How a managed hotel in Riyadh splits its profit
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The prompt
An illustrative managed hotel in Riyadh has total revenue of SAR 100 million a year and a gross operating profit (GOP) of SAR 35 million. The operator charges a base fee of 3 percent of revenue and an incentive fee of 8 percent of GOP. The owner also sets aside 4 percent of revenue as a reserve for furniture, fittings, and equipment (FF&E). What does the operator earn, and what is left for the owner before property tax, insurance, and financing?
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