Glossary for the Boutique Hospitality Industry

3 flat sheets + duvet.  1 flat sheet direct on mattress as a “fitted” sheet and 2 flat sheets with duvet in the center to form duvet cover.

Account development looks at saturation and penetration of accounts. The most effective teams have deep knowledge in key contacts within their accounts, as well as the role and influence that each player has in the marketplace.

The costs that are associated with acquiring customers, they can be categorized into Distribution System Costs,  Commissions, Loyalty or Brand Costs, and even costs that can be attributed to full time employees. Acquisition costs are increasing, which drives the profit down. In many cases, teams are unaware of the cost of acquisition of each segment.

Organizations that provide overnight accommodation but don’t fit into the concept of a traditional hotel. These include: peer to peer short and long term rentals (VRBO, AIrBnb, Inspirato); short and long term serviced rentals (Sonder, Zeus); members’ clubs offering overnight stays (Soho House), etc. 

Ancillary revenue is defined as any revenue generated by products or services in addition to hotel rooms. Examples include restaurant, casino/gaming, parking, spa, golf, entertainment, etc.

When liabilities exceed assets prompts a reorganization or liquidation of holdings.

A collection of both physical and digital materials, goods, and creative media meant to amplify and support your brand’s identity.

How a brand is different from its competitors and where, or how, it sits in customers’ minds. It is one of the most important aspects of a hotel’s strategy, and defines everything from concept to design and guest experience to marketing, loyalty programs, and promotion. 

A valuation prepared by a third party sales broker used to support the current valuation of a hotel. BOV’s are typically done in anticipation of a sale or another type of capital event (e.g., refinancing). Oftentimes, BOV’s are done to assess current market conditions.

Can mean the difference between ordinary and extraordinary. Don’t let fear get in the way if you are passionate about the direction of your goal. Your business growth depends on your willingness to try something new, even if it ends in failure.  Evaluate every opportunity by stepping back to gather as much valuable information as you can in order to create a road map. At the same time weigh possible outcomes against the risk to your bottom line.

Capital expense which is also known as CAPEX or capital expense is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land.

Whereas an operating expense is an expense required for the day-to-day functioning of a business. A capital expense is an expense a business incurs to create a benefit in the future. Operating expenses and capital expenses are treated quite differently for accounting and tax purposes.

A high level term that relates to accessing capital, or funding.  A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold.  Hotel owners may access capital markets for either debt or equity financing.

The most common used metric in acquisitions and dispositions.

Recurring property expenses that hotel real estate owners must pay usually on monthly basis during the period of owning a property.

The amount of cash a business produces or loses. This is depending upon the level of revenues and expenses, but also many other elements that are on the balance sheet such as accounts receivable and accounts payable and capital expenditures directly impact cash flows well as financing and capital infusion & distributions.

Cash income earned on the cash invested.

A loss that is unexpected, sudden or due to unusual circumstances (i.e. fire, earthquake).

A “change of control” is often specifically defined within a contractual arrangement, but often provides that where there is a transfer of 50% or more of any stock (in an individual or series of transactions) or the change in “control” where the direct or indirect possession of the power to direct or cause the direction of the management and policies of the entity, or the power to veto major policy decisions of the entity, whether through the ownership of voting securities, by contract, or otherwise.

When a loan is backed by assets to ensure payment.

A commercial loan is a debt-based funding arrangement between a business and a financial institution such as a bank. It is typically used to fund a purchase, major capital expenditures and/or cover operational costs that the company may otherwise be unable to afford.

When a pool of loans is sold off as an investment vehicle.

A graphical depiction of a hotel’s Occupancy and ADR position relative to its competitive set.

The Hotels in market that are most closely aligned with the subject hotel. Key factors to note for what might qualify a competitive set Hotel would be number of guest rooms, amount of meeting space, proximity to subject hotel, and Hotel chain scale (i.e., limited service, upscale, upper upscale, luxury).

A process by which the government takes private property for public use for just compensation.

The capital needed to construct a project.

Part of a mobile-first guest experience, guests can use their mobile device to check in and skip the front desk entirely, bypassing unnecessary interactions with hotel staff and the lobby line. Most effective when paired with a mobile key.

Marketing strategy centered around content creation and dissemination across multiple channels, centered around attracting, engaging with, and retaining customers. Content marketing channels include websites, social media, email marketing, and any other form of written, verbal, or visual communication.

Changing the use of a building for greater value.

Cost of sales which is also known as COS refers to the cost required to provide the services for that specific purchase. Essentially, the cost of sales refers to what the supplier (Hotel) has to pay in order to create the product and get it into the hands of a paying customer.

Sales, marketing and customer service have to have an understanding of what their customer’s buying journey is and how we connect with the customer with differentiated messaging at the time the customer is needing or wanting information. Traditionally prospective clients move from unaware to aware, to research, validate, then ultimately purchase. Our role as sales and marketing professionals is to understand how the customer is buying, rather than how we sell.

Customer Relationship Management is the art of optimizing your company’s relationships with your customers and potential customers. A CRM system is technology that allows companies to focus on relationships with customers, colleagues, and partners. CRM is not a hotel specific term or solution and serves almost every industry globally.  Regardless of industry, a CRM tool should allow you to store client information, identify sales opportunities, record service issues and manage marketing campaigns all in one central location. Many CRM systems integrate email, text messaging and other forms of communications. There is a growing trend in the CRM space around automation and personalization that is making this system more important than ever.

(synonym : leverage) An amount of money borrowed from one party to another, used as leverage, in the context of often the most cost effective way to finance development.

Total amount of cash needed to pay interest and principal on a debt for a specific period of time, in accordance with the loan agreement. 

A ratio used to measure a hotel’s ability to cover debt service (cash interest plus debt amortization, which in this case is the denominator).  The numerator is NOI.

Cash Flow/Net Income divided by the loan amount to determine a debt capitalization rate.

NOI divided by outstanding debt.  This ratio is used to set debt extension tests based on a minimum anticipated performance threshold.

Hotels with delinquent mortgages where debt service has not been paid on or before the the scheduled payment date. If the borrower can’t bring the payments on a delinquent mortgage current within a certain time period, the lender may begin foreclosure proceedings.

Any dining system where guests can order and pay for room service, food pick-up, or table delivery from anywhere via a hotel mobile app or in-room device. For staff, orders are routed to a POS or ticketing system.

Reservation made directly with the hotel, in person, by phone, email, or via proprietary website.

Doing your homework.

A set of standards applying for a company’s operations that socially conscious investors use to screen and evaluate investments. Once a niche set of criteria, it has become much more mainstream and is increasingly being reported upon along with financial results. Environment covers protection of the natural world (and embraces sustainability, etc.); Social covers people and relationships (including guests, employees, and the community); Governance covers the way a company is run, its leadership, and corporate citizenship.

The amount of money dispersed to a company’s investors if liquid.

A shareholder’s right to profit distribution calculated by the shareholder’s total capital contributions minus its liabilities.

An occurrence (whether intentional or not) in a contract that is in contravention or against the terms of the contract by one party (the defaulting party); Event of Default is typically the existence of such default after notice (from the non-defaulting party to the defaulting party) and the failure to cure (as may be provided in the contract) such default.

Stay which typically exceeds seven nights.  “ESOC” (Extended Stay Occupancy) is typically tracked separately from short term transient occupancy.   

In this case, this would represent the total amount of F&B revenues divided by the number of F&B covers. 

A unit of measurements that equates to a diner.  For example, if there are 4 people dining at a table, that would represent 4 covers. 

How easy or how difficult it is to accomplish your goal on any given project.

When a property cannot meet its obligations, which could include loan payments, payroll or other obligations that results in potential losses.

The amount of bottom-line profit in relation to the amount of revenue, measured as a variance. For example, revenue variance to budget was positive $100,000.  Profit variance was positive $75,000; therefore, flowthrough is 75%.

A folio is the guest account or hotel bill.  A guest folio contains guest contact information as well as all transactions related to a guests’s stay.

Unforeseen and uncontrollable circumstances that prevent a party from performing under a contract.

Unforeseen circumstances that prevent someone from their contractual obligations

Fractional Owners Representation is the ability of an agency to use shared resources to manage a project on behalf of multiple stakeholders (owners), while offering them an opportunity to save costs and optimize value as compared to hiring a full time individual Owners Representative. Fractional Owner’s Representation services can range from site selection, design, entitlements, permitting, and construction – to a multitude of non-development special interests of value to both Owners and Ownership Groups.

A “pre-opening” trial run where generally friends and family are compd a stay in order to give feedback on functionality and service.

Hotel with Food & Beverage services at minimum.

FF&E means all furniture, furnishings, wall coverings, fixtures, equipment and systems (except equipment and fixtures attached to and forming a part of the Improvements) located at the Hotel and required for the operation of the Improvements as a hotel, including (a) office furnishings and equipment, (b) specialized hotel equipment necessary for the operation of any portion of the Improvements as a hotel, including equipment for kitchens, laundries, dry cleaning facilities, bars, restaurants, dining rooms, public rooms, commercial spaces, and recreational facilities, including Operating Equipment, and all artwork, (c) all other furnishings and equipment (except equipment and fixtures attached to and forming a part of the Improvements) as necessary or desirable in the operation of the Hotel in accordance with the terms and conditions set forth in this Agreement, and (d) all replacements, substitutions and additions of and to all of the foregoing.

General ledger codes are logically numbered accounts for all the detailed classifications of assets, liabilities, revenues, and expenses. Financial statements are summaries of general ledger detail.

A metaphor referring to an invisible barrier that prevents women and minorities from being promoted to managerial- and executive-level positions within an organization. It’s a subtle but damaging form of discrimination where you cannot attain the opportunities you see in front of you, despite your suitability and your best efforts.

Extreme disregard or reckless negligence in one actions (or lack of actions).

Gross operating profit, is before fixed charges and is intended to provide a measure of operating profit performance.

GOPPAR is the gross operating profit (GOP) per available room. Gross Operating Profit is the net revenue from the hotel after expenses. Rooms Available are the rooms available for sale during the specified time period.

The strategic mapping of the experience a guest will have with your brand prior to booking, upon arrival, during their stay, and after they check out.

Connected software and/or hardware that extends and elevates a property or brand’s guest experience. Can include mobile apps, in-room and public space devices, and cloud software that connect guests to staff, services, and information throughout their stay.

Guest reviews are typically requested following a guest stay to gauge their stay experience, use of services and outlets on property, interactions with team members, and to glean insights on the overall guest experience.

Guest surveys are a tool used to measure guest experience through a short-form questionnaire. The most effective guest surveys limit the number of questions and include open-ended comment boxes, allowing guests to provide feedback.

A finite set of values, beliefs, principles, and standards meant to influence decision-making and keep your brand on the right course.

Your reputation in the marketplace and the identity by which you are recognized.

The intentional efforts at every customer touchpoint focused on supporting your hotel’s brand.

Contract between third party manager and owner of hotel outlining key terms and provisions regarding hotel operations and deal structure.

Hotel marketing encompasses a variety of marketing strategies, techniques, and channels used to bring guests through your doors. Digital marketing channels may include website, social media, paid media, and email marketing.

Securities that generally combine both debt and equity characteristics issued by non-financial high-quality companies that generate solid, consistent operating cash flow. These bonds are high-yielding because they are subordinated debt instruments to the issuers’ senior debt so they carry higher risks.  They combine characteristics of bonds (payment of a coupon) and of equities (no or very long maturities).  They are mainly used for refinancing purposes by issuers who wish to stabilize their financial profile and prevent a rating downgrade.

Building an inclusive brand requires a wholesale audit of your business, from hiring to operations, to where you’re spending your marketing dollars, who your products serve and who they do not. Building an inclusive brand will pay off—by 2045, minorities will make up the majority in the US.

Inclusive marketing is all about embracing diversity by including niche consumers in your messaging. Guests want to see themselves, and the people they love, reflected in your marketing.

An Indemnification is a contractual obligation of one party to secure against a harm, loss, damage and/or claim against another party for an act of the indemnitor or another third party. 

Percentage of principal amount charged by a lender for the use of its money. The flux in interest rates determine the cost of a loan.

Generally this refers to communications between two entities, people, or systems – with regards to the exchanging of information or data.   With management information systems, interface refers to the electronic sending and receiving of data between two or more systems.

The IRR equals the discount rate that makes the NPV of future cash flows equal to zero. The IRR indicates the annualized rate of return for a given investment—no matter how far into the future—and a given expected future cash flow.

A commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities.

An acronym for Key Performance Indicator. They are used to monitor and benchmark performance in a variety of areas in a hotel or group of hotels.  Examples include average daily rate (ADR), revenue per available room (RevPar), cost per occupied room, operating profit ratio, etc.

A license agreement is a contractual arrangement which permits one party (the licensee) to use and/or earn revenue from the property of another (the licensor).

Email messages automatically deployed based on your customers’ life cycle data. These messages may be triggered based on a booking anniversary, a previously booked package that’s now available, or other scenarios. By focusing on key customer segments, life cycle campaigns drive incremental revenue.

No services other than basic hotel services, front desk and housekeeping.

The term is used to provide for an agreed upon amount (or ascertained) of damages as compensation for a breach or termination of a contract. 

Oversight of loan payments by a third party or lender, as well as making sure the loan is meeting all contractual criteria.

Terms and conditions set when borrowing money, including repayment period, monthly payments, and costs set by lender and agreed upon by borrower. 

Loan-to-Value Ratio is a financial term that expresses the ratio of the loan amount to the value of the asset being secured. 

To Cost is a financial term used to express the ratio of the loan amount to the cost of building the secured project.

A space that can be subdivided into two distinct dwelling units, allowing for flexibility and privacy.

A tax that is set in place by the state and local government that revenues from room nights.

In hospitality terms, rate parity is the practice of ensuring published guest room rates are being sold at the same price regardless of which booking channel (booking.com, Expedia, hotels.com, hotel website, etc.) the potential guest is shopping.

 Or “fair share” defined as subject Hotel’s performance to the competitive set Hotels, measured as a percentage with 100% = fair share. Key metrics measured in Market Share is ADR, Occupancy and RevPAR. 

A second mortgage that is subordinated to the senior loan.

As the part of a company’s capital that exists between senior debt and common equity as either subordinated debt, preferred equity, or a combination of the two. This type of financing is subordinate to senior debt but senior to common equity. This type of financing typically demands a higher yield. 

Guests can use their mobile device as a room key, providing simple, safe access to guest rooms and public areas with keyless hotel entry, as part of a seamless contactless mobile check-in experience.

Net operating income or sometimes known as EBITDA less operating capex reserve.  This figure is intended to represent the amount of cash that a hotel can produce in a given measurement period.

Typically associated with loans, non-recourse limits the liability of the borrower to the collateral in which he is borrowing against, rather than his own distinct personal assets.

A web-based marketplace that allows consumers to research, review and book travel products and services typically at discounted rates, including hotels, flights, cars, tours, cruises, activities and more, directly with travel suppliers (e.g. Expedia, Booking.com, Trip Advisor).

Operating Equipment means linens, chinaware, glassware, uniforms, utensils and other items of similar nature.

Entity leading the value creation process in a hotel investment or development deal.

When referring to price optimization for hotels, it means using all information available (inventory, historical rates, competitor rates, seasonality, etc.) to produce rates that maximize revenue for a hotel.

In the hotel business it generally means the list of projects that are forthcoming for an owner or manager.  It can also mean a list of prospects or leads that a company or hotel is anticipating getting new business from.

An organization that raises money privately to influence elections or legislation, especially at the federal level. It pools campaign contributions from members and donates those funds to political campaigns for or against candidates.

An authentic and unique place that your brand occupies in the marketplace as understood by your target customers.

An automated email that deploys after a guest’s departure to gauge the guest experience. The Post Departure email typically includes a link to a survey or an opportunity for the guest to rate and review their experience. Open-ended questions are a great way to gain valuable guest feedback beyond checking boxes.

An automated email that deploys prior to a guest’s arrival, the Pre Arrival is an opportunity to share useful details about a guest’s stay, which may include things to do in the area including events, dining, and seasonal activities. This is an opportunity to introduce room and amenity upgrades, and share safety information.

Party responsible for sourcing and buying materials and products needed for hotel’s fit out and daily operations.

Frequently required by a brand, reservation system or lender to ensure the property is being upgraded and maintain to standard.

Typically monthly; also issued quarterly and annually.   A summary statement is supplemented by more detailed departmental statements.   Comparisons are made to budget and same time last year.

Progressive Web Apps are web apps that use emerging web browser APIs and features along with traditional progressive enhancement strategy to bring a native app-like user experience to cross-platform web applications. Progressive Web Application’s deliver a mobile app experience through your browser. It is built with common web technologies like HTML, CSS and JavaScript.

A company that owns and/or finances income-producing real estate. This type of company has to meet a number of requirements in order to qualify as a REIT. Most REITS are listed on major stock exchanges. 

Special purpose vehicle or debt instrument that pools mortgage loans together and issues mortgage-backed securities to provide income for issuers and investors.

Replacing an existing hotel operator with a new and likely better suited operator.

The restructuring of a loan that dissolves the previous terms and enforces new terms often in order to reduce monthly payments, lower interest rates or change to a fixed rate. 

Changing the target markets understanding of a property.

Injection of capital into a distressed hotel asset with the intent of increasing the asset liquidity and allowing the property to survive an economic downturn. 

Return on Ad Spend, meaning what did your investment produce for you. You’ll typically see ROAS defined as  “X”:1, so if you were to have an 8:1 ROAS, you want have made $8 on every $1 invested.Important to note that very high ROAS isn’t always a good thing, as you’re leaving money on the table. Finding the “sweet” spot means balancing spend and revenue opportunity (you can almost think of it like ADR and REVPAR…while high ADR is great and a key KPI, your REVPAR really helps measure success).

Return on investment which is more commonly known as ROI is a performance measure used to calculate the profitability of an investment. ROI aims to directly measure the amount of return on an investment, relative to the investment’s cost.

ROI is calculated by subtracting the initial value of the investment (C) from the final value of the investment (D) which equals the net return (E), then dividing this new number (E) by the cost of the investment (C), and, finally, multiplying it by 100.

A: Purchase Price $5,000,000

B: Renovation Price  $1,000,000

C: Cost Price $6,000,000

D: Selling Price $7,500,000

E: Net Return $1,500,000

ROI 25%

The potential cost (or lost revenue) to a Hotel if a booking decision is made that prevents the Hotel to achieve maximum revenue potential.   

Establishing rates, length of stay and other restrictions (such as cancellation policy, guarantee method, deposits) to maximize revenue and profitability.

The Revenue Management System (RMS) is a system used to analyze customer demand in order to optimize inventory and price availability while maximizing revenue growth. The intelligent algorithm calculates daily price suggestions based on the most relevant data.

Revenue per available room is a metric used in the hospitality industry to measure hotel performance which is calculated by multiplying a hotel’s average daily room rate (ADR) by its occupancy rate.

Revenue per available room night, which is a function of occupancy and average daily rate (ADR) generated by a hotel. This figure essentially captures the amount of revenue a hotel produces in a given period and excludes other revenue (F&B and other non-room departments).

Room revenue per available guest room.

The number of rooms available on any given day/everyday essentials that a guest may need or enjoy such as glassware, an iron, a blow dryer, toiletries, etc. 

The number of rooms that are booked during any set date/ rooms that are heavily demanded due to location or look of room.

Smith Travel Reports, industry standard to measure occupancy, rate and RevPar on a fair share basis.

There are various types of reports, but at a minimum these are valuable reports used to assess the current performance of a hotel versus a competitive set in the market which the hotel is located.

SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis is an analysis conducted to help businesses identify their areas of improvement and opportunity, as well as their competitive set market positioning. 

SEM is a digital marketing strategy that increases visibility in search engine results. This strategy is used in paid ads or bids to maximize visibility and results.

SEO is optimizing website content and keywords to boost organic traffic to your page(s).

The pooling and repackaging of various financial assets into one group to be sold to investors for the benefit of diversification and liquidity.

A new way of gaining customer insight, often used in conjunction with traditional surveys. Social listening is a more organic tool than formal surveys and interviews, resulting in data that doesn’t rely on prompts from the survey or interviewer. It “listens” for conversations gathered from the millions of breadcrumbs consumers scatter across the web detailing their experiences, viewpoints, and personal perspectives.

The idea that companies have a duty to act in the best interests of their employees, community, customers, society, and the world as a whole. This can embrace sustainability, social equity and justice initiatives, ethical sourcing, good and fair working conditions. 

Standard Operating Procedures are step-by-step instructions that outline essential operations at a Hotel to help the onboarding and training process, as well as ensure work is done efficiently to brand and service standards. 

Automated email campaigns that deploy throughout your guest’s stay cycle. Upon booking a reservation, the Reservation Confirmation email is deployed. Several days prior to arrival, the Pre Arrival email is deployed. After the guest departs, the Post Departure email deploys with a survey link.

As used in legal documentation, it is the placement of an obligation, contract, claim or other credit in an inferior placement for payment or reimbursement (i.e. a second lien against a property is subordinate to a first lien on the property providing for amount to be credited against the first lien then the second lien in such order).

A strategy for identifying and developing future leaders at your company — not just at the top but for major roles at all levels. It helps your business prepare for all contingencies by preparing high-potential workers for advancement. 

Reduction in or exemption of level of taxation for an individual or company, typically due to overpayment or publicly backed grants.

Calculation of the targeted efficiency of an operation based on pre-determined cost and margin assumptions. 

Software for automating and streamlining daily operations—service requests, work orders, housekeeping, preventative maintenance, etc. Use “tickets” that are assigned, worked, escalated, or closed out. Often part of or integrated into a property management or guest experience management system. 

TRevPAR, or total revenue per available room, is calculated by dividing the total net revenues of a property by the total available rooms.

The main advantage of TRevPAR is that it takes into account revenue from all departments, including food and beverage sales, meeting space, spas, golf, parking and phone/internet services. These departments can have a significant impact on a hotel’s overall performance especially for example in a large conference or event property.

This tax is charged per person per night. The tax helps fund tourism advertising.

Segments created from a pool of securities offered at the same time—usually debt instruments such as bonds or mortgages—that are split up by varying risk, time to maturity, rewards, or other characteristics in order to be marketable to a diverse range of investors.

A cleaning service that is provided every day once the guest has left for the day. It ensures that the guest returns to a clean room. (Due to COVID, some smaller hotels do not offer turndown service while the guest is inside the room; they will clean before guest arrival and after guest has check-out. 

When a guest must be turned away from a hotel even though they have a reservation due to over-booking or other related issues.

UX (User Experience)/UI (User Interface). UX/UI are terms related to creating and developing website and app solutions. UX designers focus on the experience of the user, the elements, the organization – solving user problems before they become an issue. UI designers focus on the look, feel and style of the website. 

Refers to the number of rooms that could be sold if there were no constraints such as the hotel’s capacity or restrictions on bookings. Unconstrained demand provides a complete picture of all the possible demand, not just the demand you accept. Also referred to as true demand.

In the case of an oversell, the Front Desk will “walk” a guest to a nearby hotel and cover the costs

Working Capital means funds reasonably necessary for the day-to-day operation of the Hotel.

Helps calculate the percentage of growth and change for the last 12 months.

Helps calculate the exact growth and change from one specific date to another.