What is the meaning / definition of ARI in the hospitality industry?
ARI stands for: Average Rate Index.
It is a Hotel KPI that measures the performance of their ADR compared to their comp set during the same period (competitive set: a group of other hotel brands and competitor that have a similar target market and concept).
How do you calculate ARI?
- ARI Formula: ARI= Hotel ADR / Aggregated group of hotel’s ADR
- $150 / $120 = 1.25
(this means that your ADR is 25% better than the average of your competitive set)
- ARI Index = 1.00 The hotel ADR is equal to the average ADR of their comp set
- ARI Index > 1.00 The hotel ADR is more expensive than the average ADR of their comp set
- ARI Index < 1.00 The hotel ADR is less expensive than the average ADR of their comp set
Depends on the occupancy rate, the hotel can choose to lower, equal or higher their ADR compared to the ADR or their comp set in order to gain more revenue and make themselves more competitive towards their competitors.
- Average Rate Index