Net operating income (NOI)

Net operating income (NOI) is a financial metric used primarily in real estate and hospitality industries to measure the profitability of an income-generating property. It is calculated by subtracting all operating expenses from the total revenue.

NOI helps investors evaluate a property’s ability to generate profit from its core activities and determine its potential return on investment (ROI). It also helps them make informed decisions about managing, buying, or selling the property.

Consider a hotel with a mix of revenue streams, including conference facilities and on-site restaurants. The hotel’s NOI would be calculated by taking the total income from all these sources and subtracting operating expenses like property management fees, housekeeping costs, and utilities.