Hotel Cap Rate Calculator
Value a hotel from its net operating income and cap rate, see value per key, the implied cap rate at an asking price and a ±1% sensitivity table.
How to use the free Hotel Cap Rate Calculator
- Enter your figures in the fields above – use real numbers from your PMS, channel manager or accounts.
- Tap the button to see the result instantly. Change any value to compare scenarios.
- Copy, print or save the result and use it in your daily or monthly review.
This Hotel Cap Rate Calculator runs fully in your browser on mobile or desktop – no sign-up and nothing is uploaded. Free hotel cap rate calculator. Value a hotel from NOI after FF&E reserve, get value per key, implied cap rate from asking price and a sensitivity table.
What a cap rate is
The capitalisation rate, or cap rate, links a property's stable yearly income to its value. If buyers expect a 9% yield from a hotel, every ₹1 of net operating income (NOI) is worth about ₹11.1 of value. A lower cap rate means a higher price for the same income, usually for safer, better-located or branded assets.
Getting NOI right for a hotel
For hotels, NOI is usually taken as EBITDA after management fees, property tax and insurance, minus a reserve for replacing furniture, fixtures and equipment. Leaving out the FF&E reserve overstates value, because every hotel must keep refreshing rooms. Use a normalised year, not one unusually strong or weak season.
- Revenue × margin: quick option when you know total revenue and a realistic EBITDA margin.
- NOI known: enter NOI before reserve from your P&L.
- FF&E reserve: often a few percent of total revenue; the tool deducts it before valuing.
Example
A 50-room hotel earns ₹10 crore revenue at a 30% EBITDA margin, or ₹3 crore. After a 4% FF&E reserve of ₹40 lakh, NOI is ₹2.6 crore. At a 9% cap rate the value is about ₹28.9 crore, or ₹57.8 lakh per key. If the seller asks ₹25 crore, the implied cap rate is 10.4%. The sensitivity table shows how a one-point change in cap rate moves value by several crores, which is why small assumptions matter.
Use it with other methods
Cap rate valuation suits stable, operating hotels. For new projects or turnarounds, a cash-flow approach is better: try the NPV and IRR calculator and cross-check with the hotel valuation calculator. For a purchase, loan or dispute, always rely on a registered valuer's report.
Remember that a buyer's cap rate already reflects risk. A new hotel with no trading history, a leased building or a remote location usually needs a higher cap rate, and therefore gets a lower value, than an established branded hotel in a strong market.
Frequently asked questions
How do you calculate a hotel's cap rate?
Divide net operating income after the FF&E reserve by the property price. For example, NOI of Rs 2.6 crore on a price of Rs 25 crore gives a cap rate of 10.4 percent.
What is a good cap rate for a hotel in India?
There is no single figure. It depends on city, location, brand, condition, structure and interest rates. Ask a registered valuer or look at recent comparable deals.
Why deduct an FF&E reserve from NOI?
Hotels must regularly replace furniture, fixtures and equipment. Deducting a reserve gives a more realistic sustainable income and avoids overstating value.
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