Investing in an Apart-Hotel: ROI When Income Is Split

Aparthotel Investments: Calculating ROI with Revenue Sharing 📈

Investing in an aparthotel can combine short‑term rental income with long‑term capital growth. But when revenue is split between the property owner and an operator, simple ROI formulas can be misleading. This guide explains what to include and how to model realistic returns.

Key components that affect ROI 🔑

• The revenue split between owner and operator.
• Occupancy rates and seasonality — marketing numbers often differ from real performance.
• Operating expenses: cleaning, maintenance, utilities, guest services, booking fees.
• Management fees and platform commissions.
• Taxes, depreciation and capital expenditures (CapEx).

Step‑by‑step ROI calculation 🛠️

1) Estimate gross revenue using realistic occupancy and average nightly rates.
2) Subtract operating expenses and taxes to get operating profit (a NOI‑like measure).
3) Apply the revenue‑sharing formula to determine the owner’s share.
4) Deduct owner’s CapEx and one‑off costs to see true cash flow.
5) ROI = (owner’s annual net cash flow) / (owner’s actual invested capital).

Remember: cash flow after all deductions is the most important metric for investors, not headline revenue.

Common revenue‑sharing models 🤝

• Fixed management fee + percentage of revenue. This can shift risk to the owner.
• Net profit split (after expenses) — more transparent but requires reliable reporting.
• Guaranteed minimum payments to the owner, with operator taking upside beyond thresholds.

Tip: require clear reporting terms and audit rights in the contract.

Practical examples and scenarios (illustrative) 🧾

• Example scenario: operator takes a standard management percentage, and operating costs are a sizable portion of revenue. Even with strong occupancy, the owner’s net cash flow may be far lower than gross figures imply.

• Alternative: guaranteed owner payouts reduce volatility but cap potential upside in high‑demand periods.

Use conservative, base and optimistic scenarios to stress‑test ROI and payback timelines.

Taxes, accounting and cash flow distinctions 💡

Tax rules and depreciation affect taxable income but not necessarily cash flow. Distinguish between accounting profit and actual cash received. Consult a local tax specialist to understand implications.

Risk factors to model 🛡️

• Off‑season occupancy drops.
• Rising operating costs (service rates, utilities).
• Contractual changes if management company changes or if the asset is resold.

Create scenario models and sensitivity analyses for occupancy, ADR, and operating cost percentages.

Due diligence: what to check 📂

• Historical performance data for the property or comparable assets.
• Detailed expense breakdowns and booking system access.
• Contract clauses on reporting, audit, and termination.

To start comparing aparthotels and running basic evaluations, you can review listings here: https://buyhome.ge/en/search

Final recommendations ✅

Focus on the owner’s net annual cash flow after all fees and taxes. Insist on transparency in contracts and build multiple scenarios. ROI is a helpful metric but should be part of a wider analysis that includes capital growth potential and exit options.

If you’d like help modeling ROI for a specific property or reviewing an operator agreement, contact BuyHome — we’ll help you choose the right investment and calculate realistic returns.