Average Rate Index meaning in hospitality

ARI is a key performance metric in the hospitality industry to compare your average daily rate (ADR) to your competitors. It’s calculated by dividing your ADR by your competitors' ADR and then multiplying by 100. If ARI is above 100 you are outperforming, below 100 you need to improve.

ARI is useful for hospitality professionals because it gives you a clear picture of how your property is pricing its rooms compared to similar properties in the area. This helps you make informed decisions on pricing, marketing and overall competitiveness. By tracking ARI over time you can see trends and adjust your approach to maximise revenue and market share.

Let’s say you’re the revenue manager of a boutique hotel in London. Your hotel’s ADR for the past month was £150 and your competitive set’s ADR was £140. To calculate your ARI you would divide 150 by 140 and multiply by 100 to get 107.14. So your hotel is 7.14% better than your competitors on average daily rate. With this information you might decide to keep your current pricing or even increase it to take advantage of your strong position in the market.