Behind the model
How the hotel model works
Every number in the model is worked out from your inputs; nothing is hidden. Below is each formula, paired with a worked example from the default 60-room midscale hotel at a ₹5,500 room rate (ADR). Change any input in the model and the same formulas apply.
Rooms, room rate and RevPAR
The number of rooms, the average room rate (ADR) and steady-state occupancy drive revenue. Revenue per available room (RevPAR) is the number hoteliers and banks watch most.
Rooms available / year
keys × 365
60 × 365 = 21,900
Rooms sold / year (steady state)
keys × 365 × steady-state occupancy
× 70% = 15,330
Room rate (ADR, average daily rate)
rate per sold room a night (your input)
₹5,500
Revenue per available room (RevPAR)
ADR × occupancy
₹5,500 × 70% = ₹3,850
Operating profit per available room (GOPPAR)
gross operating profit ÷ available rooms
₹2,674 / room-night
Set-up cost (CapEx)
Construction and furniture and equipment (FF&E) grow with the number of rooms; land (with stamp duty), pre-opening costs and approvals are added once; then a buffer for surprises (contingency) and interest during construction (IDC). Cost per room is worked out, never assumed. Enter building costs including GST: hotels can’t claim back GST on construction (section 17(5)).
Construction
keys × construction / key
60 × ₹45 L = ₹27 Cr
FF&E
keys × FF&E / key
60 × ₹8 L = ₹4.8 Cr
Stamp duty on land
land × 6% (only when land > 0; 5–7% by state)
₹8 Cr × 6% = ₹48 L
Base cost
land + stamp duty + construction + FF&E + pre-opening + line items
₹44.3 Cr
Buffer for surprises (contingency)
base × 8%
₹3.54 Cr
Interest during construction (IDC)
total × debt% × interest% × (months ÷ 12) × ½
24 mo → ₹2.51 Cr
Total project cost
base + contingency + IDC
₹50.3 Cr
Set-up cost per room (worked out)
total project cost ÷ keys
₹83.9 L / key
Running costs (OpEx), GOP and operator fees
Running costs are a share of revenue; that share moves only by the gap between cost rises and room rate rises (revenue already includes the room rate rise). Gross operating profit (GOP) is revenue minus running costs, before operator fees and maintenance: the standard hotel accounting basis (USALI) that Indian hotel management agreements use for the incentive fee.
Running costs
revenue × 55% × ((1 + 5%) ÷ (1 + 5%))^(yr−1)
once busy: ₹7.16 Cr a year
Gross operating profit (GOP)
revenue − running costs (before operator fees and maintenance)
once busy: ₹5.86 Cr a year (45% of revenue)
Operator base fee
revenue × 2% (Indian management agreements: 1–3%)
once busy: ₹26 L a year
Operator incentive fee
max(0, GOP) × 7% (Indian management agreements: 6–8% of GOP)
once busy: ₹41 L a year
Maintenance reserve
base set-up cost × 1% a year (roughly the usual 4%-of-revenue reserve)
₹52.7 L a year (with yearly rises)
Total running costs and fees
running costs + base fee + incentive fee + maintenance
once busy: ₹8.36 Cr a year
Revenue and the occupancy ramp
Room revenue is rooms sold × ADR; food, banquets and other revenue is a share of room revenue. A new hotel fills up in a straight line from opening to a steady level; in a phased opening each phase fills up on its own.
Room revenue
keys × occupancy × ADR × 365 × (1 + room rate rise)^(yr−1)
once busy: ₹9.3 Cr a year
Food, banquets and other revenue
room revenue × 40%
once busy: ₹3.72 Cr a year
Total revenue
room revenue + F&B revenue
once busy: ₹13 Cr a year
Occupancy ramp (straight line)
start + (steady − start) × (age − 1) ÷ (ramp years − 1)
50% → 70% over 3 years
Phased opening
each group of rooms opens in its own year and fills up from scratch
all at once by default
Loan, repayment holiday, tax and depreciation
A long hotel loan with an interest-only repayment holiday (moratorium) through construction and the first years of trading, then principal repayments; straight-line depreciation; tax with losses carried forward.
Loan and your money
loan = total cost × loan % ; your money = the rest
₹25.2 Cr loan · ₹25.2 Cr your money
Construction delays first revenue
lead years = ⌈ months ÷ 12 ⌉ − 1 (extra years before revenue)
24 months → 1 lead year(s)
Repayment holiday (moratorium)
interest only for the first N years from opening, then repay principal
2-year holiday, 14-year loan
Equal-principal repayment
loan ÷ (loan term − holiday) each repayment year
₹2.1 Cr
Fixed EMI option
loan × r ÷ (1 − (1+r)^−(loan term − holiday))
the same payment every year
Interest
outstanding balance × interest rate
year 1: ₹2.64 Cr (interest only in the holiday)
Depreciation (straight-line, without land)
(total cost − land − stamp duty) ÷ 20 years: land is never depreciated in India
₹2.09 Cr a year
Tax (with loss carryforward)
max(0, PBT − losses) × 25% ; losses carry forward
early losses reduce later tax
Returns, loan cover and the sale
The project cash flows (before any loan) give the project return; the cash flows to you give the return on your money. Project return leaves out the tax saving on loan interest, so the loan doesn’t change it. The hotel is sold at the end for its operating profit ÷ the exit yield (cap rate).
Operating profit (EBITDA)
revenue − running costs − operator fees − maintenance
once busy: ₹4.66 Cr (36% margin)
Project cash flow
EBITDA − project tax − set-up cost (project tax ignores interest)
project return (IRR) 10.3%
Cash to you (equity cash flow)
PAT + depreciation − principal − set-up cost paid from your money
return on your money 11.8%
Value above your hurdle (NPV)
Σ project cash flow ÷ (1 + minimum return)^t
at 11% = -₹3.56 Cr
Payback
the year total project cash flow so far first turns positive
12.2 years
Loan cover (DSCR)
CFADS ÷ loan repayment ; CFADS = EBITDA − tax (repayment years only)
min 1.23× · avg 1.49×
Loan-life cover (LLCR)
today’s value of CFADS over the loan’s life ÷ loan
1.40×
Money back per ₹1 (equity multiple)
Σ cash returned to you ÷ your money put in
4.94×
Sale value at the end (terminal value)
last year’s EBITDA ÷ exit yield (cap rate)
₹8.37 Cr ÷ 8% = ₹105 Cr
Capital gains tax on the sale
max(0, sale − net book value) × 12.5%: India’s 12.5% long-term capital gains tax on property (since 2024, no indexation); land keeps its full book value because it is never depreciated
₹10.7 Cr
Break-even occupancy
steady-state occupancy at which NPV = 0
75%
Energy, water and carbon
What the hotel uses and emits once it is busy, worked out per room sold.
Power
rooms sold × kWh per sold room
6,13,200 kWh a year
Water
rooms sold × litres per sold room ÷ 1000
9,198 kL a year
Carbon
energy × grid emission factor ÷ 1000
435 tonnes CO₂ a year
Carbon intensity
carbon ÷ rooms sold
28.4 kg per sold room
These are planning estimates you can check line by line, not a quote. The typical Indian figures are assumptions from public sources, not ClarWorks data, and every one can be changed in the model. Open the model →
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