Revenue projections for new buildings overstate what owners keep

What we saw

We built a revenue projection for a planned building of hotel-style rooms and apartments in a UK city. It was not yet built, and its use for short stays all year round still depended on planning consent.

Three things stood out once the model was complete:

• Gross is not what the owner keeps. After VAT and OTA commission, about a third less was left than the headline figure for a normal year, which included VAT.
• Year one is not a normal year. Opening in January, year one came out about an eighth below the stabilised year.
• One input carried the model. One room type produced close to half of the revenue, and its price came from rates that nearby hotels advertise. Moving that one price 15% up or down moved the whole year by about 7%.

So the projection showed year one by opening month, what the owner keeps after VAT and commission, the three cases side by side, and the planning condition stated plainly.

As reported. A projection, not a result.

How to check yours

1. Find the headline figure and ask three questions: gross or net, with or without VAT, year one or a normal year?
2. Work out what the owner keeps: take off VAT, channel commission and payment costs. In the UK, VAT at 20% is a sixth of a VAT-inclusive price.
3. Find the input that carries most revenue, usually the largest room type's price or its occupancy. Move it 15% up and down and see what happens to the total.
4. Check where that price came from. Advertised prices of nearby properties are a ceiling; look for what they sell at, on which dates, and how full they are.
5. Ask for year one by opening month. A winter opening and a summer opening give different first years.
6. Check the conditions: consent, opening date, room count. A projection without them will be read as a promise.

The number

From the projection, realistic case, percentages against the headline figure for a normal year including VAT.

VAT source: GOV.UK, VAT rates, standard rate 20%, read 6 Nov 2026. Hotel and holiday accommodation is charged at the standard rate since 1 April 2022: GOV.UK, VAT Notice 709/3, updated 27 Oct 2026.

As reported. A projection, not a result.

When not to do this

• If the building is already trading, use its own history. A model from comparables is weaker than one year of real bookings.
• If the owner needs a lender's format, give them that format as well. Lenders often ask for a stabilised year; keep year one beside it.
• Do not add precision the inputs cannot carry. Round the figures and say which inputs are assumptions.

Frequently asked questions

Should a projection include VAT?

Show it both ways and say which is which. In the UK, accommodation is charged at the standard VAT rate of 20%, so VAT is a sixth of a VAT-inclusive figure before any other cost comes off.

Where should the rate assumptions come from?

From prices that comparable properties actually achieve for the same months, not only from the prices they advertise. Advertised prices are a ceiling; check them against occupancy and booked dates.

How long until a new building reaches a normal year?

It depends on the opening month and the market. Model year one by opening month, so the owner can see what an opening in winter or summer does to the first twelve months.