$188.33 was the answer recently in 2019. But – how did it get there? Could it ever become higher?
Here’s a Breakdown of Minneapolis’ Average Daily Rate, or “ADR:”
Several factors make up for an ADR such as the frequency and salience of events nearby, the time of year you’re looking, the number of vacant units present, etcetera – however, ADR isn’t based on demand metrics alone; Other important factors are the type and size of property you’re renting. For this example; A Downtown Minneapolis apartment rent is averaged with the qualities of 1 bed and 1 bath units that range in footage from 800 to 1,200 square feet. On top of that – In 2019, there was an average of 91 booked properties per month in West Downtown Minneapolis alone. Booked properties mean demand and demand means business, so why is ADR important?
Analyzing with ADR
By understanding the Average Daily Rate a listing can earn, we are allowed to create financial projections and make pricing adjustments based on several factors, specifically occupancy rates, for specific prices. For example, if a listing is at 80% occupancy within the Minneapolis ADR of 188.33, but 75% occupancy at $195, you may make see more profits by going with a higher or lower rate than the ADR. We can multiply that same $188.33 by Minneapolis’s average occupancy rate to create a Pro-forma (value projection) for any listings we may be eyeing. In this case, Minneapolis’s annual average occupancy in 2019 was 63%, so in 2019 an apartment could have made upwards of $43,000.
But what about that hinted Increasing ADR?
Owners have no control over several ADR-fueling factors, yet fortunately – there is one variable that can increase ADR and an online travel agency (OTA) platform can provide that to you. Optimizing listings (link to optimizing article) ensures the best experience to potential guests and often leads to better reviews. By performing positively, platforms will rank listings more highly which leads to more bookings. Part of optimization can even include revenue augmentation through automating pricing algorithms and more. The more you know!