Performance & revenue
ARI
Also written: average rate index
What ARI means
Average Rate Index (ARI) measures a hotel's Average Daily Rate performance relative to a defined competitive set. A score of 100 indicates rate parity with competitors, above 100 demonstrates price leadership, and below 100 signals underpricing against the market.
Formula
ARI = (Hotel ADR / Competitive Set ADR) × 100
How it is used
Revenue managers use ARI alongside Market Penetration Index (MPI) and Revenue Generation Index (RGI) to evaluate pricing power. An ARI above 100 paired with low occupancy indicates overpricing that sacrifices volume. Conversely, an ARI below 100 with high occupancy suggests uncaptured rate potential. Operators analyze weekly and monthly ARI trends from STR reports to adjust rate structures, evaluate corporate contract performance, and justify rate positioning to owners and asset managers.
Worked example
A boutique hotel achieves an ADR of $210 during peak season. Its competitive set reports an average ADR of $175 for the same period. The hotel's ARI is ($210 / $175) × 100 = 120. This shows the property priced 20% higher than its primary competitors.
Common mistake
Relying on ARI in isolation can mask revenue underperformance if aggressive pricing drives away enough demand to collapse overall market share.
Related terms
Frequently asked
+What does ARI mean in a hotel?
Average Rate Index (ARI) measures a hotel's Average Daily Rate performance relative to a defined competitive set. A score of 100 indicates rate parity with competitors, above 100 demonstrates price leadership, and below 100 signals underpricing against the market.
+How is ARI calculated?
ARI = (Hotel ADR / Competitive Set ADR) × 100
+What is an example of ARI?
A boutique hotel achieves an ADR of $210 during peak season. Its competitive set reports an average ADR of $175 for the same period. The hotel's ARI is ($210 / $175) × 100 = 120. This shows the property priced 20% higher than its primary competitors.
+What is the most common mistake with ARI?
Relying on ARI in isolation can mask revenue underperformance if aggressive pricing drives away enough demand to collapse overall market share.