Why EBITDA % and not Net Profit %?
Most hotels adhere to USALI accounting principles, which allows different hotels to be compared on an EBITDA basis. This is not the case with Net Profit, as different ownership structures impact Interest, Tax, and other factors, making comparisons difficult. Additionally, General Managers (GMs) have relative control over a hotel’s performance up to the EBITDA line but not beyond.
What EBITDA % Should You Target?
It is difficult to provide a definitive EBITDA % target because every hotel faces unique advantages and challenges. However, it is possible to estimate targets based on factors such as location, size, and star rating.
The human factor is also crucial: a good GM and his/her team will achieve 80% of the EBITDA % target by repeating last year’s successes, but a great GM will grind out the remaining 20% by being on top of his/her numbers and take appropriate action to reach the hotel’s full potential.
Industry Benchmarks: Ireland and the UK
To establish reference points, we can examine recent data from Crowe, Dalata and IHG. The accountancy firm Crowe conducts an insightful Annual Ireland Hotel Survey. Dalata is Ireland’s largest hotel group and IHG has a large hotel footprint in the UK and further afield. For additional international context I also reference STR and their predictions for Hotel EBITDA % in 2024 along with Emersion Wellness who have an interesting blog on the topic.
Crowe 2024 Ireland Hotel Industry Survey Crowe Survey
- All Hotels: 19.5%
- Rooms 0-99: 15.9%
- Rooms 100+: 22.4%
- Dublin: 32.1%
- Regional: 15.6%
Dalata Hotel Group (H1 2024): EBITDA – 35.5% Dalata H1 24
(32 Hotels in Ireland and 23 in the UK, mostly 4-star properties)
Intercontinental Hotel Group (IHG, 2023): EBITDA – 23% IHG Results 2023
(Over 6,300 hotels worldwide across 3, 4, and 5-star segments)
STR Press Release – US Market estimate 2024 – EBITDA – 26.2% STR Press
STR is the global leader in hospitality data benchmarking.
Emersion Wellness: Industry EBITDA Margin Guidelines Emersion Blog
- Luxury Hotels: 25-35%
- 4-Star Hotels: 20-25%
- Average Hotels: 15-25%
- Budget Hotels: 5-15%
Estimated EBITDA % by Location, Star Rating, and Room Count
Below is a table estimating the EBITDA % that can be earned under the various variables and using the above reports as a guide.
| Location | Star Rating | Rooms < 100 | Rooms 100-200 | Rooms > 200 |
| City | 3-Star | 10% | 12% | 14% |
| City | 4-Star | 15% | 18% | 20% |
| City | 5-Star | 25% | 28% | 30% |
| Suburban | 3-Star | 8% | 10% | 12% |
| Suburban | 4-Star | 12% | 14% | 16% |
| Suburban | 5-Star | 20% | 22% | 25% |
| Regional | 3-Star | 5% | 7% | 9% |
| Regional | 4-Star | 10% | 12% | 14% |
| Regional | 5-Star | 18% | 20% | 22% |
Final Thoughts
As a GM, do these figures align with your expectations? Do they align with your owners’ expectations?
SSOT Analytics: Helping hotel leaders unlock data-driven insights to optimize performance. Reach out to us at www.ssotanalytics.com.
