Faculty & Research
ADR Rule of Thumb: Validity and Suggestions for Its Application
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Vol 44 No 4
By: John W. O'Neill
Executive Summary: Most hotel-industry observers are familiar with the commonly used valuation rule of thumb that hotels should generate $1 in ADR per $ 1,000 in value per room. This article presents research that both tests the validity of the ADR rule of thumb and provides guidance to managers regarding how to apply it. The research shows that the ADR rule of thumb has validity when it is applied to the five types of hotels presented in this article. However, for most types of hotels, the relationship between ADR and value per room does not follow the $1-per-$1,000 ratio that has been used generally. The research found that the ADR rule of thumb possesses the greatest degree of accuracy when used to estimate the value of hotels that have relatively few guest rooms, high occupancies, high ADRs, and modern physical plants.
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- ADR Rule of Thumb: Validity and Suggestions for Its Application By: John W. O'Neill
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