I have an upcoming interview with a GP that invests in hotels and was told that after the interview I will be given a 2-hour modeling test. I have limited hotel experience and I'm trying to brush up ahead of time. Does anyone have any case study prompts they can share or at least point me in the right direction so I can get some practice in?
Thanks in advance!
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Depending on your level, Adventures in CRE have a hotel model you can download.
Learn the basic metrics such as RevPar, ADR, etc. and how they are calculated, occupancy % levels play a part in this.
Familiarise yourself with the basics of Management Agreements/Contracts in the hospitality industry and the terms that need to be modelled such as FF&E allowance, management fees and incentive fees.
Entry/Exit can be calculated by either a cap rate or an EBIDTA multiple (basically an inverted cap rate) eg. a gross cap of 6% = 16.66x EBIDTA (1 / 0.06).
Everything else is really just typical RE modelling stuff, the key item is just learning how to get to that bottom line NOI. No harm in glancing over different departmental revenue/expenses beforehand but they are generally straightforward enough.
Where can we find sample(s) of Management Agreement contracts between the hotel operator and the property owner?
Not sure about sample agreements, also don't know what market you're in and how/if they vary much between countries, but google 'hotel management contracts in Europe' and there is a good synopsis via pdf from a company called HVS.
Edit: Didn't see the comment from @Capital360. Take his advice.
If you have no exposure to underwriting a hotel deal then I feel like it's gonna be tough for you. It's a little different than most CRE asset classes in terms of UW. I was in a similar spot and ended up buying the full A.CRE Accelerator program, including all the models, as they have a hotel acquisition model. It's expensive but helped me to land the job 🤷. Would definitely try to find some sort of hotel model to look at before the interview.
Is the hotel case study from A.CRE The Stone Hotel case study? I ask because that’s what I’m using as practice.
That's not a part of the Accelerator program so I haven't done it but I'm sure it would be helpful. They provide a shell hotel acquisitions model that helps you understand how to model a hotel acquisition.
You can go to brokers websites (CBRE, MM, or Loopnet) and fill out NDAs and download marketing materials. Flip to the financials section and study the historical and projected operating statements. After a few you’ll get the gist. Sometimes they even put return models in there for you.
OP how did the modeling test go? I have a 3-hour hotel acquisition test coming up with limited hotel experience as well. Any chance you could share the case study or I can DM you?
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