GRM and Cap Rate
Gross Revenue Multiplier Measures an inns ability to create a revenue stream as a factor of its value. A GRM of 3-5 times gross is typical for a small lodging property.

Calculation = Asking Price
                        Gross Revenue

Income Capitalization Rate A measure of an inns firepower or ability to put money to the bottom line. ICR is an interest rate one could reliably expect to earn on an investment at a certain level of risk. An income cap rate of 10% - 12% is not unusual for a small lodging property.

Calculation = Net Before Debt
                        Asking Price

Net Before Debt: Net income before depreciation, owner salaries or distribution and mortgage payments.

Close Window