EBITDAR stands for Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent. It is a profitability metric used in the hotel industry to measure operating performance independent of a property's capital structure and lease obligations.
By adding rent and lease expenses back to EBITDA, EBITDAR isolates the underlying operating profitability of the hotel itself, making it especially useful for comparing owned versus leased properties on equal footing.
EBITDAR = Revenue - Operating Expenses (excluding rent, lease, interest, taxes, depreciation, amortization).
Example: A hotel with $10M revenue, $8M operating expenses (including $1.5M in rent), would report EBITDAR of $3.5M ($10M - $8M + $1.5M).
EBITDARM extends EBITDAR by also adding back management fees. This is particularly relevant for hotels operating under third-party management contracts, where management fees can materially distort comparisons of pure operating performance.
EBITDAR is a core metric for hotel owners, investors, lenders, and analysts. It supports valuation, peer benchmarking, M&A analysis, and lease negotiations. Combined with metrics like RevPAR, GOPPAR, and ADR, it gives a fuller picture of a property's financial health.
EBITDA excludes interest, taxes, depreciation, and amortization. EBITDAR goes one step further by also adding back rent and lease expenses. This makes EBITDAR more useful in hospitality, where leased real estate is common and rent costs can vary substantially between properties. Comparing two hotels using EBITDA alone may understate the operating performance of a leased property versus an owned one; EBITDAR neutralizes that difference.
Investors use EBITDAR because it isolates a hotel's underlying operating profitability from its capital structure and real estate arrangement. This makes it easier to compare properties with different ownership models, evaluate acquisition targets, and apply consistent valuation multiples across a portfolio. Lenders also use EBITDAR to assess debt service coverage in lease-heavy structures.
EBITDAR is typically calculated from data in a hotel's accounting and ERP system, with revenue and expense detail flowing from the PMS, POS, and payroll systems. Modern hotel finance teams use the Uniform System of Accounts for the Lodging Industry (USALI) chart of accounts to ensure EBITDAR is calculated consistently and is comparable to industry benchmarks.
EBITDARM (which also adds back management fees) is more useful when comparing hotels that operate under third-party management agreements. Because management fees can range from 2% to 5%+ of revenue, including them in the comparison can mask true operating performance. EBITDARM lets owners and investors evaluate the asset itself, separate from any specific operator's fee structure.
EBITDAR margins vary widely by segment, market, and operating model. Limited-service hotels in strong markets may post EBITDAR margins of 35-45%, while full-service urban hotels typically range from 25-35%. Luxury resorts often run lower due to higher labor and amenity costs. Margins are also affected by occupancy levels, ADR, and the hotel's lease versus owned structure.
Hotels improve EBITDAR by growing top-line revenue (occupancy, ADR, ancillary), controlling labor and operating costs, and renegotiating lease terms where possible. Automation tools, including digital concierge and self-service platforms, can reduce front-desk staffing costs and lift ancillary revenue per guest, both of which flow directly into EBITDAR.
.avif){kind=spacer}
