How to read this result
In the default example, hotel noi is $1,200,000.00. Results describe this input scenario; they are not a recommendation.
Change one assumption at a time to see how it affects the scenario. Compare periods and cost definitions consistently. Negative results show a modeled shortfall; an unavailable ratio needs a valid denominator.
Formula and methodology
Add rooms revenue and other operating revenue, deduct hotel operating expenses, then divide NOI by the chosen cap rate. The entered revenue and expenses must describe the same operating period.
Enter percentages as whole numbers: 5 means 5%. When used as a factor, the calculation divides a percentage by 100. Percentage outputs multiply the final ratio by 100. Calculations retain precision internally; displayed amounts and rates are rounded to two decimals.
Variables and input definitions
- Annual rooms revenue (USD/year)
- Annual room revenue. Minimum: 0.
- Annual other operating revenue (USD/year)
- Food/beverage and other property operating revenue. Minimum: 0.
- Annual operating expenses (USD/year)
- Operating expenses before debt service/depreciation. Minimum: 0.
- Cap rate (%)
- User-entered cap rate. Minimum: 0.01. Maximum: 100.
Worked example
This example uses the exact prefilled inputs above. Reset defaults to restore this scenario after making changes.
| Item | Default scenario |
|---|---|
| Annual rooms revenue | $2,500,000.00 |
| Annual other operating revenue | $500,000.00 |
| Annual operating expenses | $1,800,000.00 |
| Cap rate | 9.00% |
| Item | Default scenario |
|---|---|
| Hotel NOI | $1,200,000.00 |
| Indicated hotel value | $13,333,333.33 |
Assumptions and limitations
Simplified real-property income approach; hotel enterprise/intangible components and FF&E treatment may require professional valuation adjustments.
Results describe this input scenario; they are not a recommendation.
The tool uses values you supply. It does not retrieve market prices, verify leases or inspect a property. Results exclude items outside the listed inputs. Review local requirements and the relevant contract when a payment, fee or allocation depends on them.
Common mistakes
Hotel operating assumptions should account for relevant staffing, utilities and operating costs. Management, franchise or reserve treatments must be consistent with the NOI and cap-rate basis.
Sources and method references
These references provide context for the method and terminology. They do not endorse this tool or validate your property assumptions.
- Office of the Comptroller of the Currency — Comptroller's Handbook — Commercial Real Estate LendingNOI, direct capitalization, cap-rate valuation and DCF concepts for commercial real estate.
- Appraisal Institute — Basic Formulas — Income CapitalizationIncome/cap-rate/value relationships, gross income multiplier and debt-coverage formula references.
Frequently asked questions
Does the model value the hotel business separately?
No. It provides a simplified property income indication. It does not separate business enterprise, furniture and real estate values.
Is debt service a hotel operating expense here?
No. Direct capitalization uses income before debt service. Financing is separate from this valuation method.