Hotels & assets
FF&E Reserve
A percentage of revenue set aside under a hotel management agreement to fund future capital replacement — conventionally in the low single digits. It is a funding mechanism, and it is not a capital plan.
The reserve tells you what money is arriving. It says nothing about what the building needs — and audited industry data shows hotels spending materially more than the conventional reserve provides. The gap does not disappear; it defers.
And the mechanism has a cruelty in it: because the reserve is revenue-linked, it shrinks in exactly the years the property is under pressure, while the chillers age on the calendar rather than on the P&L.