The ADR You Report Isn't the ADR You Keep

A note for owners, GMs, and anyone about to write next year’s plan — because the channel side of the budget is usually the part nobody plans.

Two hotels in the same city both report an ADR of €120 for October. Same size, same segment, similar occupancy. One of them keeps materially more of it than the other.

Nothing is wrong with either number. ADR is a gross figure — the average rate you sold at, before the cost of having sold it. What lands in the bank depends on where the booking came from, and hotels with similar rate performance can have very different distribution profiles.

That difference is invisible in the report everyone looks at, which is why it survives for years.

Net ADR, in one sentence

Net ADR is the room revenue left after attributable variable distribution costs are deducted, divided by the room nights sold:

Net ADR = (room revenue − attributable variable distribution costs) / room nights sold

Those costs may include commission, channel or connectivity fees, payment costs, metasearch spend attributable to the booking, and any partner-side deduction that comes off the top.

That’s the whole concept. The work is in doing it channel by channel rather than as one blended figure — because a blended net ADR tells you what happened, while a channel-level one tells you what to do.

Two practical cautions before the arithmetic:

• Compare like with like. Commission is typically charged on the room revenue, so decide up front whether you’re working with or without VAT and with or without extras, and keep it consistent across channels.
• Separate variable from fixed. Commission scales with every booking. PPC or metasearch spend attributable to a specific booking can also be a variable acquisition cost. Your website, booking engine subscription, agency retainer, and in-house marketer’s salary are usually fixed or shared costs. All of them matter, but only the attributable variable part belongs in strict net ADR. Put the fixed costs alongside it as a separate layer when you assess the full economics of a channel. If a fee is charged per booking rather than per night, spread it across that booking’s room nights before comparing it with ADR.

Direct is cheaper. It is not free.

This is where most hotels’ mental model is wrong, and it’s worth being precise, because the error runs in both directions.

A direct booking avoids commission. It does not avoid cost:

• The booking engine, typically a subscription or a smaller transaction fee.
• Payment processing.
• Metasearch, PPC campaigns, and other paid traffic — where you may pay for the click or impression whether or not it produces a booking.
• The marketing agency retainer, campaign-management fee, or creative fee if you work with an external partner.
• The salary and time of an in-house marketer if you build demand internally.
• The website itself, its content and analytics, and the people answering emails and phones.
• Whatever you gave away to win the booking: a member rate, breakfast included, a flexible cancellation policy that costs you inventory later.

Treat these in two views. Booking-level net ADR deducts only the costs you can reasonably attribute to that booking. Fully loaded direct-channel cost also includes the period’s PPC and metasearch spend, agency fees, technology, and the relevant share of internal labour. You can divide that total by direct bookings or room nights, but document the allocation rule and do not pretend every brand-building euro was caused by one booking.

The point is not that OTAs are better than direct. A strong direct channel usually gives you more control, a direct guest relationship, more first-party data, and cheaper repeat business. An OTA can supply demand and visibility that the hotel might not reach alone, or might reach only at a higher cost. The useful question is not which channel is “good,” but which booking increases total contribution for this date, segment, and demand situation.

The assumption that direct is free is still dangerous: it can produce campaigns that cost more per booking than the commission they replace. The answer is not automatically more OTA; it is to manage direct with the same cost discipline as every other channel. Our hotel digital marketing piece covers where marketing genuinely earns its place.

Do the arithmetic once, by channel

An illustrative example for a hotel selling at €120 — the numbers are made up, the method isn’t. For each channel, take the gross ADR, subtract the variable acquisition cost per room night, and see what’s left:

• An OTA booking at €120 with a commission in the mid-teens percent leaves you a little over €100.
• A direct booking at €120 will usually leave more than the same commission-bearing booking after the booking engine’s transaction fee, card costs, and attributable paid search are deducted — but it does not leave the full €120. Fixed marketing and payroll costs belong only in the separate, fully loaded view.
• A wholesale or tour operator booking arrives at a contracted net rate, so the “discount” is already inside the rate you see.
• A corporate booking at a negotiated rate may carry a booking-tool or agency fee on top of the lower rate.

Use your own contracted rates and your own marketing spend. The output is a single table you can put in front of the owner: gross ADR, variable cost, net ADR, and the share of room nights each channel delivers. Putting these four columns next to each other is what turns a general preference for cheaper channels into a decision you can test.

The trap: highest net ADR is not the goal

Here’s where a naive reading of the table causes damage.

If you optimize purely for net ADR, the answer is to sell only direct. And a hotel at 100% direct and 62% occupancy earns less than the same hotel at 78% direct-and-OTA and 85% occupancy. Net ADR is a per-booking measure; you get paid on the total. Lower channel cost is an advantage only if you can also capture the demand; a higher cost may be acceptable when it brings genuinely new, profitable business.

Which turns the real question into something harder and more interesting: is this booking incremental?

• The OTA guest who had never heard of your hotel, found you while comparing options, and would otherwise have stayed elsewhere — that commission bought you revenue you would not have had. It’s expensive marketing that only charges you when it works.
• The guest who already knew your name, typed it into a search engine, clicked the OTA result on top of the page, and booked — that’s a booking you already had, purchased at full price. The billboard effect is the term for the first case; the second is what happens when you don’t defend your own brand traffic.

You can’t sort these perfectly, and anyone promising a clean split is overselling. But you can move the needle: brand-name search coverage, a website that converts, rate and inclusion advantages that are visible on your own site, and enough consistency that guests have a reason to come back directly next time.

What to actually track

Five numbers, reviewed quarterly rather than daily:

1. Net ADR by channel, updated when contracts or fees change.
2. Fully loaded direct acquisition cost, separating attributable PPC and metasearch spend from period costs for the agency, technology, and in-house marketing work. Review it per direct booking and as a share of direct room revenue.
3. Channel mix by room nights, and how it’s moving. A mix that drifts toward higher-cost channels erodes revenue quietly, with no visible drop in ADR or occupancy — which is precisely why it goes unnoticed for a year.
4. Total variable acquisition cost as a share of room revenue. One number, tracked over time. If it’s rising while revenue is flat, you’ve found something.
5. Repeat and direct-return rate. The cheapest booking you’ll ever get is the second one from a guest you already served.

And when you build next year’s plan, plan the mix, not just the rate. A budget that assumes last year’s channel split while the market shifts underneath it will hit its revenue line and miss its profit line. Our hotel budgeting guide covers the build; this is the column most plans leave out.

(Full disclosure, since this is our product: Peaqplus reports revenue, ADR and room nights by channel and segment, so the mix side of this article — where the business comes from and how it’s shifting — is directly visible. What it does not do is calculate net ADR for you: your commission percentages, contract terms, PPC and agency spend, and internal marketing cost live in your contracts and your accounts, not in your PMS feed, so the cost column is something you add. We’d rather say that plainly than imply a report we don’t ship.)

Frequently asked questions

Should we charge more on OTAs to cover commission?

Maybe — where your contract and local law permit it. There is no universal rule. In the EEA, Booking.com may not prevent hotels from offering better prices or conditions elsewhere, including on their own websites; other platforms and jurisdictions may differ, so check the current agreement and local rules. Commercially, making direct better through added value, flexibility, or a member rate is often clearer than simply making the OTA price worse, because the OTA is also where many guests compare you. The rate parity glossary entry explains the distinction.

Isn’t it simpler to just cut OTA share?

Only if the bookings are replaceable. Cutting a channel removes both its cost and its volume, and if you can’t fill those nights another way, you’ve traded commission for empty rooms — the more expensive of the two. The sequence that works is to build the direct capability first (site, conversion, brand-search coverage, repeat guests), watch what actually shifts, and let the OTA share fall as a consequence rather than as an instruction.

Should agency fees and an in-house marketer’s salary be deducted from net ADR?

Only when a cost can be attributed directly and consistently to a booking should it enter strict net ADR. A monthly agency retainer or salary supports multiple campaigns, channels, and brand-building tasks, so it belongs in a separate, fully loaded direct-channel view. That does not make it any less real; it simply avoids mixing a booking-sensitive acquisition cost with capacity you pay for even if the month produces no additional bookings.

How often should we recalculate net ADR?

Once or twice a year is enough for the table itself — commission rates, contracts and fee structures don’t change monthly. What deserves quarterly attention is the mix: the share of room nights by channel, and the total acquisition cost as a percentage of revenue. Those move continuously, and they’re what turns a stable ADR into a shrinking margin without anything looking wrong.

Where to go from here

The glossary covers the terms: net ADR, channel mix, direct booking, cost of acquisition, and billboard effect. For the marketing side, read hotel digital marketing and which campaign actually brought bookings?; for the revenue side, how to increase RevPAR.

Two hotels, one ADR, different bank balances. The report was never going to tell you which one you are.