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.
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