Operating Expense Ratio
Calculation: Operating Expense Ratio = ((Total Operating Expenses – Depreciation) / Gross Revenue) * 100%
Ideal ratio: below 80%
What is the Definition and Importance of ‘Operating Expense Ratio’:
Using this KPI can help you evaluate whether an investment is worth your time by giving insight into how much it costs to manage/maintain the project.
How? By taking the operational cost and rental income into account you will be able to compare the ratio (ideally under 80%) to make a well-informed decision for your investment opportunity. This step can´t be overlooked and our hotel revenue management consulting company always recommends calculating the Operating Expense Ratio to ensure the full potential and financial health of your projects.
Keep reading about hotel investment KPIs, or delve into more hotel revenue management consulting articles, below:
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About the Author:
As CEO and Founder of XOTELS, Patrick Landman has made it his mission to turn hotels and resorts into local market leaders. XOTELS´ diverse expertise and deep-knowledge across revenue management consulting, hotel management, and hotel consulting, enables us to drive results for independent boutique hotels, luxury resorts, and innovative lodging concepts. Below you will find opinion articles written by Patrick Landman.
