Rebuild the historical operating case before forecasting improvements. Separate genuine operating adjustments from changes that require your capital, management effort or risk.
Step 3.1: Reconcile the rooms business
For each month, calculate:
- Occupancy: rooms sold ÷ rooms available.
- ADR: room revenue ÷ rooms sold.
- RevPAR: room revenue ÷ rooms available, or ADR × occupancy.
- GOPPAR: gross operating profit ÷ available room nights, using a clearly specified operating-account definition.
These measures answer different questions; none is automatically cash available for distribution. STR/CoStar’s glossary and reporting guidance provide the metric definitions and benchmarking context. (costar.com)
Reconcile PMS revenue to the general ledger, then explain differences against merchant settlements and bank receipts. Check deposits, taxes, refunds, group billing, timing differences, package allocations and merchant-channel reporting with the accountant.
Keep a separate inventory bridge for physical rooms, rooms removed from sale and the reporting denominator. A renovation forecast should not gain apparent occupancy simply by concealing unavailable rooms.
Step 3.2: Build an adjustment register
For every proposed earnings adjustment, require an explanation, supporting record and replacement-cost treatment.
| Seller’s proposed adjustment | Buyer’s test |
|---|---|
| Owner salary removed | What paid role replaces the owner’s work? |
| Related-party expense removed | What would an independent supplier charge for the same service? |
| One-time legal or repair cost removed | Why is it nonrecurring, and is there an unresolved underlying issue? |
| Management fee reduced | Is the replacement agreement executable, including central charges and transition costs? |
| Property tax held flat | What does local post-transfer analysis support? |
| Insurance held at seller’s premium | What coverage and price can the buyer obtain? |
| Restaurant loss eliminated | What lease, outsourcing or closure plan supports the change? |
| Renovation uplift included | Where are the budget, approvals, downtime and demand evidence? |
Maintain three separate columns: reported historical, normalized current operation, and buyer’s improvement case. Do not describe future execution benefits as existing earnings.
Step 3.3: Rebuild payroll from positions and coverage
Use departmental staffing schedules rather than a single payroll percentage. Estimate coverage hours, pay, benefits, overtime, relief staffing, recruitment and any housing obligation.
Use local occupational data and actual recruiting evidence as cross-checks. For example, a September 28, 2026 Gecko Hospitality posting for an Ozarks boutique-resort general manager advertised $65,000–$85,000 base plus on-site housing. That is one role-specific recruitment observation, not a US boutique-hotel GM benchmark. BLS also provides state and area occupational wage resources. (geckohospitality.com)
Have employment counsel review applicable wage, overtime, tip and classification issues. The Department of Labor’s hotel and motel fact sheet identifies several recurring FLSA compliance issues; local requirements still need separate checking. (dol.gov)
Step 3.4: Calculate channel contribution without double-counting
Use this proposed management-analysis bridge:
Recognized booking revenue − acquisition charges not already netted from revenue − incremental servicing costs = booking contribution before fixed overhead
Include actual commissions, booking and payment charges, relevant loyalty costs and attributable marketing expenditure. Treat direct bookings as a channel with costs, not as free demand. Kalibri’s own methodology emphasizes acquisition-cost-adjusted contribution rather than revenue alone; its commercial claims are not a substitute for your invoices and reconciliations. (kalibrilabs.com)
Gate 3: the model must explain how reported revenue becomes normalized operating cash. Material unexplained differences remain an investment condition, not a footnote.