ADR Calc

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12/30/2012

10 rooms

1 King @ $135

4 Queens @ $125

4 Doubles @ $125

Total $1335 per night if all rooms sold.   So...........ADR is $113.50, correct?

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05/22/2008

I thought you had given up on this dud.

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12/30/2012

The rest of the group has asked me to keep working on the project. All but me has been to the property and love it. I am being the stick in the mud trying to show them worst-case.

Madeleine's picture
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09/29/2011

ThuderingWind wrote:

The rest of the group has asked me to keep working on the project. All but me has been to the property and love it. I am being the stick in the mud trying to show them worst-case.

You can call yourself the voice of reason...

If they all get to say neener neener to you down the line, you can hold up your head and say it's because you did all the groundwork.

__________________

Everyday, for good or ill, we intersect with some else's story and become a part of it.

 

OnTheShore's picture
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08/28/2011

You have only listed 9 rooms, not 10. Given that, the total if all rooms are sold would be $1135, not $1335. Thus the ADR would be $126.11

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12/30/2012

opps..let's try this again

10 rooms

2 King @ $135

4 Queens @ $125

4 Doubles @ $125

Total $1270 per night if all rooms sold.   So...........ADR is $127.00 correct?  1270/10

OnTheShore's picture
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08/28/2011

Correct. But note that there is an inherent assumption that you are selling all 10 rooms every night at full rate with no discounts.

I tend to think of ADR as something calculated "after the fact," as in you look at the total room revenue for some period of time, and divide by the number of room nights sold in that same period. Assuming the period is representative (big assumption), you can then use the ADR for forward-looking projections. It may be more useful for comparing different past periods, or for comparing different properties for the same past period (assuming the different properties use the same assumptions in calculating their ADR and occupancy figures!).

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12/30/2012

Thank you that explanation.

Because this property is a foreclosed property, no real data is available prior to the bank taking it back.  They did higher a Hotel Management service to come in and keep it active so it would sell better.

We are being directed by our SBA and SCORE Reps to use the ADR calc to show potential income at various Occupant rates so the bank can see the break even point (and we can too) for loan package.

Madeleine's picture
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09/29/2011

ThuderingWind wrote:

Thank you that explanation.

Because this property is a foreclosed property, no real data is available prior to the bank taking it back.  They did higher a Hotel Management service to come in and keep it active so it would sell better.

We are being directed by our SBA and SCORE Reps to use the ADR calc to show potential income at various Occupant rates so the bank can see the break even point (and we can too) for loan package.

This is what those spreadsheets I mentioned will do for you. It's what we did to find where every property we were looking at broke.

What you also want to throw in the mix is anything you know about the area. Can you raise rates? What's the reason people stay at this property? Is anything going to change? We went in with the lowest projections to the bank to show we weren't wearing those rose colored glasses.

You can show, you have to show, the bank how you are going to increase sales, not just hover where you think you are now.

OnTheShore's picture
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08/28/2011

OK, in the worst case scenario, 50% occupancy with 10 rooms over 365 nights, all 1825 room nights are in queen or double rooms (king rooms never sold), so ADR would be $125.

In the best case scenario, both king rooms were sold every night of the year (730 room nights), with the queen and double rooms making up the rest (1095 room nights, total 1825 room nights), your ADR would be $129.

So under these two scenarios, total room income would range between $228,125 to $235,425.  Some inherent assumptions are that your rates are constant year round, that you never discount, and that you really do achieve 50% occupancy, or 1825 sold nights.

OnTheShore's picture
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08/28/2011

Put another way, another way to think about 50% occupancy with your room mix is that you sell 5 rooms every night, rather than 10 rooms half of the nights. If you only sell 5 out of 10 rooms, obviously the mix of rooms could vary: 1 king, 2 queens, 2 doubles (ADR would be $127) -- or 2 kings, 2 queens, 1 double (ADR=$129) -- or 4 doubles, 1 queen (ADR=$125) -- and so on.

Madeleine's picture
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09/29/2011

Can the ADR be less than the average of the room prices?

Tom
Tom's picture
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10/11/2009

Average of room prices for rooms actually rented, used, paid, and funds collected -- not including room tax and excluding any discounts or rebates.  It is not a theoretical; it is based on actual history.

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