Average Rate Index is a measure of how the hotel’s average rate compares to that of there competitors. The comparison works against a designated set of competitors (comp set), selected based on their likeness to your own business i.e. hotels with the similar brand, target audience and size. By choosing competitors that has a similar competition to your own, the company is ensuring the rate comparison is effective within the audience.
ARI = ADR ÷ Competitor’s ADR
Using ARI keeps the hotel up to date with your competition and gives the peace of mind that the hotel is not charging way too much or way too little. It’s a good way to keep the hotel up to date, with both feet in the game. A rate greater than 1 shows that the hotel is averaged priced higher than the competitors. While a rate lower than 1 means that the hotel is priced lower.
Knowing this data can help deciding whether to adjust the rates to increase bookings or attract lower occupancy but higher revenue, as it’s not always ideal to operate at 100% occupancy.