Is You Hotel Running in Losses? Have checked on the rent amount ?

Is You Hotel Running in Losses? Have checked on the rent amount ?

Simple rule to determine the ideal rent when taking a hotel property on rent to run it as of 2024 is below as per my personal experience (Indian Context).

1. Tier 1 Cities - When you take a property on rent to run a hotel there, just divide the rent by number of rooms in the building. This will give you the rent of a single room per month. If the rent of a room is more than Rs 8,000 per month then you are more likely to incur losses. If it is equal to Rs 8,000 then you would breakeven and if it is less than Rs 8,000 then you are more likely to run the business in profit. As the rent per room reduces, your profit increases.
2. Tier 2 Cities : This value to determine ideal rent per room per month is Rs 6,000.
3. Tier 3 Towns - The rent should not be more than Rs 3,500 per room per month.

Now of course this ideal rent value can not be same for all kinds of properties. I have determined this value for budget properties which can be sold at an ARR of up to 1400.

Here is an example of a property sales and expenses which has a rent of Rs 2,40,000 (Rs 8000 per room)

Now let’s see what happens when the rent per room increases to Rs 9000 per room per month:

Now, lets see what happens when the rent per room per month goes to Rs 10,000:

Please note : I have just taken major expenses here. There are more expenses like water bill, expenses on cleaning chemicals, Expenses on accounting and tax filing etc. Still you can see the magical number of Rs 8,000 per room per month is so evident of running a hotel in profit. Any rent higher than this will only make you incur losses !