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Author Question: Using the Hubbart formula, calculate the necessary ADR from a 100-room hotel with 1 million in ... (Read 7 times)

joesmith1212

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on: Sep 11, 2019

Question 1

What is DDA and why is it difficult to measure for the industry at large?
 
  What will be an ideal response?

Question 2

Using the Hubbart formula, calculate the necessary ADR from a 100-room hotel with 1 million in annual expenses and a 60 occupancy rate that cost 10 million to build if the investor wants to earn a 20 return on investment.
 
  What will be an ideal response?


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GCabra

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Reply #1 on: Sep 11, 2019

Answer 1

DDA is daily dollar average received for a rented car. It is difficult to measure for the industry at large because several companies routinely include revenues from insurance and other charges in the total, which distorts the comparisons between companies.

Answer 2

Based on the Hubbart formula, to earn a 20 return on investment (20 x 10 million = 2 million), a hotel must generate 3 million in revenue since annual expenses = 1 million. Thus, the required ADR would be 136.99 or 137 (rounded) based on: 3 million/21,900 room days (100 rooms x 365 days x .60 occupancy rate) = 136.99.


joesmith1212

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Reply #2 on: Sep 11, 2019
TY


GCabra

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Reply #3 on: Sep 11, 2019
You're welcome


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