A good margin is one that is clearly defined, supported by comparable operations and sufficient for the investment’s capital needs. A percentage without its accounting basis is not a useful buying signal.
The illustrative hotel above has a 30% GOP margin, a 16% cash margin before debt service after the replacement allowance, and 4% remaining cash as a percentage of revenue. All three describe the same hypothetical business.
For a defensible comparison, request:
- The exact profit numerator and revenue denominator.
- Consistent treatment of management, affiliation and central-service charges.
- Comparable food-and-beverage intensity and service standards.
- Staffing costs that reflect the proposed operating model.
- A clear bridge to replacement funding and owner-level costs.
HFTP states that the USALI 12th Revised Edition took effect on January 1, 2026. For comparisons spanning 2025 and 2026, ask the accountant whether presentation or account mapping changed before attributing a movement entirely to operating performance. USALI is an accounting framework, not a promise that every supplied statement is comparable. (academy.hftp.org)
Recommended decision rule: reject an unlabeled target margin. Replace it with a reconciled cash-flow bridge and a shortlist of the operating assumptions necessary to achieve it.