Classified as income-producing assets, hotels are mainly valued based on their recurrent income-generating potential. Similar to other forms of commercial real estate, one fundamental indicator of their percentage profit is the capitalization rate (cap rate). So, is a higher cap rate always the sign of a great deal? Not entirely.
A cap rate, or capitalization rate, is an equation that determines how much an investor could make or lose after purchasing a particular property. In the hotel industry, it indicates the rate of return expected on a hotel investment. Cap rates are the most popular way to help you assess a hotel’s return and profitability potential before buying it.
This metric helps to show how much a hotel would have yielded after a year, assuming you buy it in cash with no loan. Cap rates can help you know the asset’s intrinsic, natural, and un-levered rate of return early on.
Hotels typically have the highest capitalization rates of any asset class, with most cap rates ranging between 7.5% to 10.5%, depending on the type of asset and market factors. However, even using a cap rate does not predict the future profitability of the asset, since it is using historical data to determine the value.
The most common formula involves a division of the hotel’s net operating income (NOI) by its current market value.
Capitalization Rate = (Net Operating Income / Current Market Value) X 100.
The formula above refers to the income that the hotel is expected to generate in a year. You can obtain it by checking the expected revenue amount and deducting all the expenses necessary for the hotel to operate optimally. This includes utilities, staff wages, property taxes, maintenance and repair costs, and insurance, among other operating expenses.
(Total NOI = Total Revenue – Operating Costs).
The hotel’s current market value refers to its value today in line with the prevailing market estimates. It is also worth noting that the NOI does not include Interest Expense, Amortization, Depreciation, and Income Taxes that an individual or the corporation has to pay.
Calculating the cap rate is simple, and you can do it on your own with or without using a capitalization rate calculator.
Consider that you are looking to invest in a hotel located in a famous tourist destination, consistently attracting numerous guests throughout the year. Its revenue streams include an on-site restaurant and bar, room rentals, spa services, and conference facilities.
After digging into the hotel’s financial statements, you discover that it generates total revenue of $1,500,000 annually. You also determine that its total operating expenses, including staff wages, maintenance and repair,
marketing, utilities, and other costs, add up to $600,000 annually. The hotel is estimated to have a value of $10,000,000 presently.
To calculate its cap rate, you must:
Perhaps you are considering buying a hotel set up in a busy metropolis with a continuous stream of guests throughout the year and an estimated value of $30,000,000. Its features include a rooftop restaurant with stunning city views, a spa center, and luxurious accommodations.
After thoroughly scrutinizing the hotel’s financial statements, you discover that its total operating expenses, ranging from marketing to staff wages and other costs, amount to $2,500,000 annually. The hotel has an annual revenue of $5,000,000.
To calculate its cap rate:
Calculating the cap rate using the asset’s purchase price is also possible using the formula:
Capitalization Rate = (Net Operating Income / Purchase Price) X 100
However, this method is not as popular as the one that uses the hotel’s current market value. This is because it can lead to unrealistic results for old hotels purchased at lower prices. It is also impossible to apply the formula to calculate the capitalization rate of inherited hotels since their purchase price is zero.
There are several reasons why hotel investors calculate cap rates. One major reason is to assess the current and expected performance of similar hotels in the same property market to determine the one with the highest rate of return. Consider this case scenario, for instance:
Another huge reason is to establish a fair valuation of the hotel based on net operating income. Here, you can make a calculation using the formula below:
Finally, investors evaluate cap rates to use the net asking price of the hotel to calculate its net operating income. You should consider that:
Cap rates can help you determine the relative attractiveness of different hotels by doing an investment and market analysis. For instance, you can assess the relationship between the hotel’s current value and NOI to determine its performance over time or compare different hotel properties. Furthermore, using cap rates to analyze market trends can help you understand the level of risk and demand associated with a particular market.
However, it can be unnecessary to calculate at certain times when making a hotel purchase. For instance, unique properties, such as luxury resorts and boutique hotels, could have distinct operational dynamics and revenue streams requiring a finer analysis. Development projects also do not require cap rate calculations since they lack an existing NOI and rely on projected costs.
Knowing the capitalization rate of a hotel you are interested in can help you quickly assess its profitability and determine whether it is a great investment. NewGen Advisory can guide you through the process of evaluating various hotels based on their cap rates and picking those that suit your investment strategy.
If you are in the market for a hotel property or are simply comparing the performance of various hotels, our hospitality brokerage professionals can help. Contact us today to learn more.
Jourdyn leads the strategic marketing initiatives for NewGen Advisory, overseeing brand development, market positioning, communications, and business growth efforts across the firm.
With more than a decade of experience in marketing and business development, Jourdyn specializes in building brands, creating demand-generation strategies, developing thought leadership programs, and executing integrated marketing campaigns that drive measurable business results. Her expertise spans digital marketing, public relations, content strategy, events, social media, lead generation, and corporate communications.
At NewGen, Jourdyn is responsible for shaping and executing the firm’s marketing strategy, ensuring consistent brand visibility across all channels while supporting advisors, clients, and strategic initiatives nationwide. She works closely with leadership to develop campaigns, elevate industry presence, strengthen client engagement, and position NewGen as a trusted advisor within the hospitality investment sector.
Jourdyn holds a Bachelor of Arts in Mass Communication and Media Studies from Arizona State University and a Master of Business Administration (MBA) with an emphasis in Marketing from Grand Canyon University.
Most mornings you’ll find Jourdyn in the gym before sunrise and spending time with her husband and children.
Allysia Howerton joined NewGen Advisory in 2026 as a Pipeline & Transaction Assistant, relocating from St. Louis, MO to Arizona to take on the role. She brings a background spanning property management, client services, sales, and administrative leadership, with a track record of managing complex workflows and keeping transactions moving efficiently from inception to close.
Known for her organization, attention to detail, and relationship-driven approach, Allysia supports transaction management, pipeline coordination, and day-to-day brokerage operations — and is passionate about growing her career within the hospitality real estate industry.
Outside of work, she enjoys discovering new coffee shops and restaurants, traveling to experience new cultures, and spending time with her dogs.
2 years
Josie Numedahl joined NewGen Advisory in July 2024 as a Real Estate Assistant (REA). Originally from Iowa, she relocated to Arizona to pursue her education, graduating from Grand Canyon University in 2022 with a Bachelor’s degree in Marketing and Advertising.
Josie began her professional career as a recruiter in the finance and accounting sector, and brings that client-facing, detail-oriented background to her work at NewGen.
Outside of work, she enjoys reading, hiking, exploring local coffee shops, and spending time with friends.
X years
Anthony is the Staff Accountant for NewGen Worldwide, LLC and its subsidiaries Green Card Fund, LLC and NewGen Advisory, LLC, working directly under CFO Michael Lepore to handle day-to-day accounting functions across all NewGen operations.
Green Card Fund (greencardfund.com) is a USCIS-recognized EB-5 Regional Center authorized to raise foreign capital for domestic development projects. EB-5 investors fund community-need projects and receive an immigration benefit in exchange for job creation. To date, GCF has facilitated over $125 million in foreign direct investment, delivered immigration benefits to more than 250 families, and created over 2,500 jobs in healthcare, education, and hospitality across Arizona and Washington, D.C.
NewGen Advisory (newgenadv.com) is a full-service commercial real estate brokerage specializing in hospitality assets.
Prior to joining NewGen, Anthony completed coursework at Paradise Valley Community College before co-founding a family business that produced custom-wrapped die-cast model cars for corporate clients — handling vehicle customization, display stands, and branded packaging. Serving as Director of Operations, he gained hands-on experience in management, production workflows, and running a business from the ground up.
Outside of work, Anthony is a lifelong ice hockey player with a passion for motorsports — particularly motocross and classic cars. Among his favorites: the 1963 C2 Corvette Sting Ray, the 1965 Shelby Cobra S/C, and the 1971 Plymouth Hemi ‘Cuda. He hopes to one day own and operate a bookkeeping firm serving small businesses.
X years
Nick serves as Director of Operations for NewGen Worldwide and NewGen Advisory, bringing a detail-oriented, forward-thinking approach to supporting the company’s continued growth. A Minneapolis native, Nick studied at Denison University and the University of Minnesota before making his way to Arizona, where he now lives in Mesa.
He spent a decade in the hospitality industry as a server, bartender, and restaurant manager — hands-on experience that gave him a strong operational foundation and a natural fit within NewGen’s hospitality-focused business.
Outside of work, Nick is an avid writer with a passion for art, photography, and travel, and enjoys documenting his experiences through the lens.
X years
Nycole serves as Chief of Staff at NewGen Advisory, where she trains and manages the Real Estate Assistant (REA) team. She works closely with REAs to ensure agents receive consistent, high-quality support throughout every stage of a deal — from contract to close.
Alongside the Office Manager, Nycole leads onboarding for new agents, REAs, and team members across NewGen Worldwide’s subsidiaries, and has developed a training library to streamline the process for incoming staff. She is also actively involved in evaluating and implementing new platforms to improve agent and REA workflows, while providing leadership with the data needed to monitor KPIs and track revenue goals.
Her background in franchise operations management — spanning startups to scaling franchises — makes her a versatile and valuable member of the NewGen team.
20+ years
Michael is the Chief Financial Officer of NewGen Worldwide, LLC and its subsidiaries Green Card Fund, LLC and NewGen Advisory, LLC — a diversified real estate investment and capital solutions firm focused on creative, flexible solutions. Michael and his team oversee day-to-day accounting, budgeting, forecasting, and financial modeling across all NewGen operations.
Green Card Fund (greencardfund.com) is a USCIS-recognized EB-5 Regional Center authorized to raise foreign capital for domestic development projects. EB-5 investors fund community-need projects and receive an immigration benefit in exchange for job creation. To date, GCF has facilitated over $125 million in foreign direct investment, delivered immigration benefits to more than 250 families, and created over 2,500 jobs in healthcare, education, and hospitality across Arizona and Washington, D.C.
NewGen Advisory (newgenadv.com) is a full-service commercial real estate brokerage specializing in hospitality assets.
Prior to joining NewGen, Michael built over 20 years of experience in accounting, tax, and operations management serving small to mid-sized businesses. He holds active CPA licenses in both New York and Arizona. His career spans public accounting — including a role as Audit Manager at PricewaterhouseCoopers — as well as private accounting and business ownership, giving him a broad, hands-on command of accounting and management functions. That dual perspective allows him to bring both tax strategy and business strategy to bear when evaluating financial decisions. He is a member of the American Institute of Certified Public Accountants (AICPA) and the Arizona Society of Certified Public Accountants (ASCPA).
A proud Italian-American, Michael lives in Scottsdale with his wife, Patty, and their three children, Alyssa, Anthony, and Joey. Outside of work, he coaches ice hockey and has a passion for cooking Italian food.
X years
Kyle is a co-founder, Principal, and Chief Executive Officer of NewGen Worldwide, LLC and its subsidiaries Green Card Fund, LLC and NewGen Advisory, LLC — a diversified real estate investment firm focused on creative, flexible solutions. Beyond his broad responsibilities as CEO, Kyle’s primary focus is leading Green Card Fund, developing and implementing capital solutions domestically and internationally, and identifying attractive investment opportunities.
Green Card Fund (greencardfund.com) is a USCIS-recognized EB-5 Regional Center authorized to raise foreign capital for domestic development projects. EB-5 investors fund community-need projects and receive an immigration benefit in exchange for job creation. To date, GCF has facilitated over $125 million in foreign direct investment, delivered immigration benefits to more than 250 families, and created over 2,500 jobs in healthcare, education, and hospitality across Arizona and Washington, D.C.
NewGen Advisory (newgenadv.com) is a full-service commercial real estate brokerage specializing in hospitality assets — a natural evolution of NewGen Worldwide’s business model, built on business partners Girish Patel and Dan Rama’s lifetime experience in the industry. Kyle’s financial acumen and creative approach to structuring deals help NewGen Advisory clients identify and secure profitable opportunities.
Kyle earned a B.A. in Interdisciplinary Studies from Arizona State University with a focus in Business and Urban Planning. He has long been involved with the Greater Phoenix Economic Council’s (GPEC) International Leadership Council, and in 2016 was elected to the Board of Directors of Invest in the USA (IIUSA), the national EB-5 trade association, where he actively contributes to legislative reform efforts and the permanent reauthorization of the EB-5 program.
Kyle splits his time between company offices in Phoenix, AZ and Washington, D.C. Outside of work, he is an avid reader, global traveler, and snowboarder — and after logging over a million miles as a passenger, he has recently taken to the cockpit, learning to fly himself.
20+ years
Girish Patel is a co-founder and Principal of NewGen Worldwide, LLC and its subsidiaries Green Card Fund, LLC and NewGen Advisory, LLC — a diversified real estate investment and capital solutions firm focused on creative, flexible solutions across hospitality and healthcare. Among his core responsibilities are leading strategic initiatives, overseeing financial management, and driving real estate investment acquisitions.
Green Card Fund (greencardfund.com) is a USCIS-recognized EB-5 Regional Center authorized to raise foreign capital for domestic development projects. EB-5 investors fund community-need projects and receive an immigration benefit in exchange for job creation. To date, GCF has facilitated over $125 million in foreign direct investment, delivered immigration benefits to more than 250 families, and created over 2,500 jobs in healthcare, education, and hospitality across Arizona and Washington, D.C.
NewGen Advisory (newgenadv.com) is a full-service commercial real estate brokerage specializing in hospitality assets — a natural evolution of NewGen Worldwide’s business model, grounded in Girish’s and business partner Dan Rama’s lifetime experience in the industry. Having grown up in his family’s hotel business as an immigrant, Girish developed a bottom-up understanding of hospitality — mastering operations before becoming an investor, lender, and consultant. That ground-level perspective, tested across multiple economic cycles, underpins his 20+ years as a successful business owner and brings a distinctive depth of insight to NGA’s clients and investors.
Committed to continuous learning and giving back, Girish established the RC Patel Memorial Scholarship for students pursuing careers in real estate investment. He also serves on the Board of Directors of Global Ties Arizona, an organization that strengthens international relationships by making exchange programs more impactful.
X years
Dan is a co-founder and Principal of NewGen Worldwide, LLC and its subsidiaries Green Card Fund, LLC and NewGen Advisory, LLC — a diversified real estate investment and capital solutions firm focused on creative, flexible solutions. His primary role is leading NewGen Advisory and serving as its Designated Broker in Arizona.
Green Card Fund (greencardfund.com) is a USCIS-recognized EB-5 Regional Center authorized to raise foreign capital for domestic development projects. EB-5 investors fund community-need projects and receive an immigration benefit in exchange for job creation. To date, GCF has facilitated over $125 million in foreign direct investment, delivered immigration benefits to more than 250 families, and created over 2,500 jobs in healthcare, education, and hospitality across Arizona and Washington, D.C.
NewGen Advisory (newgenadv.com) is a full-service commercial real estate brokerage specializing in hospitality assets — a natural evolution of NewGen Worldwide’s business model, built on Dan’s and business partner Girish Patel’s lifetime experience in the industry. Throughout his career, Dan has been involved in the disposition of over $600 million in hospitality assets, advising clients on acquisitions, mergers, and divestitures across the United States.
Dan began his career as a hotel operator and owner in 1994 following his studies at the University of Arizona, going on to build a portfolio as a franchisee of Red Brick Pizza, Holiday Inn, Ramada Inn, and Comfort Suites. He holds General Manager Certifications from Holiday Inn, Motel 6, and Days Inn, and is a Certified Hotel Owner (CHO) with a Certification for Hotel Industry Analytics (CHIA).
Beyond his company responsibilities, Dan is an active industry voice. He serves as an Ambassador with the Asian American Hotel Owners Association (AAHOA) — the largest hospitality owners association in the U.S. — and previously served as its Southwest Regional Director. He also sits on the Board of Directors of the Arizona Lodging and Tourism Association (AZLTA).
Dan lives in Gilbert, AZ with his wife, Chetna, their son Suraj, and their daughter Sonya. Outside of work, he enjoys golf and cheering on the Denver Broncos.
15+ years
Suraj is the Chief Legal Officer of NewGen Worldwide, LLC and a member of its senior leadership team, where he contributes to the operational management and strategic planning of the company and its subsidiaries — including Green Card Fund and NewGen Advisory. NewGen Worldwide is a diversified firm engaged in real estate investments, creative capital solutions, and advisory services for the entrepreneurial investor.
Suraj first served as outside counsel for Green Card Fund and NewGen Worldwide from 2008 to 2014 before joining the organization as Chief Legal Officer. In this role, he leads the company’s legal, regulatory, and corporate governance functions, with responsibility spanning real estate, risk management, contractual relations, and investment strategies. He also oversees the business administration of NewGen Advisory, a full-service commercial real estate brokerage specializing in hospitality assets.
Prior to joining NewGen, Suraj was Managing Partner of Bhakta & Associates, PLLC, a full-service business law firm where he represented a broad range of clients across acquisitions and sales, corporate structuring, contracts, franchise law, development and construction, and equity and debt financing.
A native of Ohio, Suraj graduated from The Ohio State University in 1999 with a B.S. in Business Administration and earned his J.D. from Case Western Reserve University in 2002. He resides in Peoria, AZ with his wife, Neena, and their two sons, Shiv and Soham.
