hotel finance
Hospitality Financial Leadership: What Are CAP Rates and How to Use Them
David Lund | November 4, 2024
A capitalization rate, or cap rate, is a measure of the income return on an asset, such as hotel or rental property, relative to its purchase price. It is calculated by dividing the net operating income (NOI) of the asset by its purchase price. That’s what this piece is all about. It also must be said from the get-go that understanding cap rates is not so difficult. “Normally” NOI is calculated using all income less all operating expenses but does not include costs for debt, depreciation, amortization, reserve for capital expense or income taxes. That’s the typical basis for the calculation of the hotel’s value, est...
Ensuring Your Deal Closes: Three Areas to Focus On
Eric Guerrero | October 31, 2024
Both buyers and sellers want a seamless hotel transaction closing, but a variety of potential pitfalls can slow a deal’s closing. Below, we review three key areas of a hotel sale that may present obstacles: financing, PIP costs, and property insurance premiums. We also provide recommendations that help you to anticipate and prevent issues. Financing Securing debt at a reasonable market rate with good terms is still one of largest obstacles in closing a deal. In order to obtain a good loan, a buyer must have a strong balance sheet with a credible global cash-flow and solid track record of success in owning and operating other hotels. Bu...
Methods in the Madness: Insiders Share Their Budgeting Approach
HotStats | October 15, 2024
Budgeting is like training for an Olympic marathon. Days are spent creating a plan to address weaknesses, build on strength and endurance, and hedge against unfortunate events. Money is earmarked for activities that hopefully will generate income or sponsorships to procure better equipment. A significant amount of time is spent too in scoping out conditions in the field and closest competitors. The goal, after all, is to be in business for the long haul while staying lean and nimble in the short term. Like all athletic training, there are no easy ways to go about budgeting. “There’s a lot going around in my head,” says Neetu Mistry, ...
Hospitality Asset Managers Association (HAMA) Releases Fall 2024 Conference Industry Outlook Survey Results
HAMA | October 15, 2024
LA JOLLA, Calif., Oct. 15, 2024—The Hospitality Asset Managers Association (“HAMA”) today announced the results of its Fall 2024 Industry Outlook Survey. The semi-annual report conveyed the latest opinions, experiences and predictions of nearly 70 hotel asset managers on topics ranging from budget forecasts to management company outlooks. Conducted in conjunction with HAMA'S 2024 Annual Fall Meeting that was held in La Jolla, Calif., the results were presented to media live with a concluding Q&A session via online conferencing. In total, 65 asset managers, comprising approximately one-third of membership, participated in the...
Hospitality Financial Leadership: Managing F&B Expenses and How to Record Them on Your P&L
David Lund | September 30, 2024
As I have said in many of my earlier posts, Food and Beverage is special. And I mean that with all sincerity because it's an integral part of our business especially with a full service offering. However, there are challenges that we need to overcome and one big one is how to report the profit and loss activity so that it is as meaningful as possible. I say “possible” because there are no absolute methods to get 100% of the picture that really work. Many try to get and stay on top of their costs and payroll and that’s the right thing to do. The reality is that it’s never going to be perfect. It’s not going to be perfect because w...
The Future of Investments and Financing – Hospitality Sector Trends
Hala Matar Choufany, ISHC | September 12, 2024
The hospitality industry is undergoing a significant transformation, driven by technological advancements, shifting consumer preferences, and evolving global economic trends. These changes are reshaping how investments and financing in the sector are approached. Over the next two decades, the industry is expected to witness substantial evolution in investment strategies and priorities. Currently, there are approximately 300,000 rooms under development across the GCC. However, in the current economic environment, challenges such as rising borrowing costs, development expenses, and operational expenditures are increasingly impacting hotel va...
Hospitality Financial Leadership: Why You Want to Use a Rolling Forecast
David Lund | September 9, 2024
Rolling forecasts are nothing new but I must point out that most hotels don’t use them, and they really should. It’s an incredibly useful tool that is literally worth its weight in gold. That being said, it doesn’t weigh much but once you start to use one it’s an indispensable tool that you must have each month, and its impact and importance usually gains weight and momentum into the final few months of the year. Like the plot in a good mystery, it can take a sudden turn and produce an unexpected ending. To start out we need to define how we produce a rolling forecast and point out the best practices around its creation. Then, we w...
Hospitality Financial Leadership The Number 1 Financial Mistake Hoteliers Make
David Lund | August 12, 2024
Now that’s a big statement to put out there, but I’m very confident that I’m pretty close to 100% correct with my observations. The reason why I’m so sure is that I know most hoteliers are not financial people and they are oblivious to the issue I am going to explain. On top of that – I see this all the time. It’s also pretty clear that most hoteliers don’t have an accounting background and knowing this fact prompts me to write this piece and hopefully clear up the picture for others. The catalyst for my article is the many discussions I've had with my clients over the years around this topic. Here is the...
