How do lenders size hotel debt off RevPAR?

Hotel debt yield sizing and RevPAR-based underwriting

Revenue calculation: room revenue is RevPAR (revenue per available room) × 365 nights × number of keys. RevPAR is the product of ADR (average daily rate) and occupancy. Lenders examine trailing-12, trailing-3, and projected stabilized RevPAR; the underwritten value typically takes the lower of trailing or projected with stress.

Operating expense ratio: select-service hotels (limited F&B, no banquet) operate at 60-70% expense ratios. Full-service (significant F&B, banquet, room service) operate at 70-80%. Luxury / resort can operate at 75-85% reflecting amenity intensity. Lenders use STR or Smith Travel comp data plus property-specific actuals to validate.

Debt yield calculation: NOI ÷ proposed loan amount = debt yield. Lender quotes a debt yield floor that the loan must meet. Select-service stabilized: 9.0%-11.0%. Full-service stabilized: 10.5%-12.5%. Luxury / resort: 11.0%-14.0%. Construction or repositioning deals price wider with stabilized debt yield as the test.

Underwriting timing: lenders look at trailing-12 first (most-credible cash flow). Properties with declining trailing-3 vs. trailing-12 face conservative underwriting. Properties stabilizing post-construction or post-PIP get evaluated against pro-forma stabilized.

Stress assumptions: per AHLA outlook data, conservative lenders apply RevPAR stress (10%-15% RevPAR decline scenario), occupancy stress, or expense inflation in sensitivity analysis. The DSCR at stress must remain above floor (typically 1.20x).

Sponsor playbook: build the sizing model both ways. RevPAR / debt yield approach and DSCR / amortization approach. Identify which is binding. Negotiate the binding constraint at term sheet, not the non-binding one.