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Why Average Daily Rate Continued to Grow in September

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Overview

Another key indicator frequently used in the hotel industry is the ADR (or average daily rate). The average daily rate is calculated as hotel room revenue divided by the number of rooms sold. It tells us about the average room price for which the hotel rooms were sold, and thus is a major measure of the hotel’s revenue and profitability. Various hotels are then classified on this basis.

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Average daily rate

The daily rates for hotels were better in comparison to the previous year, and they have been on a positive growth trend. September also saw improvements in ADR, which grew by 4.9% to $122.56 for the week ending September 26 and by 3.7% to $123.89 for the week ending September 19. The daily rates in the top 25 US cities saw much better performances than the rates in the country as a whole.

Philadelphia ADR grew by 41% to $175.49, which was the maximum growth recorded for the week. The city hosted Pope Francis’s visit, which contributed to the huge growth. Houston’s ADR declined by 0.5% to $109.53, and it was the only market to report an ADR decline in the week.

Future outlook

As the winter and holiday seasons come closer, hotels expect to see more tourists from the US and abroad who are traveling for the holidays. This would allow the hotels to get better rates for their rooms and see better ADR in the coming quarter.

Investors can get exposure to hotel stocks by investing in the Consumer Discretionary SPDR ETF (XLY), which has 0.63% of its holdings in Marriott International (MAR), 0.52% in Starwood Hotels (HOT), and 0.38% in Wyndham Worldwide (WYN). Other major hotel stocks include Hilton Worldwide (HLT) and Hyatt Hotels (H).

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