MCD Hotel Advisors

How To Develop A Comp Set For Your Revenue Projections

Building a Comp Set is an important step in hotel underwriting. The Comp Set has several applications. One of the most important of those is for building a Penetration Analysis to help solidify your ADR and Occupancy projections. Creating a Comp Set is an analytical process that can go through many revisions. However, starting with the right framework is key. Below are criteria that you will want to consider in your analysis…

  • Product Level: Meaning the quality of the rooms, facilities, furniture
  • Service Levels: Look for properties that provide the same level of treatment to guests
  • Amenities: This can be in-room amenities or amenities in the common areas
  • Star Rating: This is kind of a byproduct of the factors above, but I recommend it being part of your analysis
  • Property Type: Urban, Beach, Extended Stay, Budget, etc.
  • Reviews: There are a number of ways to handle this and get this information; but some kind of inclusion/weighting for reviews should be involved
  • Journey: The guest physical journey to arrive at your hotel
  • Location: Environment and what it is near
  • Room Count

Response

  1. How To Project ADR & OCC In Your Hotel Pro Forma – MCD Hotel Advisors

    […] It is always best practice to project your ADR & OCC that is derived from a Comp Set. The Comp Set (at least 4 other hotels) will allow you to get an idea of what similar hotels are achieving so that you have a realistic basis for your projections. This is beneficial for your underwriting not only because it allows you to see if the project makes financial sense but also provides credibility when you pitch to investors/lenders. Furthermore, in bigger deals with Hotel Management Agreements, the Comp Set will need to be agreed upon with the management company for some of the clauses in the HMA. In other words, the Comp Set will need to be solid. Please see my blog post on How To Develop A Comp Set. […]

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