Properties and Leases · REITs

Healthcare, hotel and storage properties have distinct operating drivers. The useful comparison starts with who pays, how often prices reset and which expenses remain with the owner.

Healthcare can involve an operator between you and the resident

A landlord may lease a facility to a healthcare operator or participate more directly in operating results through a permitted structure. Those arrangements have different risk exposures. Examine operator finances, staffing costs, occupancy and reimbursement dependence where relevant. Growing demand for care does not guarantee that every operator can pay its rent.

Hotel income resets quickly

Hotel performance responds to room rates and occupied nights. Revenue per available room combines those drivers, but it is not profit. Labor, utilities, franchise charges and renovation requirements can absorb revenue gains. Business travel, leisure travel and convention demand also behave differently. Review the actual market and guest mix.

Storage economics depend on customers and competition

Storage facilities often have shorter customer commitments than office buildings. That can allow faster repricing but also exposes income to moves, promotions and local competition. Distinguish introductory prices from existing customer rates and ask how price increases affect retention. Occupancy by units and occupancy by area may tell different stories.

Calculate the operating measure correctly

A hotel with 100 available rooms, 70 occupied rooms and a $150 average daily room rate earns $10,500 of room revenue that day. Revenue per available room is $105. If occupancy rises while room rates fall, compare the combined result before drawing a conclusion. Then inspect operating expenses to see whether the improvement reaches earnings.

Try it yourself

A hotel has 80% occupancy and an average daily room rate of $120. What is revenue per available room, and is it net income?

Show the worked answer

Revenue per available room is $96. It is a revenue measure and excludes hotel operating costs, financing and other expenses, so it is not net income.

Further reading

Educational material, not a recommendation to transact. All numerical examples are hypothetical and exclude costs unless stated. Actual terms, eligibility, tax treatment and broker procedures depend on the security and jurisdiction.

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