Fundamento

The five numbers that actually govern a hotel

Five numbers govern nearly every hotel decision — RevPAR index, GOP margin, NOI after a stated reserve, DSCR, and cash-on-cash return — and almost everything else the industry quotes is either an ingredient of one of the five or commentary on it. Each one needs its convention stated on the same line it's reported, or it isn't finished.

RevPAR index compares a property's RevPAR to its competitive set's, with 1.00 meaning fair share of demand; on a worked property the index reads 0.96, meaning the hotel is capturing 96% of its fair share. GOP margin (GOP ÷ total revenue) was 41.4% on the same property. NOI after a stated FF&E reserve — never NOI without stating whether a reserve was deducted — came to $884,236, and GOP per available room (GOPPAR) to $42.19.

DSCR (NOI over annual debt service) needs a lender-standard minimum stated alongside it — 1.4x on the worked financing — and cash-on-cash return (annual pre-tax cash flow over invested equity) came to 3.51% in the modeled year, a number that is meaningless without knowing the leverage behind it.

None of these five is exotic, and none is optional to state precisely: a RevPAR number without its index, a GOP without its margin, an NOI without its reserve convention, and a return without its leverage are the four most common ways a hotel P&L misleads an otherwise careful reader.

#hotels#hospitality#RevPAR#GOP#metrics

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