Net Operating Income (NOI) – A company’s operating income after operating expenses are deducted but before income taxes and interest are deducted. If this is a positive value, it’s referred to as net operating income, while a negative value is called a net operating loss. NOI often is viewed as a good measure of company performance. Some believe this figure is less susceptible than other figures to manipulation by management.
Non-Recourse – a provision in a loan that prohibits the lender from seeking debt payments from the owner of the property (i.e. if Marriott International owns a hotel that cannot pay its debt, the lender cannot go to Marriott International to satisfy the debt).
OCC (Penetration) Index – An index designed to measure a hotel’s share of the segment’s (comp set, market, tract, etc.) demand (demand = rooms sold).
(Hotel Occupancy / Segment Occupancy) x 100 = Occupancy Index
Fair share can be thought of as the subject hotel’s “piece of the pie” in the market. For example, if there are 1,000 rooms in the competitive set and the subject hotel has 100 rooms, the subject hotel’s fair share is 10.00%. If the subject hotel accounts for 10.00% of the room nights generated within the competitive set in a given time period, the subject hotel’s actual share equals its fair share, giving it an occupancy index of 100%.
Occupancy – Occupancy is the percentage of available rooms that were sold during a specified period of time. Occupancy is calculated by dividing the number of rooms sold by rooms available.
Occupancy = Rooms Sold / Rooms Available
Online Travel Agency (OTA) – An Internet-based hotel and travel reservations system. Hotels typically provide inventory to OTAs, which sell the rooms in exchange for a commission.
Other Revenue – Includes all other revenue excluding room revenue and F&B revenue.
Other Revenue = Total Revenue – (Room Revenue + F&B Revenue)
Pipeline – Pipeline data details existing hotel supply and projected growth globally. Construction data is gathered from the major chains and management companies as well as TWR/Dodge Construction, tracking all stages of development.
– existing supply: All hotels opened and operating, including those opened in the last 12 months.
recently opened: Opened within the past 12 months.
– in construction: Ground has been broken or the owner is finalizing bids on the prime (general) contract.
– final planning: The project will go out for bids, or construction will start within 4 months.
– planning: An architect or engineer has been selected for the project and plans are underway. Initial approvals have usually been granted.
– pre-planning: No architect has been selected.
Portfolio Lender – A company that originates mortgage loans and holds a portfolio of their loans instead of selling them off in the secondary market. A portfolio lender makes money off the fees for originating the mortgages and also seeks to make profits off the spread (difference) between interest-earning assets and the interest paid on deposits in their mortgage portfolio.
Many mortgage lenders avoid the risks of holding mortgages, only profiting from origination fees and then quickly selling off the mortgages to other financial institutions. There are pros and cons to both methods. Companies who profit from mortgage origination experience less risk and likely a more stable profit stream, while portfolio lenders have a chance to experience more upside on their portfolio but also more risk.
Price Tier (U.S. Only) – The three categories of a state, STR market or submarket, which are defined by actual average daily room rate or average published rate. The three categories are:
- upper tier – top 33% room rates;
- middle tier – middle 33% room rates; and
- lower tier – lowest 33% room rates.
Product Improvement Plan/Property Improvement Plan (PIP) – A requirement by hotel brands that owners undertake renovations and upgrades to meet current chain standards. PIPs are generally required when a hotel joins a brand system, when a branded hotel is sold or when a franchise or membership agreement comes up for renewal.
Public-Private Investment Program – A plan designed to value and remove troubled assets from the balance sheet of troubled financial institutions in the U.S. The PPIP’s goal is to create partnerships with private investors to buy toxic assets. The program is designed to increase liquidity in the market and serve as a price-discovery tool for valuing troubled assets.
The PPIP consists mainly of two parts: a Legacy Loans Program and a Legacy Securities Program. The Legacy Loans Program uses FDIC-guaranteed debt along with private equity to purchase troubled loans from banks. The Legacy Securities Program is designed to use funds from the Federal Reserve, Treasury and private investors to reignite the market for legacy securities. Legacy securities include certain mortgage-backed securities, asset-backed securities and other securitized assets the government deems to be eligible for the program.