Financial
What is Operating Expenses?
The ongoing costs required to operate a property, including utilities, maintenance, insurance, management, and other day-to-day expenses.
Understanding Operating Expenses
Operating expenses are the regular, recurring costs necessary to operate an outdoor hospitality property. These include utilities (electric, water, sewer, gas), maintenance and repairs, property insurance, property management fees, marketing, administrative costs, and other operational expenses.
Operating expenses are critical for financial planning and property valuation. They're subtracted from gross operating income to calculate Net Operating Income (NOI), which is used in property valuation and investment analysis.
For outdoor hospitality properties, operating expenses typically range from 30-50% of gross revenue, depending on property type, amenities, and management structure. Understanding operating expenses is essential for accurate financial projections and feasibility analysis.
Sage Outdoor Advisory includes detailed operating expense analysis in our feasibility studies and appraisals, using industry benchmarks and property-specific factors.
Operating expenses are critical for financial planning and property valuation. They're subtracted from gross operating income to calculate Net Operating Income (NOI), which is used in property valuation and investment analysis.
For outdoor hospitality properties, operating expenses typically range from 30-50% of gross revenue, depending on property type, amenities, and management structure. Understanding operating expenses is essential for accurate financial projections and feasibility analysis.
Sage Outdoor Advisory includes detailed operating expense analysis in our feasibility studies and appraisals, using industry benchmarks and property-specific factors.
Examples of Operating Expenses
- •A 30-unit glamping resort tracks operating expenses: Utilities (electric, water, sewer) = $45K annually, property insurance = $25K, maintenance and repairs = $60K, property management fees (15% of revenue) = $75K on $500K revenue, marketing and advertising = $20K, administrative costs = $15K. Total operating expenses = $240K. These represent 48% of revenue, which is within the typical 30-50% range for outdoor hospitality. Understanding these expenses helps project NOI and property value.
- •An RV park owner analyzes operating expenses: With 100 sites generating $750K annual revenue, operating expenses total $300K including: utilities ($85K), property maintenance ($75K), landscaping and groundskeeping ($40K), management fees ($60K), insurance ($25K), and administrative ($15K). The 40% expense ratio leaves $450K NOI. By benchmarking against industry standards, the owner identifies that utilities are high and could invest in efficiency improvements to reduce costs and increase NOI.
- •Operating expense tracking for a campground: Monthly expenses include $3,500 utilities, $4,200 maintenance, $2,800 management, $1,500 insurance, $1,200 marketing = $13,200 monthly or $158K annually. On $420K revenue, this 38% expense ratio is efficient. These operating expenses are critical for calculating NOI ($420K - $158K = $262K), which is then used for property valuation using the income approach (NOI ÷ cap rate = value).
Common Use Cases
- •Financial planning
- •Property valuation
- •Feasibility studies
- •Investment analysis
Related Services
Frequently Asked Questions About Operating Expenses
What expenses are included in operating expenses?
Operating expenses include utilities, maintenance, insurance, management, marketing, and other day-to-day operational costs, but exclude debt service, taxes, and capital improvements.
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