Hotel Revenue Glossary · Financial

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

A measure of operating performance that adds back non-cash charges (depreciation, amortization) and financing costs (interest, taxes) to net income. In hotel context, EBITDA approximates the cash-generating ability of the property before capital structure effects.

Why it matters: EBITDA is widely used in hotel transactions and management company evaluations because it normalizes for different ownership structures and tax situations. It allows apples-to-apples comparison of operating performance across properties.

Worked example: Start at the bottom and work up. The P&L shows net profit of A$640,000. Add back interest of A$980,000, tax of A$275,000, and depreciation and amortisation of A$355,000, and EBITDA is A$2,250,000. On A$9 million of revenue that is a 25% margin. The hotel across the road produces the same A$2.25 million on A$12 million of revenue — an 18.75% margin — and is the weaker operation despite the larger top line.

Common mistake: Reading EBITDA as cash in the bank. It excludes the FF&E reserve, and a hotel that has deferred soft-goods refurbishment for six years reports a flattering EBITDA right up to the year the rooms have to be redone. Ask what capital the number is quietly borrowing from before you celebrate the margin.

All glossary terms NOI (Net Operating Income) GOPPAR (Gross Operating Profit Per Available Room) Capitalization Rate (Cap Rate)