GOPPAR – Gross operating profit per available room. The metric measures performance across all revenue streams.
Group Rooms – Group rooms are sold simultaneously in blocks of a minimum of ten rooms or more (e.g. group tours, domestic and international groups, association, convention and corporate groups).
Hold Period – the timeframe that an investor owns a hotel; in underwriting, owners typically assume a 5-year or 10-year hold period.
HOST Study – The HOST (Hotel Operating Statistics) Study contains information on hotel revenues and expenses broken down by departments including rooms, food and beverage, marketing, utility costs and maintenance. This report is published annually by STR and the results are based on the operating statements of more than 5,000 U.S. hotels. Custom HOST Reports are also available for entire states, metropolitan areas or competitive sets.
Hotel Types – Hotel classifications are driven primarily by building structure and secondarily by service level. Chain management has provided us with hotel type classifications for a significant number of locations. Hotel types are:
– All-Suite: All guest rental units consist of one or more bedrooms and may include a separate living area. Many suites contain kitchenettes or mini-refrigerators. Suite hotels often have no integrated dining facilities available; however, many offer complimentary breakfast.
– Boutique: These are hotels that appeal to their guests because of their unusual amenity and room configurations. They are normally independent and smaller than 200 rooms with a high rack rate. However, there are three chains whose hotels are automatically coded as boutique: W Hotels (a Starwood brand), Kimpton Hotels and Joie de Vivre Hotels.
– Conference: Lodging hotels that place major focus on conference operations. Hotels must meet guidelines of the International Association of Conference Centers.
– Convention: Hotels with a minimum of 300 rooms and large meeting facilities (minimum of 20,000 Square feet) and not part of the conference center group.
– Destination Resorts: These are hotels that appeal to the leisure traveler, are located in resort markets and are considered a destination in themselves. They have extensive amenities, multiple pools, multiple restaurants and normally a beautiful physical hotel. If a hotel has the word “resort’ in its name and is part of a luxury or upper-upscale chain, it is automatically considered a destination resort.
– Extended Stay: Hotel must have kitchenettes, including a stove-top burner. Extended stay hotels focus on attracting hotel guests for extended periods of time, typically more than 5 consecutive nights. These hotels quote weekly rates.
– Gaming/Casino: Lodging hotels that place major focus on casino operations.
– Golf: Hotel must have a golf course on hotel property to be considered. It is not sufficient if the hotel only has privileges on the course next door.
– Hotel/Motel: A standard hotel or motel operation.
– Ski: Guests have easy access to ski slopes.
– Spa: Hotel must have designated spa facility and offer treatments. Offering a sauna or hot tub/whirlpool would not qualify.
– Waterpark: An indoor or outdoor waterpark resort as a lodging establishment containing an aquatic facility with a minimum of 10,000 square feet of waterpark space and inclusive of amenities such as slides, tubes and a variety of water play features.
Hybrid Bonds – A single financial security that combines two or more different financial instruments. Hybrid securities, often referred to as “hybrids,” generally combine both debt and equity characteristics. The most common type of hybrid security is a convertible bond that has features of an ordinary bond but is heavily influenced by the price movements of the stock into which it is convertible.
Index – An index measures a hotel’s performance relative to an aggregated grouping of hotels (e.g. competitive set, market, submarket). We utilize indexes to measure performance in three key areas: occupancy, ADR and RevPAR.
An index of 100 means a hotel is capturing a fair share compared to the aggregated group of hotels. An index greater than 100 represents more than a fair share of the aggregated group’s performance. Conversely, an index below 100 reflects less than a fair share of the aggregated group’s performance.
Interest Rate – the rate of return paid to the lender; the interest rate on a Fixed Rate loan remains the same throughout the lifetime of the loan; the interest rate for a Floating Rate loan varies with a variable base rate.
Internal Rate of Return (IRR) – The discount rate often used in capital budgeting that makes the net present value of all cash flows from a project equal to zero. Generally the higher a project’s internal rate of return, the more desirable it is to undertake the project. IRR can be used to rank several prospective projects a company is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first. IRR is sometimes referred to as economic rate of return (ERR).
Think of IRR as the rate of growth a project is expected to generate. While the actual rate of return that a given project ends up generating will often differ from its estimated IRR rate, a project with a substantially higher IRR value than other available options still would provide a much better chance of strong growth.
IRRs also can be compared against prevailing rates of return in the securities market. If a company can’t find any projects with IRRs greater than the returns that can be generated in the financial markets, it may choose to invest its retained earnings into the market.