What comes out of a hotel’s room revenue before the owner is paid?

Room revenue is the top line of a hotel’s statements, and it is easy to mistake for what the owner earns. It is not. Many costs sit between the two, and which ones apply depends on how the hotel is run. A buyer who knows the layers can ask the seller for the right documents instead of guessing from one headline number.

Costs of running the rooms

Start with what it takes to sell and prepare a room: housekeeping labour, laundry, supplies, front desk wages and utilities used by the guest floors. Hotels with a restaurant or event space have more departments, each with its own costs. Ask for the statement broken out by department so you can see which parts earn their keep and which are carried by others.

Commissions and fees

Online booking platforms and travel agents take a commission on the rooms they sell. A branded hotel may also pay fees to the brand, and a managed hotel pays a management company. Ask for the agreements, not only the totals, so you can see what is fixed and what moves with sales. Your lawyer should read them, as in contracts to review when buying a hotel.

Property costs, debt and replacement

Then come the building: insurance, maintenance, property taxes and any rent. Next is the reserve for replacing beds, carpets and fixtures, which is easy to overlook. Last come loan payments, which belong to the owner’s financing rather than the hotel’s operation. Your accountant can tell you how each appears in the books.

Owner-operated or managed

An owner who works at the hotel often takes pay as a mix of wages and profit, so the statements may not show what a manager would cost. If you plan to hire one, ask the seller what the work involves. For hidden costs in a smaller property, see costs a motel seller’s statements might not show.