How to use
Use this worksheet to size a hotel CRE loan from RevPAR-driven NOI under a debt yield floor (typical 11% to 13% on stabilized hotels, 13%+ on transitional). Walks the math from occupancy and ADR through NOI, debt yield, and loan sizing, with sensitivity to a RevPAR shock and operating-margin compression.
Section 1. RevPAR-driven NOI build
Start with rooms revenue, layer in F&B and other revenue (full-service only), then deduct operating costs to reach NOI. RevPAR is the single most important operating metric, small RevPAR shocks translate to large NOI shocks at hotel operating leverage.
- Rooms revenue = keys × 365 × RevPAR (RevPAR = occupancy × ADR).
- F&B and other revenue (full-service): typically 25% to 40% of total revenue.
- Operating expenses: select-service 50% to 55% of revenue, full-service 60% to 70% of revenue.
- NOI = total revenue − operating expenses − management fee (3% to 5%) − FF&E reserve (4% to 5%).
Section 2. Debt yield floor and loan sizing
Hotel debt sizes off debt yield (NOI / loan amount), not LTV or DSCR alone. Debt yield is the bankruptcy-remote measure most resilient to operating-business volatility and the metric that matters in stress.
- Stabilized full-service or select-service: 11% to 13% debt yield floor.
- Transitional / value-add hotels: 13% to 15% debt yield floor.
- Loan amount = NOI / debt yield floor.
- Cross-check vs. DSCR (1.30x to 1.40x typical) and LTV (60% to 70% on stabilized).
- Binding constraint typically debt yield on stabilized; LTV in low-cap-rate markets; DSCR in high-rate environments.
Section 3. RevPAR shock and stress sizing
Lenders apply a RevPAR shock to test resilience, typically 10% to 20% RevPAR decline applied to the underwriting NOI, with operating-margin compression layered in (operating leverage means a 10% RevPAR drop is a 25% to 30% NOI drop).
- RevPAR shock, 10% to 15% on stabilized; 20%+ on transitional.
- Operating-margin compression, 200 to 500 bps margin haircut layered on shocked revenue.
- Stress NOI = shocked rooms revenue + F&B − stress-margin operating expenses.
- Stress debt yield = stress NOI / loan amount, must clear stress floor (typically 9% to 10%).
Section 4, PIP reserve sizing
PIP reserves at acquisition or refinance are required by both the brand and the lender. Brand-letter PIP scope drives the reserve; lender adds contingency.
- PIP reserve = brand-letter scope × 110% to 115% (for contingency).
- Funding mechanics, escrow at closing or earnout structure tied to completion milestones.
- PIP reserve typically excluded from loan amount (net of reserve) or funded via earnout.
- Coordinate franchise-renewal cycle with loan maturity to avoid mid-loan PIP triggers.