Small Hotel Break-Even Analysis: $78K Monthly Revenue Threshold

Fixed costs $22.2K Base overhead

Contribution margin 86.5% After variable costs

Break-even revenue $25.7K Monthly target

Break-even timing Month 25 Payback point

Break-even calculator

Test how monthly room revenue, variable expenses, and fixed overhead shape break-even for a small hotel.

Lean Base Full

Monthly revenue This drives the cash left after direct costs. $ Lower sales Higher sales Variable expenses These rise with bookings, like commissions, food service costs, and promo spend. $ Lower costs Higher costs

Money available to cover fixed costs $64,000 $75,000 revenue - $11,000 variable expenses

Margin ratio

85%

Covers fixed costs

$3,267 short

Fixed monthly costs This is the monthly overhead break-even must cover. $ Lower overhead Higher overhead

Break-even chart Revenue Total costs

Which hotel expenses are fixed, and which move with occupied room nights?

Cost classification

Break-even gets unreliable when fixed bills, usage-driven costs, and staffing steps are blended together. Lease and property tax set the monthly floor, while commissions, food, utilities, cleaning, and staff coverage move as occupied room nights rise.

Expense	Cost	Break-Even Treatment	Common Mistake
Lease Payment ($15,000/month)	Fixed	Include in the monthly fixed base that room revenue must cover before profit.	Spreading it per room and missing the cash floor in slow months.
Property Tax ($2,500/month)	Fixed	Treat as a stable monthly burden across the planning range.	Linking it to occupancy when it does not fall with empty rooms.
Utilities ($4,000/month)	Semi-variable	Keep a base amount, then add usage tied to occupied rooms and shared spaces.	Treating utilities as fully Fixed and understating peak-season load.
Cleaning Supplies ($900/month)	Semi-variable	Model a base stock level plus extra supplies as occupied room nights increase.	Ignoring laundry and cleaning load when occupancy rises.
Food & Beverage Costs (6.0% in first year)	Variable	Deduct from revenue when calculating contribution margin, which is sales left after variable costs.	Using one food percentage for every room and service mix.
Online travel agency commissions (5.0% in first year)	Variable	Reduce room revenue by the commission rate on bookings that use third-party channels.	Burying commissions in marketing instead of showing booking-channel drag.
Marketing Digital (2.5% in first year)	Variable	Treat as a sales-linked spend when calculating revenue needed to break even.	Calling all marketing Fixed and missing spend that scales with bookings.
Housekeeping Staff	Semi-fixed	Hold staffing flat within a room-count band, then step it up as occupancy and service coverage rise.	Treating all payroll as Variable instead of staffing by coverage needs.

How does break-even change across lean, base, and full hotel cases?

Scenario table

Lean still misses break-even because fixed payroll and lease costs outrun room revenue. Base narrows the gap, and full finally clears the line once higher occupancy and added coverage lift revenue faster than cost.

Planning figures only; actual break-even will move with occupancy, ADR mix, and staffing.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean Year 1 case	$604K	$82K	$673K	86.5%	-$151K	Still below break-even; opening risk stays high.
Base Year 2 case	$716K	$93K	$714K	87.0%	-$91K	Closer, but still short of break-even.
Full Year 3 case	$1.13M	$139K	$814K	87.7%	$178K	Above break-even, with a real cushion.

What breaks the small hotel’s break-even plan first?

Stress test

Year 1 break-even is about $778K, so the plan has little room for miss steps. A 10% revenue shortfall can create about a $67K contribution gap, and higher fixed costs or weaker margin push breakeven up fast.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$778K	$0 gap	55% occupancy and Month 25 break-even leave little slack.
Revenue shortfall	Revenue misses the Year 1 plan by 10%.	$778K	$67K gap	A small demand miss turns into a fast cash drain.
Fixed-cost pressure	Fixed costs rise 10% on the $673K burden.	$855K	$77K gap	Lease, payroll, and utilities push the target up.
Margin pressure	Variable expenses rise from 13.5% to 18.5% of revenue.	$825K	$47K gap	Booking-site fees and discounting erode contribution fast.
Combined pressure	Fixed costs rise 10% and variable expenses rise to 18.5%.	$908K	$130K gap	Two hits together can push breakeven past $900K.

Should you sign the lease and fund the full buildout only after this hotel proves break-even math?

Founder checklist

Don’t sign the lease or commit to the full renovation until Year 1 occupancy, room rates, and staffing line up with the Month 25 break-even path. If any one of those misses, the cash gap shows up fast.

1Demand test55% occupancy

Test local demand at the opening mix: 55% occupancy with Standard at $150 midweek and $200 weekend, Deluxe at $200 and $250, and Suite at $300 and $400.

2Fixed load$67.3K/mo

Make sure the lease, property tax, insurance, utilities, admin, IT, cleaning, security, and Year 1 wages can all fit inside this monthly load before variable costs.

3Margin mix86.5% CM

Keep Year 1 variable costs near 13.5% of revenue, because contribution margin (sales left after variable costs) is what pays the fixed bills.

4Staffing ramp10→14 roles

Make sure housekeeping, front desk, restaurant, and maintenance can cover 10 roles at launch and 14 by Year 3, or service slips will hit occupancy.

5Cash runway$162K

Keep at least this much cash through Month 25, because that is the model’s minimum cash point and the same month it reaches break-even.

6Capex timing$495K capex

Stage the room, kitchen, HVAC, IT, lobby, spa, parking, and website spend across Months 1 to 10 so cash is not trapped before revenue ramps.