Glossary
Hotel investment glossary. Definitions for the terms hotel investors actually use.
Each entry has a 30-word direct-answer definition for the LLM lift, a worked example, common misconceptions, and a 5-question FAQ. Public sources cited.
adr
ADR (Average Daily Rate)
ADR, or average daily rate, is a hotel's rooms revenue divided by the number of occupied rooms in the same period. It measures pricing power per night sold.
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bov
BOV (Broker Opinion of Value)
A hotel BOV, or broker opinion of value, is a written valuation prepared by a hotel investment-sales broker that estimates the price an asset would clear in the current market, supported by comp set, financial analysis, and a buyer-pool view.
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comp-set
Competitive Set (Comp Set)
A competitive set is the group of nearby hotels a property is benchmarked against in its STR report. Hilton's 2025 Hampton disclosure document says each hotel generally must identify at least 3 competitors.
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dscr
Debt Service Coverage Ratio (DSCR)
Debt service coverage ratio is net operating income divided by annual debt service. A 1.35x DSCR means a hotel produces 35 percent more cash than the loan needs.
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debt-yield
Debt Yield
Debt yield is a hotel's net operating income divided by the loan amount, expressed as a percentage. It measures the lender's return if it had to take the asset back.
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defeasance
Defeasance
Defeasance releases a hotel from a CMBS mortgage by replacing the property with government securities that make the remaining loan payments. Tax rules bar it within 2 years of the securitization's startup day.
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ffe-reserve
FF&E Reserve
An FF&E reserve is money set aside each year, usually quoted as a percentage of total revenue, to replace a hotel's furniture, fixtures and equipment. HVS called 4 percent of revenues typical in 2014.
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comfort-letter
Franchise Comfort Letter
A comfort letter is a three-party agreement among a hotel franchisor, the owner and the lender. It gives the lender notice of franchise defaults and time to cure them. Hilton's 2025 Hampton document lists a $3,500 processing fee.
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franchise-fdd
Franchise Disclosure Document (FDD)
A Franchise Disclosure Document is the 23-item disclosure a franchisor must give a prospective franchisee at least 14 calendar days before signing or paying. For a hotel it is the public source for brand fees, terms and build costs.
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going-concern-value
Going-Concern Value
Going-concern value is the value of a hotel as an operating business: real estate, furniture and equipment, and intangibles together. Federal appraisal guidelines dated December 2, 2010 say it may not stand in for market value of the real property.
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gop
Gross Operating Profit (GOP)
Gross operating profit is hotel revenue minus departmental and undistributed operating expenses. It comes before management fees, property taxes, insurance and the FF&E reserve, so it is always higher than NOI. In the example below it is 49.0 percent of revenue.
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ground-lease
Ground Lease
A ground lease is a long-term lease of the land under a hotel. The hotel owner owns the building and pays ground rent. For an SBA 504 loan, the lease must run at least as long as the debenture, up to 25 years.
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cap-rate
Hotel Cap Rate
A hotel cap rate is the property's stabilized net operating income divided by its purchase price, expressed as a percentage. It is the unlevered first-year yield a buyer accepts.
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franchise-agreement
Hotel Franchise Agreement
A hotel franchise agreement is the long-term license that lets an owner operate under a brand in exchange for fees. Hilton's 2025 Hampton terms run 22 years for new construction, with a 6 percent royalty on rooms revenue.
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iom
IOM / Investment Memorandum / OM
An IOM (investment offering memorandum), also called an OM or offering memorandum, is the marketing book a hotel broker produces to present an asset to qualified buyers during a confidential disposition process.
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key-money
Key Money
Key money is a cash payment a hotel brand makes to an owner for signing or converting to its flag. It is usually forgiven in equal parts over the franchise term, such as 1/20th a year over 20 years.
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ltv
Loan-to-Value (LTV)
Loan-to-value is the loan amount divided by the hotel's appraised value, as a percentage. A $6.5 million loan on a $10 million appraisal is 65 percent LTV.
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mezzanine-debt
Mezzanine Debt
Mezzanine debt is a loan that sits between the first mortgage and the owner's equity. It is secured by the ownership interests in the borrower, not the hotel. In the example below it lifts total debt from 60 to 75 percent of value.
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mpi-ari-rgi
MPI, ARI and RGI (STR Index Scores)
MPI, ARI and RGI are index scores that compare a hotel's occupancy, ADR and RevPAR with its competitive set. A score of 100 is fair share; above 100 means the hotel is taking more than its share.
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noi
Net Operating Income (NOI)
Hotel net operating income is total revenue minus operating expenses, including franchise fees, management fee, taxes, insurance and an FF&E reserve. It excludes debt service, depreciation and income taxes.
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non-recourse-carve-outs
Non-Recourse Carve-Outs (Bad-Boy Guaranty)
Non-recourse carve-outs are exceptions that make a guarantor personally liable on an otherwise non-recourse loan. They come in 2 kinds: liability for the lender's actual loss, and full recourse for the entire debt.
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pip
PIP (Property Improvement Plan)
A PIP, or property improvement plan, is the brand-mandated capital scope a franchisor requires a hotel owner to complete to maintain or earn a franchise license. It typically runs every 7 to 10 years.
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per-key
Price Per Key
Price per key is a hotel's price divided by its number of guest rooms. A 96-key hotel that sells for $11.5 million trades at about $119,800 per key.
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prime-rate
Prime Rate
The prime rate is the base rate banks use to price many business loans, including SBA 7(a) loans. Major banks moved it to 7.00 percent effective September 17, 2026.
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revpar
RevPAR (Revenue Per Available Room)
RevPAR is revenue per available room. It equals occupancy multiplied by ADR, or rooms revenue divided by total available room nights. It is the headline performance metric in hotel investment.
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sba-504
SBA 504 Loan
An SBA 504 loan is a two-part financing: a bank first mortgage plus a fixed-rate second funded by an SBA-backed debenture. A hotel buyer puts in at least 15 percent. The 25-year debenture priced at 6.54 percent in September 2026.
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sba-7a
SBA 7(a) Loan
An SBA 7(a) loan is a bank loan of up to $5 million with a partial federal guaranty. Owner-operators use it to buy, refinance or renovate a hotel, with real estate terms up to 25 years.
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sofr
SOFR (Secured Overnight Financing Rate)
SOFR is the benchmark rate for most floating-rate commercial loans. It measures the cost of borrowing cash overnight against Treasury securities. It was 3.90 percent on September 30, 2026.
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yield-maintenance
Yield Maintenance
Yield maintenance is a prepayment charge that pays the lender the interest it loses when a fixed-rate loan is repaid early. Agency loan documents set it at the greater of 1 percent of the balance or the calculated amount.
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