Page 4 - Financial Fundamentals

Developing Room Rates

What is It?

• In order to effectively set rates on a day to day basis, it is essential
to have a comprehensive understanding of your competitor’s

rates. Rates should be based upon occupancy, average length of
stay, market supply and area demand, season, and competitors'

rates.

Why is it Important?

• If you charge too high, you will lose market share to your
competitors. If you charge too little for your rooms, you will lose

money.
• Total Available Rooms: The number of rooms less the number of

rooms out of order or not in service.

• Hotel Occupancy Percentage Formula: The Formula for
Occupancy Percentage= (Number of Rooms Occupied) / (Total

Number of Rooms Available for sale) * 100

• Average Daily Rate (ADR): ADR (Average Daily Rate)
or ARR (Average Room Rate) is a measure of the average rate paid

for the rooms sold, calculated by dividing total room revenue by

rooms sold.
• Revenue Per Available Room (RevPar): Formula is Total Room

Revenue / Total Rooms Available for Sale