ARI (Average Rate Index) shows where your rate stands against your competitors: 100 means parity, 92 means you ask 8% less, 110 means you ask 10% more. It is an index of position, not of performance — and most of the mistakes people make with it hide in that difference.
The formula — and what exactly goes into it
The calculation is simple: your rate divided by the average rate of your comp set, times 100. If you ask €92 and your competitors average €100, your ARI is 92.
What is not simple — and almost never said — is which rate goes on top. At the big benchmarking companies, ARI is built on achieved ADR: what you finally collected against what they finally collected. Here the top line is the rate you set for the night — what the guest sees in the shop window while searching. Two different questions, both useful: “how do I look tonight?” and “what did I finally make?”. Do not mix them up: the first changes today, the second is fixed only after the guest has left.
Your ARI target is set in the Settings — 100 by default — with a tolerance band of ±3 points around it. Inside that band the index reads “on target”: a difference of one or two points is not a signal, it is noise.
Why the simple average lies
The hotel next door was renovated last year and asks €120. You ask €92. Are you 23% cheaper — or just 23% different? The simple average cannot tell, because it counts rates without knowing what the guest buys with each one.
That is why each competitor gets a quality index, with your own property at 1.00. Above 1 means “better than mine”, below 1 means “weaker than mine”. Their rate is divided by the index, so that it comes down to your level and you compare like with like.
Competitor B: 95 ÷ 1.05 = €90.48
Competitor C — same class: 88 ÷ 1.00 = €88.00
Simple average: (120 + 95 + 88) ÷ 3 = €101.00
→ ARI = 92 ÷ 101.00 × 100 = 91.1
Adjusted average: (92.31 + 90.48 + 88.00) ÷ 3 = €90.26
→ ARI = 92 ÷ 90.26 × 100 = 101.9
Same rate, same day, two completely different readings. The simple average says you sell 9% cheap and pushes you to raise. The adjusted one says you are at parity — because two of the three are objectively better properties, and their higher rate is no proof that you underprice.
Did you know? WisDom RM does not download competitor rates from anywhere and has no access to market data. You record the rates yourself, as you saw them — and ARI is calculated from those, with the quality indexes you have set.
Try it free for 14 days →When ARI gives no number
If no competitor rate was recorded for a night, the index is not calculated. It does not show 100, it does not show 0, it does not borrow the week’s average: it says “Not calculated without competitor rates” and stops there. An index without a denominator is not an index — it is a guess with two decimals.
There is a quieter case too, and it is worth knowing: the average comes from the competitors you recorded that day. If on Tuesday you noted all three and on Wednesday only one, you will see an index on both days — but they do not stand on the same ground. The Tuesday–Wednesday comparison then says more about your shift than about the market. A record of what each rate decision was based on is what saves you a month later, when you no longer remember what you were looking at.
Three traps that turn it upside down
- Non-refundable next to flexible. “€150 non-refundable” and “€150 free cancellation” are not the same rate — the gap between them is often around 10–15%. Put them in the same average and ARI shows parity while you are actually cheaper. The app lets you mark which rate is non-refundable, but it does not make the correction for you: it does not know how many flexible bookings cancel, and a “market” percentage would be invented.
- The room type is a lens. When you switch room type, the rate, the suggestion and ARI change — occupancy and booking pace do not, because they are always for the whole hotel. An ARI of 94 for the suite does not mean the hotel is cheap; it means the suite is.
- The index does not know whether they are filling. ARI 92 with the competition full and ARI 92 with the competition empty are the same number and two opposite situations. That is why ARI is always read next to your own booking pace and never alone — just as RevPAR is not read without the occupancy behind it. And next to the second compass, the comparison with last year: one places you against the market, the other against yourself.
A word about cutting the rate
The most common use of ARI is the worst one: “I am above the competition, so I cut”. An index of 104 with a good booking pace is not a problem; it is pricing power. The brakes that stop a hasty cut exist precisely because the index on its own is very persuasive.
Conclusion
ARI is one of the easiest indexes to calculate and one of the easiest to misread. Keep three things: use quality indexes so you compare like with like, do not ask it what the hotel across the road is selling, and when it has no rates, do not look for a number — the gap is the right answer. One thing worth trying: write down your three competitors’ rates for next weekend and see how far the index moves once you adjust them.
Mathematician with studies in hospitality management and years of night shifts in hotels. WisDom RM — and this blog — were born on the night shift.
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