses.
It is important to note that the calculation of Net ADR may vary depending on which distribution costs are included. Hotels should establish a consistent definition to ensure accurate comparisons across different sales channels.
Why Should Hotels Calculate Net ADR?
When looking only at ADR, OTA bookings may appear to generate attractive room rates. However, once distribution costs are deducted, direct bookings may deliver higher net revenue.
This is why hotels should not focus solely on achieving the highest ADR or generating the largest number of bookings. More importantly, they need to understand how much net revenue each sales channel contributes.
By evaluating Net ADR alongside booking volume and distribution costs, hotels can make more informed decisions about pricing, channel management, and marketing investments.
Net ADR vs. ADR: What Is the Difference?
ADR measures the average room rate achieved for rooms sold, while Net ADR measures the average room revenue remaining after deducting specified distribution costs.
For example, a hotel sells 100 room nights and generates total room revenue of IDR 100 million.
The ADR calculation is:
ADR = IDR 100 million ÷ 100 room nights = IDR 1 million
Suppose IDR 70 million comes from OTA bookings with an average commission of 18%, while IDR 30 million comes from direct bookings with a distribution cost of IDR 30,000 per booking. The net revenue generated by each channel will differ based on its associated costs.
Hotels can use these metrics for different purposes:
ADR: Measures the average room rate achieved for sold rooms.
Net ADR: Measures average room revenue after deducting defined distribution costs.
Occupancy Rate: Measures the percentage of available rooms that are occupied.
RevPAR (Revenue per Available Room): Measures room revenue relative to the total number of available rooms.
These four metrics should be evaluated together rather than in isolation to provide a more complete picture of hotel performance.
Don't Forget to Account for Costs Beyond OTA Commissions
A basic Net ADR calculation typically focuses on OTA commissions. However, hotels can include other distribution-related expenses to gain a more accurate understanding of channel profitability.
These costs may include:
- OTA commissions
- Payment gateway fees
- Promotional discounts funded by the hotel
- Campaign or visibility fees
- Channel-specific distribution fees
- Paid advertising acquisition costs
Since each sales channel has a different cost structure, hotels should maintain channel-level reports with clearly defined cost categories. This allows management to compare gross room revenue, distribution costs, and net revenue more objectively.
By consistently comparing Net ADR across OTAs, direct bookings, and other sales channels, hotels can make better-informed decisions about where to allocate their marketing and distribution budgets.
Ecommerceloka helps hotels manage their digital and eCommerce strategies through an integrated approach, covering everything from online distribution to direct booking optimization and channel performance. With the right data and insights, hotels can make decisions based on the revenue they actually retain, rather than relying solely on headline sales figures.