Glossary of terms, acronyms and abbreviations

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ADRR Average daily room rate.

Architect The architect establishes the overall design and is
often responsible for the detailed design of the fabric of a hotel.
Architects are concerned with both the functional and aesthetic
issues of building design. Typically, architects are appointed as
lead consultants and will contribute to the project brief.

Area per room A useful guide to ensure the efficient use of
space within the hotel. This is defined as the gross floor area of
the whole building divided by the number of bedrooms.

ARR Accounting rate of return. The percentage rate of return
earned by a capital investment project.

Asset Can represent a building or item of mechanical or electrical
plant.

Asset management The process by which a property with
money value is effectively controlled and managed as a business.

BoH Back of house.

BoQ Bill of quantities. A pricing document prepared by a quantity
surveyor, which may include a detailed description of the type
and quantity of the work involved.

Brands Brands are products, services or concepts that can be
distinguished from other products, services or concepts in a way
that it can be easily communicated and marketed. A ‘brand
name’ is the distinctive name used to market the offer.

Brown field site Development land or site area that is contaminated
or requires remedial works before new development or
building can occur.

Brown goods Describes household items of furniture such as television
sets, chairs and tables.

Budget cost The predicted cost as opposed to the actual cost.

Buildability Judgement based on experience and practice as to the
practicability of a construction method or form.

Building file A requirement under the UK’s Construction (Design
Management) Regulations (1994) to keep a complete record of materials
used in construction, all the construction drawings with maintenance
procedures detailed and even how the building can be safely demolished
at the end of its life.

CAGR Compound average growth rate.

Casegoods A term used widely in the industry for bedroom furniture.

CMBS Commercial mortgage backed securities: bonds backed by
mortgages on commercial property.

Commissioning Establishing a building as a working operation.

Concept development The process of identifying, defining and collecting
ideas to create an image for a new business or product.

Condition survey Inspection and report describing the current state of a
building or item of plant.

Construction manager The construction manager is a fee earning professional who is employed to programme and coordinate the construction
works undertaken. The construction manager selects, supervises
and manages the work of specialist trade contractors who are employed
to undertake the work.

Cost of capital The rate of return required by investors in the business.

DCR Debt-coverage ratio.

Deal sheet Summary of the major terms of the proposed loan.

Debentures Fixed interest long-term loans.

Depreciation The proportion of the cost of a fixed asset which is to be
charged to the profit of the business.

Discount factor The percentage rate of return which represents the
opportunity cost of using the funds in different ways.

Discounted cash flow The future monetary value of net cash flows
expressed in present value terms.

Double loaded corridors Acorridor providing access to rooms on two
sides.

Due diligence A systematic process in which concerted attempts are
made to unearth every fact that is relevant to the situation, and that
might affect the decision to continue with the venture.

EBITDA Earnings before interest, taxes, depreciation and amortization.
Can be used to analyse the profitability between companies and
industries, because it eliminates the effects of financing and accounting
decisions.

EMV Expected monetary value. A weighted average of the values of
the possible outcomes of some action, the weights being the respective
possibilities.

Facilities management A contract to look after a property, which may
cover not just building and plant maintenance and renewal, but also the
provision of services such as security, laundry or computer facilities.

Feasibility study A written document prepared in the planning stage
of a new development that represents research to justify the costs and
benefits of undertaking the project.

FF&E Furniture, fittings and equipment. The components of a hotel
bedroom which are ‘loose’, or not structural in origin.

Footprint A statement of the gross area of the building which covers
the site at ground floor level, regardless of height or overhangs.

Franchise Under a franchise agreement the investor retains ownership
of the asset and almost full control of the operating business, subject to
meeting certain basic operating criteria and product standards established
by the franchisor. In return the franchisee benefits from being able
to use the company’s brand name, reservation system and other forms of
support (such as bulk purchasing agreements, employee training and
development and financing advisory services).

FRI Fully repairing and insuring. A term applied to leasehold agreement
in which the lessee or tenant has full responsibility to keep in good
repair both the inside and outside of the leased building.

GAP General accounting principles: used in the USA.

GDP Gross domestic product.

GDS Global distribution system.

GOP Gross operating profit.

GOPPAR Gross operating profit per available room.

Green field site A parcel of land designated for the first time for new
development.

Hold point A point beyond which work shall not proceed without the
written authorization of a designated individual or organization.

Hurdle rate Target return on capital proposed for capital investment
projects that exceeds the cost of capital.

HVAC Heating, ventilation and air-conditioning.

Interior designer The interior designer is responsible for the design of
the finishes and furniture, fittings and equipment (q.v.) elements of a hotel.
The interior designer may, if appointed at an early stage, be involved in the
space planning of a hotel, but is often appointed at a later date.

IRI Internal repairing and insuring. A leasehold agreement in which
the tenant agrees to undertake internal repairs.

IRR Internal rate of return. A method of assessment of capital projects
in which future cash flows are discounted to equal the cost of the project.
The rate of interest which is effective in achieving this is the internal rate
of return. Where there are several projects being contemplated, the one
showing the highest internal rate of return is usually chosen.

JCT Joint Contracts Tribunal. An independent body representing all
parties and which produces and published standard forms of contract
for use in the UK construction industry.

Joint venture An agreement by two parties with different expertise to
jointly invest and/or manage a development or facility.

KPI Key performance indicator.

Lead time The time taken in planning or implementing an event until
it actually occurs.

Lease contract A form of legal agreement to lease an asset that is
owned by one party who receives rent from another party, the tenant.
The tenant operates the business for a period of time in the expectation
that the profits from the business will exceed the rent paid. The lease is
normally long term (typically 15 to 20 years plus tenants’ options to
extend) with the property owner receiving a fixed rent.

LIBOR The London Interbank offer rate.

Life cycle The length of time a whole building or individual part may
last, including maintenance required.

Life cycle costing A group of economic appraisal techniques which
assess the sum of all relevant capital, operating and maintenance costs
and incomes of an asset. All costs and incomes are brought together in a
comparable form, allowing for the fact the cash flows occur at different
times during an asset’s life cycle.

LTV Loan-to-value ratio.

Maintenance Replacement or overhaul of a building component, for
example windows or items of plant such as replacing the heating boiler
to ensure that an agreed standard of service is economically achieved.

Management contract An agreement in which a hospitality management
company not only offers a licence for the use of its brand name and
reservation system but also takes full responsibility for the day-to-day
management of the hotel as agent for the owner of the asset.

Massing The aggregation or volume of the components of the building(
s), and their relationships to each other.

M&E Mechanical and electrical. Usually refers to building services.

Mechanical feasibility Mechanical studies are those which a client
commissions in a feasibility study because it is required by a third party,
for example in support of the application for funds, and this is the most
common circumstance in which a mechanical study is prepared. Bankers,
certainly, are less willing to lend on projects unless such appraisals have
been well organized and have been carried out by independent professional
organizations.

Mezzanine loan An additional loan which increases total debt financing
from (say) 60 per cent of value to 80 per cent of value.

Negative feasibility study One which recommends that a project is
not pursued.

NOI Net operating income

NPV Net present value. The current cash value of future discounted net
cash flows arising from a project.

Opportunity cost An term in economics that means that the next best
alternative that has been foregone. This may represent the time taken or
money lost from not choosing a particular option.

OS&E Operating supplies and equipment.

Outturn cost The agreed final construction cost of a development project.

Payback method A method for discriminating between projects based
on how quickly the original cash investment is repaid.

Planned preventative A phased schedule of regular property and
equipment maintenance and repairs over time.

Principal contractor The appointment of a principal contractor is a
statutory requirement under the Construction (Design & Management)
Regulations 1994. The principal contractor must be involved in the management
of the construction work, must be competent and able to allocate
adequate resources to the task.

Pro-active feasibility One where the client who commissions it requires
information to be provided in addition to projections of the return on
investment.

Procurement Method of obtaining by care and effort the most suitable
process of competitively priced element for construction or purchase.
Product building Where the building form is an integral part of a
lifestyle product, such as a hotel.

QS Quantity Surveyor.

Rack stuffer Promotional material which fills hotel brochure shelves or
racks.

REIT Real Estate Investment Trust. Started in the USA, a REIT is an
investment vehicle that takes the form of real estate mutual fund permitting
small investors to participate in large, professionally managed real
estate projects.

RevPar Revenue per available room.

RFP Request for proposal, which seeks external support for services
such as public relations or marketing.

Risk allowance A contingency sum that is set aside to fund the cost of
construction variations.

Risk management A process used by project teams to reduce the
impact of risks on the outcomes of a project, through the formal identification,
appraisal and management of potential risk events throughout
the life of the project.

Schedule of condition Details the state of the property at the start of a
lease, as a standard by which the tenant must hand back the property at
the end of lease period.

Sensitivity analysis An accounting technique that measures the relationship
of cost and volume to profits. If small changes in factors such as
volume, selling price, variable and fixed costs cause a large change in
profit, it can be said that profit is sensitive to that factor, and that it is critical
to the business.

Snag Abuilding industry term which means incomplete work, or complete
work not in accordance with the specification, identified prior to or
at ‘practical completion’ or during the, ‘defects liability period’ or at ‘making
good defects’ inspection.

Snagging list The joint identification of a list of faults or problems that
need to be rectified before the final payment is made to the contractor(s).
Soffit The undersurface of an arch, balcony or ceiling.

Sous-vide A food production method in which cooked food is vacuum-
packed in central production kitchens so that it can be easily reconstituted
at the point of sale by comparatively less skilled staff.

Straight-line method This method charges an equal amount of depreciation
to each accounting period that benefits from the use of the fixed asset.

Turn key projects A development project in which the sole contractor
is responsible for construction, fitting out and commissioning the building,
so that all the client has to do is turn the key and begin trading.

TWC Temporary works coordinator. One who is appointed on a temporary
basis to supervise on-site construction works.

VM Value management. A process used by project teams to define the
objectives of a project and to deliver these economically and quickly.

WACC Weighted average cost of capital. Represents the combined cost
of the sources of finance ulilized by the business.

WTTC World Travel and Tourism Council.

Yield management A technique that aims to maximize revenue over a
cycle of peaks and troughs by adjusting prices to suit market demand.

Zone split The physical division of a property to be refurbished
between the parts that are open for business, and those that are to be
closed for building work.

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