Does ADR Have a Ceiling? Rethinking Hotel Metrics

Boutique Hotel News (BHN), in collaboration with Agilysys, a leader in hospitality technology, hosted a business breakfast debate in London to discuss whether Average Daily Rate (ADR) has a ceiling and explore better metrics for hotels.

Held at BrewDog Waterloo, the event centered on the theme “ADR Has a Ceiling: Optimising Space to Maximise Revenue.”

BHN editor Eloise Hanson opened the discussion, followed by Agilysys’ Paul Finch, who questioned whether ADR is the most effective metric.

Finch proposed that focusing on revenue per guest, rather than revenue per room (RevPAR) or ADR, offers better revenue optimization and aligns with a guest-centric approach.

Finch, along with colleague Mathew Prosser, presented an analysis from over 1,000 guests over four years at a specific property, revealing an untapped revenue potential of $1.8 million. Their “Propensity Projection” model, powered by advanced AI, suggested a feasible 9.3% revenue uplift with the correct strategy.

One major challenge identified by Finch and Prosser is the need for real-time data to seize this opportunity, which not only enhances the bottom line but also improves guest satisfaction and increases rebooking rates.

Examples of leveraging real-time guest data discussed included:

– Offering the most relevant upgrades both pre-check-in and at check-in.
– Tailoring targeted offers based on previous guest behavior.
– Understanding room preferences.
– Identifying which guests are most likely to purchase profitable products and services, and when.

Representatives from various companies, including Imperial Hotels London, Lore Group, and Rosewood London, attended. Consensus was that all hotel employees should have consistent, real-time insights within one ecosystem during the guest’s stay. While post-stay reporting is useful, real-time reporting is more impactful.

Topics covered in the conversation included:

Best Practices for Real-Time Offers:
Modern communication channels like text messaging, email, WhatsApp, or face-to-face interactions should be tailored to guest preferences to align with the property’s brand values. Agilysys’ system places the guest profile at the center, enabling real-time, personalized communication. AI analysis of guest spending habits helps employees understand preferences and provide relevant recommendations.

Applicability in City Center Hotels:
Even hotels without extensive facilities can benefit from tracking various guest activities, such as dining times and travel needs. A five-star London hotel attendee mentioned using a manual spreadsheet for room upgrades, which, while effective, lacked efficiency and consistency. Integrating elements like loyalty programs, room upgrades, restaurant bookings, and spa services into one system could enhance revenue per guest.

Importance of Data Quality:
Participants agreed that multiple legacy systems and high staff turnover complicate data management. Centralizing data in one system simplifies identifying and removing duplicates, creating a single source of truth.

The debate concluded that while ADR hasn’t necessarily hit a ceiling, a revenue-per-guest model offers a more potent perspective. Unlocking and utilizing real-time data is crucial for enhancing guest experiences during their stay, rather than after checkout.