A hotel is usually valued on its rooms. Rate and occupancy drive the model; the comparables are drawn on the same basis, and the operating statement is read from the top line down.
That approach works well for a luxury resort, where sixty to eighty percent of revenue does come from rooms. It works considerably less well in urban Oahu, where the proportion looks different, and the difference sits in lines that acquisition models tend to summarize rather than examine.
The Revenue Stack
A full-service hotel runs several distinct businesses under one roof, each with its own demand drivers and margin profile.
Rooms are the first. Food and beverage – restaurant, bar, and banquets – is the second, and behaves like a hospitality business rather than a real estate one. Parking, including valet, is the third. Retail is the fourth, alongside ancillary lines including spa and activities.
Daily resort fees sit slightly apart. “They add to your top line without any expenses,” says Mike Perkins of The Bratton Team at Colliers International Hawaii, describing why that line carries disproportionate weight in the operating statement relative to its size.
Asked which of the non-room lines is largest, Perkins names retail without hesitation.
The Line Buyers Overlook
The stream most often underweighted in acquisition analysis is parking, and the reason is that mainland experience does not prepare a buyer for how the asset behaves in Honolulu.
Parking in urban Oahu is a genuinely constrained resource, and pricing reflects that constraint. The demand is also broader than a buyer might assume from the room count: a hotel garage serves people coming to dine, to shop, and to attend events, not only guests staying in the building.
That produces a revenue line with a different character from rooms. It is less exposed to the seasonality that moves rate and occupancy, and it can be modelled independently of the hotel operation entirely.
Taken together with ground-floor retail, Perkins estimates the two can represent roughly thirty to forty percent of overall income at an optimized urban property – a figure that changes the valuation conversation when it has been treated as a rounding item.
Where The Value Gets Unlocked
Two conditions determine whether that potential is realized, and both are assessable before an offer.
The first is control. Perkins describes a mid-range property where the retail component sat in a separate commercial condominium outside the hotel’s control. The restaurant, occupying an outdoor space overlooking the ocean, declined to install televisions – which meant that guests and locals who would have travelled in to watch a game went elsewhere. The hotel could see the demand and had no mechanism to serve it.
Where an owner does hold control, the same situation reads as an opportunity rather than a constraint. A weak food and beverage operation becomes actionable at lease renewal, and selecting an operator who creates value for guests is one of the more direct levers available to an owner.
The second condition is optimization. Parking and retail deliver at the upper end of that range when the ground floor has been configured for foot traffic, and the parking operation has been priced against actual demand rather than inherited convention.
Testing Whether The Operator Is Performing
The question underneath all of this is whether a property is capturing what its position should allow, and there is a standard method for answering it.
The starting point is a STR comparison report, with attention paid to whether the comp set is genuinely apples to apples. An on-island comparison is necessary but insufficient on its own.
The more revealing analysis is seasonal. Hawaii’s demand moves substantially across the year, and a property that tracks its comp set in peak periods while underperforming through the shoulder is telling a different story from one that lags consistently. Perkins’s emphasis is on examining each swing against the data set rather than reading annual averages, which flatten exactly the variance that matters.
Why Labor Changes The Calculation
One structural feature affects how all of this converts to margin.
Labor is the largest proportion of hotel expense in Hawaii, and the union framework limits how far staffing can be adjusted to demand. Housekeeping cannot simply be scaled back through a seasonal turn.
That has a specific implication for the revenue mix. Where the operating cost base is relatively fixed, income streams that hold steady through the year become proportionately more valuable than those that swing. Parking and retail – with their broader demand base and lower seasonal sensitivity – do exactly that, which is a further argument for underwriting them properly rather than treating them as incidental.
What This Means For Valuation
For a buyer, the practical conclusion is that a Hawaii hotel deserves a segmented analysis rather than a single blended one.
Rooms, food and beverage, parking, retail, and fee income each have their own demand drivers, their own competitive set, and their own upside. A property whose rooms are performing at market while its ground floor and garage are not is a materially different proposition from one where every line is already optimized – and considerably more interesting, because the gap is addressable.
Assets of this kind appear regularly among recently closed Hawaii transactions, and the monthly market statistics give owners a running benchmark. The buyers who do best are the ones who priced all four businesses, not just the one on the front page.
About The Expert
Mike Perkins (S) is an Associate Vice President with The Bratton Team at Colliers International Hawaii in Honolulu, specializing in development and income-producing commercial assets.
The Bratton Team is a Hawaii commercial real estate and investment sales group, exclusively contracted to Colliers International HI, LLC. Led by Mark D. Bratton (R) CCIM and Mike Perkins (S), the team has advised buyers and sellers across all Hawaii asset classes for 40 years.
Disclaimer: This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
