Investor Insights: Q1 MCR Corp
THE TRICK IS MITIGATING THE VOLATILITY
Hotels (daily leases) are more volatile than other real estate asset classes (longer-term leases)
MCR mitigates that volatility via:
#1) Experienced in-house operations team
MCR runs hotels better than its competitors
#2) Low leverage
Borrow at <65% LTV/1.5x debt service coverage; can withstand recession and not breach loan covenants
#3) Focus on rooms business (high margins), not food and beverage or spas (low margins)
Projected Incremental Profit from Guestroom Sale
Sample Hotel Operating Statement
(1)
Revenue
Revenue from Guestroom Sales
Operating Expenses
Housekeeping Wages (30 Minutes at $12/Hour to Clean Room)
Complimentary Breakfast
Reservation Fees
Guest Supplies / Toiletries (Shampoo, Coffee, etc.)
Franchise Fees (Paid to Marriott / Hilton)
Credit Card Commissions
$ Amt. %
(1) The above table (sample operating statement of a hypothetical select service hotel) is for illustrative purposes only.
MCR
$100 100.0%
6.0%
3.0%
2.0%
1.0%
9.6%
2.8%
$24 24.4%
$76 75.6%
$6
3
2
1
10
3
Total Operating Expenses
Gross Operating Profit
Generally, 76% of revenue flows through to the bottom line from the sale of a guestroom
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