For an entire hotel, average daily rate - ADR - is ADR (your total room revenue for the night divided by the number of rooms you rented that night, period, regardless of room type or room inventory). You can't really pro-rate it for two or three-room suites, because you can't rent just one room in a suite and leave the other unoccupied, or rent it to someone else. ("ADKey" is a term so not in use to describe a hotel statistic, that you can't even get any relevant hits if you Google it, which I attempted before I answered your question; but I guess you could refer to it as ADKey if you want, since that's about the size of it.)
ADR works better as a statistic if it is applied to similar room types; the more similar, the better. I could see applying ADR to an entire hotel with a mix of rooms and suites then, in addition, calculating ADR for standard rooms (and within that, ADR for doubles, ADR for kings, etc.), as well as ADR for suites (then within that, ADR for 'shotgun' suites like you'd find in a Comfort Suites or the older Embassy Suites, ADR for studio suites, ADR for one-bedroom suites, ADR for two-bedroom suites, etc.); as useful information.
(I've never seen any variations of 'revenue per square foot' used as a hotel statistic, but calculating your total - maybe annual - revenue divided by the total number of square footage in your building taken up by rentable rooms and suites in your inventory, might be a useful statistic and open up some possibilities, if you're into new hotel development. I was a theatre manager for ten years, and one metric used in the early days when multiplex cinemas were first becoming the norm, in the late '70's and early '80's, was revenue per square foot, calculated on the basis of the entire building footprint.)
Hopefully you've got a property management system that'll print out a report with most of that information -- revenue, occupancy, and ADR by room type -- on it, because doing it manually every night is a time consuming exercise that will drive your night auditor nuts and make him not like you, but if it must be done manually, it becomes truly daunting unless it's done nightly.
At many hotels that have a mix of suites and conventional rooms, the suites are underused, and the manager can't figure out a way to keep them rented at an acceptable price -- so, yes, your ADR figures are going to be skewed accordingly. At most all-suite properties, availability can be a problem, and most of the reason why is indeed because of demand. The reason is that, while owners and managers of hotels where conventional rooms prevail don't understand many of the differences between rooms and suites, and the requirements attendant to marketing the suites; owners and managers of all-suite, extended stay hotels, must - not only are you dealing with a different room-type, but they operate on a slightly different business model.
A hotel room (whether double, queen, king, etc., so long as it's one room) and a hotel suite (whether studio, one-bedroom, two-bedroom, etc.) is a unit within a hotel that is accessible with a single key, and is rented in its entirety to a single guest; but there the similarity ends. Suites are not only furnished differently from rooms; they're priced differently from rooms, and they're marketed differently from rooms.
Lots of people don't realize this, so lots and lots of people who have hotels with a mix of rooms and suites don't do a very good job of marketing their suites. (The same applies to hotel chains and brands that have a mix of conventional and all-suites hotels: one notorious example, Choice Hotels' Comfort Inns and Comfort Suites. Except for the '100% non-smoking requirement' at all Comfort Suites, the operation of most Comfort Suites is indistinguishable from the operation of a Comfort Inn.) Too many owners, and managers, regard suites as merely an upscale hotel room with extra amenities (like, for example, an extra room, or a kitchenette), for which you can charge more per night; like the difference between buying the plain-vanilla Toyota Corolla or the fully-loaded Toyota Avalon. (The actual difference involved is more similar to choice of whether to buy the Toyota Prius or the four-wheel-drive Toyota Tundra with the double cab - question number one is, 'what is the customer going to use it for?')
Suites require a higher investment to build, but produce a more steady, if lower (as a percent), return if marketed properly. Most well-marketed all-suite properties will have an ADR that considered alone isn't too impressive given the added investment, but enjoy a higher occupancy, and much lower payroll and operating costs (especially in housekeeping and maintenance).
A hotel room can be occupied for a night, or even a month or more, or even a year or more; but long term occupancy is what suites are for. The way to do suites right - in designing them, furnishing and equipping them, pricing them, and marketing them - is to remember the magic words extended stay. (The guest is going to be there several days, maybe a week or longer; so she's going to want extra space, and a place to store and prepare food at some level approaching a decent meal, so she doesn't have to eat out every night. If during the day, she has some guy over for a business meeting, she wants a well-defined, if not completely separate, living room area - she doesn't want to be trying to discuss business with the guy while he's alternately gazing into her eyes and looking over her shoulder at the bed; likewise, if the guest is a man who needs to have some woman over for a business meeting, he doesn't want her to be uncomfortable about meeting him 'in a hotel room'.)
One of the most successful and well-established all-suite chains is Residence Inn by Marriott (InterContinental's brands, Candlewood Suites and Staybridge Suites, do well, too). Look on their website, pick a Residence Inn in a town you've always wanted to visit, and price it. Notice, for a stay of one or two days, a high nightly rate - higher even for a studio suite then what you'd pay for a conventional room at, say, a Fairfield by Marriott, or a Holiday Inn Express. But price that same suite for a stay of a week or two, and watch what happens to the rate - it goes down, maybe 25%. (It'll vary with local market conditions.)
And Marriott's not even too creative in how they go about it. Sometimes the rate doesn't quite go down 25%, but it still goes down. Sometimes, the rate drops after a week, but doesn't drop any further after two weeks.
But it works for them. One thing you'll notice if you play with some Residence Inns, or Staybridge Suites, or Candlewood Suites at their booking webpage; is that availability can be a problem - many of them stay pretty full. A hotel with mostly conventional rooms in its inventory is considered to be doing well if it average close to 70% occupancy (for most hotels, on average, 62% occupancy is considered the break-even point). For an all-suite property, occupancy in the eighties and nineties is the norm. It's like buying at Wal-Mart: their profit margin on their items is lower, but their volume is higher and that's where they make it up.
Of course, another part of the reason that availability at an all-suite property can be a problem is the need for the hotel to get a return on its investment and costs. Let's say I have a 74-room property, with - among the more conventional hotel rooms - three one-bedroom suites, and three two-bedroom suites. If I price the two-bedroom suites at the price of three rooms - since a two-bedroom suite is essentially three rooms - the price is going to be a little on the high side and I won't get any takers unless it's the only thing I have left, everything else in town is full and someone's desperate. If I price it at what someone is more willing to pay for one night, it'll barely cover my costs, if at all: for example, it'll take my housekeepers at least twice as long to make it for the next guest, once the last guest checks out. (Either way, it explains the lower return on investment for suites)
So, what I'll do in most cases is make it available at the lower of the two pricing options - with a three-day minimum length of stay requirement. If you want it, I'm going to charge you for three days, even if you only need it for a night. (Or I might let you have it for a night or two, but the price will be higher.) This way, I can get a return on it: for my housekeepers, there's nothing to servicing a stayover other than putting in new towels, wiping things down, maybe changing the sheets on the bed, and doing spot cleaning - nothing near the work involved in making a vacated room or suite for the next guest. Even for a conventional room, a good housekeeper can remake a vacant room in a half hour, but can service a stayover in fifteen minutes; maybe less in each case, but that's the quota we try for with the housekeepers. With one-bedroom suites, I can maybe afford to be more flexible, but I would have a minimum stay requirement on every suite if I could rent them that way at all. (I might put a family who requests connecting rooms in a suite for a night, since our current prototype provides several suites in any location, but does not provide connecting conventional rooms.)
Accordingly, this will affect availability of the various types of suites as you 'shop' the Residence Inn website and see how they're marketed differently from regular hotel rooms. You might notice that a one-bedroom suite, for example, isn't available for a night - but magically becomes available if you need it for four nights. (Another thing that will affect availability is how the traffic is stacked, and inventory is allocated. You can book a suite for six days, if it's available all six of those days. But if there's a pre-existing reservation by someone who has it booked for days three, four and five of those six days, it's not going to be available for those six days, at least not all six of them. You might get it for two nights, absent a minimum stay requirement to the contrary. This is something that's more of a management challenge than something demand-related, but still, all-suite properties benefit from a higher occupancy than a property where conventional rooms dominate.)
Suites are designed to accommodate people who are going to occupy the room for an extended stay - three days or more - or who are going to have a whole bunch of people in the room, or who are going to have visitors over while they're there. That's why they have the kitchenette, that's why they have the extra space (people are willing to pay for that, rather than spend several nights cooped up in a standard 12x24-foot hotel room), and that's how they roll. They're an all-but-altogether different sales and marketing challenge for a hotel. Yes, a nicely designed and appropriately furnished and equipped suite will work well as an "upgrade and value-add for meeting planners, brides, etc." (not trying to be a wiseguy, Susan :-) ), but suites are not just hotel rooms with extra bells and whistles that you can charge more for. (Unless, of course, you're at a Comfort Suites. But I've seen even some of them get it right.)
So, this is going to skew your ADR statistic when you have a hotel with a mix of conventional rooms and suites. Indeed, when considering a specific hotel on Loopnet or on a hotel broker's website, unless you know how many suites it has out of its total number of keys, it can make the ADR statistic for the hotel itself highly questionable - all the more so if you don't know whether or not those suites are being rented at all and if so, for how much. But I can't think of a way to fix the problem except to break down your ADR by room types and suite types, in addition to considering the ADR for the entire hotel.
(I've never seen any variations of 'revenue per square foot' used as a hotel statistic, but calculating your total - maybe annual - revenue divided by the total number of square footage in your building taken up by rentable rooms and suites in your inventory, might be a useful statistic and open up some possibilities, if you're into new hotel development. I was a theatre manager for ten years, and one metric used in the early days when multiplex cinemas were first becoming the norm, in the late '70's and early '80's, was revenue per square foot, calculated on the basis of the entire building footprint.)
Hopefully you've got a property management system that'll print out a report with most of that information -- revenue, occupancy, and ADR by room type -- on it, because doing it manually every night is a time consuming exercise that will drive your night auditor nuts and make him not like you, but if it must be done manually, it becomes truly daunting unless it's done nightly.
At many hotels that have a mix of suites and conventional rooms, the suites are underused, and the manager can't figure out a way to keep them rented at an acceptable price -- so, yes, your ADR figures are going to be skewed accordingly. At most all-suite properties, availability can be a problem, and most of the reason why is indeed because of demand. The reason is that, while owners and managers of hotels where conventional rooms prevail don't understand many of the differences between rooms and suites, and the requirements attendant to marketing the suites; owners and managers of all-suite, extended stay hotels, must - not only are you dealing with a different room-type, but they operate on a slightly different business model.
A hotel room (whether double, queen, king, etc., so long as it's one room) and a hotel suite (whether studio, one-bedroom, two-bedroom, etc.) is a unit within a hotel that is accessible with a single key, and is rented in its entirety to a single guest; but there the similarity ends. Suites are not only furnished differently from rooms; they're priced differently from rooms, and they're marketed differently from rooms.
Lots of people don't realize this, so lots and lots of people who have hotels with a mix of rooms and suites don't do a very good job of marketing their suites. (The same applies to hotel chains and brands that have a mix of conventional and all-suites hotels: one notorious example, Choice Hotels' Comfort Inns and Comfort Suites. Except for the '100% non-smoking requirement' at all Comfort Suites, the operation of most Comfort Suites is indistinguishable from the operation of a Comfort Inn.) Too many owners, and managers, regard suites as merely an upscale hotel room with extra amenities (like, for example, an extra room, or a kitchenette), for which you can charge more per night; like the difference between buying the plain-vanilla Toyota Corolla or the fully-loaded Toyota Avalon. (The actual difference involved is more similar to choice of whether to buy the Toyota Prius or the four-wheel-drive Toyota Tundra with the double cab - question number one is, 'what is the customer going to use it for?')
Suites require a higher investment to build, but produce a more steady, if lower (as a percent), return if marketed properly. Most well-marketed all-suite properties will have an ADR that considered alone isn't too impressive given the added investment, but enjoy a higher occupancy, and much lower payroll and operating costs (especially in housekeeping and maintenance).
A hotel room can be occupied for a night, or even a month or more, or even a year or more; but long term occupancy is what suites are for. The way to do suites right - in designing them, furnishing and equipping them, pricing them, and marketing them - is to remember the magic words extended stay. (The guest is going to be there several days, maybe a week or longer; so she's going to want extra space, and a place to store and prepare food at some level approaching a decent meal, so she doesn't have to eat out every night. If during the day, she has some guy over for a business meeting, she wants a well-defined, if not completely separate, living room area - she doesn't want to be trying to discuss business with the guy while he's alternately gazing into her eyes and looking over her shoulder at the bed; likewise, if the guest is a man who needs to have some woman over for a business meeting, he doesn't want her to be uncomfortable about meeting him 'in a hotel room'.)
One of the most successful and well-established all-suite chains is Residence Inn by Marriott (InterContinental's brands, Candlewood Suites and Staybridge Suites, do well, too). Look on their website, pick a Residence Inn in a town you've always wanted to visit, and price it. Notice, for a stay of one or two days, a high nightly rate - higher even for a studio suite then what you'd pay for a conventional room at, say, a Fairfield by Marriott, or a Holiday Inn Express. But price that same suite for a stay of a week or two, and watch what happens to the rate - it goes down, maybe 25%. (It'll vary with local market conditions.)
And Marriott's not even too creative in how they go about it. Sometimes the rate doesn't quite go down 25%, but it still goes down. Sometimes, the rate drops after a week, but doesn't drop any further after two weeks.
But it works for them. One thing you'll notice if you play with some Residence Inns, or Staybridge Suites, or Candlewood Suites at their booking webpage; is that availability can be a problem - many of them stay pretty full. A hotel with mostly conventional rooms in its inventory is considered to be doing well if it average close to 70% occupancy (for most hotels, on average, 62% occupancy is considered the break-even point). For an all-suite property, occupancy in the eighties and nineties is the norm. It's like buying at Wal-Mart: their profit margin on their items is lower, but their volume is higher and that's where they make it up.
Of course, another part of the reason that availability at an all-suite property can be a problem is the need for the hotel to get a return on its investment and costs. Let's say I have a 74-room property, with - among the more conventional hotel rooms - three one-bedroom suites, and three two-bedroom suites. If I price the two-bedroom suites at the price of three rooms - since a two-bedroom suite is essentially three rooms - the price is going to be a little on the high side and I won't get any takers unless it's the only thing I have left, everything else in town is full and someone's desperate. If I price it at what someone is more willing to pay for one night, it'll barely cover my costs, if at all: for example, it'll take my housekeepers at least twice as long to make it for the next guest, once the last guest checks out. (Either way, it explains the lower return on investment for suites)
So, what I'll do in most cases is make it available at the lower of the two pricing options - with a three-day minimum length of stay requirement. If you want it, I'm going to charge you for three days, even if you only need it for a night. (Or I might let you have it for a night or two, but the price will be higher.) This way, I can get a return on it: for my housekeepers, there's nothing to servicing a stayover other than putting in new towels, wiping things down, maybe changing the sheets on the bed, and doing spot cleaning - nothing near the work involved in making a vacated room or suite for the next guest. Even for a conventional room, a good housekeeper can remake a vacant room in a half hour, but can service a stayover in fifteen minutes; maybe less in each case, but that's the quota we try for with the housekeepers. With one-bedroom suites, I can maybe afford to be more flexible, but I would have a minimum stay requirement on every suite if I could rent them that way at all. (I might put a family who requests connecting rooms in a suite for a night, since our current prototype provides several suites in any location, but does not provide connecting conventional rooms.)
Accordingly, this will affect availability of the various types of suites as you 'shop' the Residence Inn website and see how they're marketed differently from regular hotel rooms. You might notice that a one-bedroom suite, for example, isn't available for a night - but magically becomes available if you need it for four nights. (Another thing that will affect availability is how the traffic is stacked, and inventory is allocated. You can book a suite for six days, if it's available all six of those days. But if there's a pre-existing reservation by someone who has it booked for days three, four and five of those six days, it's not going to be available for those six days, at least not all six of them. You might get it for two nights, absent a minimum stay requirement to the contrary. This is something that's more of a management challenge than something demand-related, but still, all-suite properties benefit from a higher occupancy than a property where conventional rooms dominate.)
Suites are designed to accommodate people who are going to occupy the room for an extended stay - three days or more - or who are going to have a whole bunch of people in the room, or who are going to have visitors over while they're there. That's why they have the kitchenette, that's why they have the extra space (people are willing to pay for that, rather than spend several nights cooped up in a standard 12x24-foot hotel room), and that's how they roll. They're an all-but-altogether different sales and marketing challenge for a hotel. Yes, a nicely designed and appropriately furnished and equipped suite will work well as an "upgrade and value-add for meeting planners, brides, etc." (not trying to be a wiseguy, Susan :-) ), but suites are not just hotel rooms with extra bells and whistles that you can charge more for. (Unless, of course, you're at a Comfort Suites. But I've seen even some of them get it right.)
So, this is going to skew your ADR statistic when you have a hotel with a mix of conventional rooms and suites. Indeed, when considering a specific hotel on Loopnet or on a hotel broker's website, unless you know how many suites it has out of its total number of keys, it can make the ADR statistic for the hotel itself highly questionable - all the more so if you don't know whether or not those suites are being rented at all and if so, for how much. But I can't think of a way to fix the problem except to break down your ADR by room types and suite types, in addition to considering the ADR for the entire hotel.
Originally appeared on Quora
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