HUBBART FORMULA

Desired Income= (Owners Equity x Owners Expectation)

Pre-Tax Income= ( Desired Income/ (1-Income Tax Rate) )

Interest Expenses= ( Total Investment Owners Equity) x Annual Interest Rate )

Income Before Taxes and Interest= (Pre-Tax Income + Interest Expenses)

Income Before Fixed Charges = (Income Before Taxes and Interest + Fixed Charges and Management Fees)

Operating Expenses = ( Admin/ General + Marketing + Maintenece/Energy)

Reqd Department Income = (Operating Expenses + Income before Fixed Charges)

Rooms Department Income = ( Reqd Department Income + F&B Income)

Direct Expenses in Rooms Department =(# of rooms x Cost Per Room x Occupancy % x Year 365)

Room Revenue =( Room Department Income +Direct Expenses in Room Department )

#of Rooms Sold =( # Of rooms x Occupancy x 365)

ADR= Room Revenue/# Room Sold

RULE OF THUMB ADR

Total Investment / # of Rooms = A A/1000 =ADR

Divided by $1000 because you charge $1/$1000 to build each room