ADR is the average rate the guest paid. It says nothing about what the hotel paid to win the booking. A room sold through a commissionable channel can be worth less to the hotel than a lower-rate room booked direct. Net ADR puts every channel on the same footing. This guide covers the net ADR calculation, the choices behind it and a fictional month.
The formula
Net ADR = (rooms revenue − distribution costs) ÷ rooms sold
When a channel charges a flat percentage, this simplifies to net ADR = ADR × (1 − cost rate).
What to deduct
- Commissions to online travel agencies, travel agents and wholesalers.
- Transaction fees that scale with bookings: booking engine fees, channel or GDS fees, and card processing where it's material.
- Paid marketing tied to a channel, if you can attribute it reliably.
Leave out housekeeping, laundry and other operating costs. They're the same whatever the channel, and they belong in cost per occupied room. Write down which costs you deduct and keep the definition fixed, because hotels don't all calculate net ADR the same way.
Fictional example: Sample Inn by channel
Fictional example. Sample Inn's month by channel, with a blended cost rate per channel:
| Channel (fictional) | Rooms | ADR | Cost rate | Distribution cost | Net ADR |
|---|---|---|---|---|---|
| Direct web | 300 | $137.00 | 5.5% | $2,260 | $129.47 |
| Online travel agency | 300 | $142.00 | 18.0% | $7,668 | $116.44 |
| Group | 180 | $130.00 | 0.0% | $0 | $130.00 |
| Wholesale | 90 | $115.00 | 20.0% | $2,070 | $92.00 |
| Total | 870 | $135.00 | $11,998 | $121.21 |
The online travel agency business has the highest ADR, $142.00. After an 18% commission, the hotel keeps $116.44 a night. Direct web business at $137.00 keeps $129.47 after a 5.5% combined booking engine and card cost. For the whole month, ADR is $135.00 and net ADR is $121.21.
The rate that breaks even
Net ADR also answers a pricing question. What direct rate leaves the hotel with the same amount as the commissionable rate? Break-even direct rate = channel net ADR ÷ (1 − direct cost rate). In the fictional example, $116.44 ÷ (1 − 5.5%) = $123.22. Any direct rate above that keeps more than the OTA booking, before differences in cancellations or length of stay.
Details that change the answer
- Commission base: some contracts charge commission on the rate including taxes or fees. Use the base in your contract.
- Packages: when the rate includes breakfast or parking, decide whether to report net ADR for the room portion alone.
- Effective rate: visibility programs and promotions push the commission above the headline rate. Divide the month's invoiced commission by that channel's rooms revenue to get the effective rate.
- Cancellations and no-shows: calculate on stayed revenue, not booked revenue.
Net RevPAR
The same deduction gives net RevPAR = (rooms revenue − distribution costs) ÷ rooms available. It sits naturally next to RevPAR and GOPPAR. The RevPAR vs GOPPAR guide explains those two.
Setting it up in Excel
Use one row per channel: rooms, revenue and distribution cost from invoices or the PMS. Calculate net ADR with =(revenue−cost)/rooms. Build the total row with =SUM of the dollar columns, not an average of the channel rates. Review it monthly alongside channel mix.