Revenue Management

ARI — Average Rate Index

Your ADR share against the competitive set — how your pricing power stacks up against peers.

Academic definition

The Average Rate Index (ARI) measures a hotel's Average Daily Rate relative to that of its competitive set, indexed to 100 for fair share. It is calculated by dividing the subject hotel's ADR by the competitive set's ADR and multiplying by one hundred. An ARI above 100 indicates the hotel commands a higher average rate than its peers; below 100 indicates it sells at a relative discount. ARI isolates the rate dimension of competitiveness, complementing the Market Penetration Index for occupancy and the Revenue Generation Index for combined performance. It appears in standard third-party benchmarking reports and helps a hotel understand its pricing position. As a rate-based index, ARI does not account for occupancy or cost: a hotel can post a strong ARI while running low occupancy, and the rate it achieves is gross, before the commission and acquisition costs that determine what the hotel actually retains.

Worked example

Your ADR of ₹4,000 against a compset ₹4,200 gives ARI = 4,000 ÷ 4,200 × 100 ≈ 95 — trailing on rate, though Net ADR may tell a different story.

The ProfitPAR^™ lens

ARI flatters the pricing team — a number above 100 says "we hold rate better than the neighbours." But it indexes gross ADR, the brochure price, not the rate that survives the channel. A hotel can lead its compset on ARI and trail it on retained profit if its rate leadership is being delivered through high-commission OTAs while a rival quietly builds direct demand. ProfitPAR™ asks the sharper question: not whose ADR is higher, but whose Net ADR is higher. Rate leadership measured before the OTA takes its cut is a trophy that may not survive to the bank. Index on what you keep, not what you quote.

Leading on rate you paid commission to win is leading on a rate that is not yours.

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Worked examples use illustrative figures in Indian Rupee (₹) with lakh/crore conventions. They are composite and representative, not drawn from any single property. ProfitPAR™ is a trademark of Sibasish Misra.