Rate Parity – A situation in which a travel supplier, such as a hotel, maintains the same price across all its various distribution channels.
REIT – Real Estate Investment Trust – an special type of corporate entity that invests in real estate (on the debt or equity side); this type of company has special tax benefits (i.e. a lower tax rate), but has certain restrictions and is required to distribute 90% of its profits to shareholders
Real Estate Mortgage Investment Conduit – A complex pool of mortgage securities created for the purpose of acquiring collateral. This base is then divided into varying classes of securities backed by mortgages with different maturities and coupons. As a synthetic investment vehicle, REMICs consist of a fixed pool of mortgages broken apart and marketed to investors as individual securities.
Real-Estate Owned – Property owned by a lender, usually a bank, after an unsuccessful sale at a foreclosure auction. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank. The minimum bid in most foreclosure auctions equal the outstanding loan amount, the accrued interest and any fees associated with the foreclosure sale.
If a property is real-estate owned, the bank will then go through the process of trying to sell the property on its own. It will try to remove some of the liens and other expenses on the hotel, and then try to sell it on the market. Real-estate investors will often go after these properties as banks aren’t in the business of owning hotels and, in some cases, the hotels can be bought at a discount to its market value.
Receivership – A type of corporate bankruptcy in which a receiver is appointed by bankruptcy courts or creditors to run the company. The responsibility of the receiver is to recoup as much of the unpaid loans as possible. Being in receivership isn’t an enviable situation for a company. Oftentimes, receivers find that the best way to pay back loans is to liquidate the company’s assets, which effectively puts the company out of business.
Recourse – a provision in a loan that allows the lender to seek compensation from the borrower when the property is in default; (i.e. if Marriott International owns a hotel that cannot pay its debt, Marriott International is obligated to pay the debt themselves); in such a case, the loan terms are often better than a non-recourse loan because there is less risk of the lender losing money on the loan.
Refinancing – to pay off an existing loan with a new loan, ideally with better terms (e.g. lower interest rate, higher LTV, etc.); this may occur because the market has improved and the owner is able to obtain better loan terms or the asset gained value, allowing the owner to increase cash flow to investors and improve the overall IRR on the investment; or this may occur when the loan term of the current loan matures, forcing the owner to obtain a new loan; this is the problem that arose during the recent downturn: many loans matured at a point where values had declined and loan terms were difficult, resulting in numerous bankruptcies, foreclosures, and loan extensions/modifications.
Regions (U.S.) – There are nine that divide the United States:
- New England (Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island);
- Middle Atlantic (New York, Pennsylvania, New Jersey);
- South Atlantic (Maryland, Delaware, West Virginia, Virginia, North Carolina, South Carolina, Georgia, Florida);
- East North Central (Michigan, Wisconsin, Illinois, Indiana, Ohio);
- East South Central (Kentucky, Tennessee, Alabama, Mississippi);
- West North Central (Minnesota, North Dakota, South Dakota, Iowa, Nebraska, Missouri, Kansas);
- West South Central (Arkansas, Oklahoma, Texas, Louisiana);
- Mountain (Montana, Idaho, Wyoming, Colorado, Utah, Nevada, Arizona, New Mexico); and
- Pacific (Alaska, Washington, Oregon, California, Hawaii).
Return On Capital Employed (ROCE) – A financial ratio that measures a company’s profitability and the efficiency with which its capital is employed. It’s calculated as: Earnings Before Interest and Tax (EBIT) divided by Capital Employed.
Return On Investment (ROI) – the percent gained (or lost) on an investment; = investment gain ÷ initial investment; for example, if you buy a hotel for $10 million and sell it for $12 million, the ROI is 20% ($2 million gain ÷ $10 million initial investment)
RevPAR (revenue per available room) – Revenue per available room (RevPAR) is the total guest room revenue divided by the total number of available rooms. RevPAR differs from ADR because RevPAR is affected by the amount of unoccupied available rooms, while ADR shows only the average rate of rooms actually sold.
Occupancy x ADR = RevPAR
RevPAR (yield) index – A RevPAR (yield) index measures a hotel’s fair market share of their segment’s (competitive set, market, submarket, etc.) revenue per available room. If a hotel is capturing its fair market share, the index will be 100; if capturing less than its fair market share, a hotel’s index will be less than 100; and if capturing more than its fair market share, a hotel’s index will be greater than 100.
RevPAR index is calculated:
(Hotel RevPAR / Segment RevPAR) x 100 = RevPAR Index
Fair share can be thought of as the subject hotel’s “piece of the pie” in the market. For example, if the subject hotel’s RevPAR is $50 and the RevPAR of its competitive set is $50, the subject hotel’s index would total 100. If the subject hotel’s RevPAR totaled $60, its index would be 120, which indicates that the subject hotel has captured more than its fair share. If the subject hotel’s RevPAR totaled $40, its index would be 80, which indicates that the subject hotel has captured less than its fair share.
Room Revenue – Total room revenue generated from the sale or rental of rooms.
RRM – room revenue multiplier – the ratio of value to room revenue; = value ÷ room revenue
Rooms Available (room supply) – The number of rooms in a hotel or set of hotels multiplied by the number of days in a specified time period.
Example: 100 available rooms in subject hotel x 31 days in the month = room supply of 3,100 for the month
Rooms Sold (room demand) – The number of rooms sold in a specified time period (excludes complimentary rooms).