Hotel Revenue Glossary · Financial

NOI (Net Operating Income)

Total hotel revenue minus all operating expenses, before debt service, capital expenditures, and income taxes. NOI represents the property's ability to generate cash from operations and is the starting point for most hotel valuation models.

Why it matters: NOI is the single most important number for hotel owners and investors because it determines the property's value and its ability to service debt. Revenue management directly drives NOI — every dollar of incremental revenue with high flow-through increases NOI.

Worked example: Total revenue of A$8.4 million against A$5.6 million of operating expenses leaves NOI at A$2.8 million. You find A$120,000 of extra rooms revenue over the year — a 1.4% lift on total revenue. Rooms revenue flows through at roughly 70% after commission, housekeeping and laundry, so A$84,000 reaches NOI. That is a 3% increase in the number the owner is judged on, from a revenue movement most people would call rounding.

Common mistake: Presenting a revenue win to ownership without the flow-through. A$120,000 of new OTA volume at 15% commission and A$34 a night in variable cost does not land as A$120,000 of NOI. Convert every revenue number into its NOI contribution before it goes in the board pack, or the next quarter's questions will do it for you.

All glossary terms GOPPAR (Gross Operating Profit Per Available Room) EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) Flow-Through