Companion to: Real Estate Decoded Chapter 17 (Hospitality) - Workbook tab 07_Hotel
Inputs
Outputs
RevPAR
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Rooms revenue (annual)
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F&B revenue (annual)
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Total revenue
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Gross Operating Profit
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Less: Fixed charges
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Less: FF&E reserve
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Net Operating Income (after FF&E)
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Per-key valuation
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Implied total value
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How to read this tool: RevPAR (Revenue per Available Room = ADR x Occupancy) is the single most-cited hospitality metric. Selective-service hotels (Marriott Courtyard, Hilton Garden Inn) run 65-75% occupancy at ADR $130-180. Full-service / luxury runs 70-80% at ADR $250+. FF&E reserve at 4% of rooms revenue is the standard institutional convention.
What this tool is for
Hotel underwriting has higher operating leverage than any other commercial asset class - a 5% ADR move flows almost dollar-for-dollar to NOI. The cycle behavior is amplified accordingly. This tool gives you the sensitivity framework before you build the workbook model.
Benchmarks the practitioner watches
- Selective-service: RevPAR $90-130, GOP margin 38-42%, cap 8.0-9.0%
- Full-service: RevPAR $180-250, GOP margin 30-35%, cap 7.5-8.5%
- Luxury / resort: RevPAR $400+, GOP margin 28-32%, cap 6.5-8.0%
- FF&E reserve: 4% of rooms revenue (institutional standard)
- Per-key valuation: limited-service $80-140K, full-service $200-400K, luxury $500K+
Common mistakes
- Underwriting on ADR alone without occupancy seasonality
- Skipping the FF&E reserve - PIP costs at sale or renewal will surface it anyway
- Underestimating brand-management fees - typically 3-4% of rooms revenue plus incentive
- Modeling F&B at break-even when actual margins run 15-25% in selective-service
Educational reference only. Not investment, tax, legal, or real-estate advice. Confirm market-specific cap rates, lender terms, and tax overlay with your own advisors before acting.