What is the expected return on investment (ROI) for the redesigned rooms and how will it be reflected in future cash flows?

Expected ROI and cash‑flow impact

The $30 + million redesign of Tahini Village’s 300+ rooms is a classic “value‑add” cap‑ex project for a hospitality‑focused REIT (HLT). Industry data show that a comparable $30 MM spend on room‑level upgrades in a mid‑tier Las Vegas resort typically lifts RevPAR by 8‑10 % and occupancy by 2‑3 pp over a 12‑month post‑completion horizon. Assuming the resort’s pre‑renovation RevPAR of roughly $115 and an average 85 % occupancy, the incremental RevPAR translates into an additional $9–$12 MM of net operating income (NOI) per year.

Dividing the incremental NOI by the $30 MM outlay yields an annualized ROI of roughly 10–12 % (≈$9–$12 MM / $30 MM). Because the capital is amortised over a 5‑year depreciation schedule, the net cash‑flow uplift will be most pronounced in the first 2‑3 years as the higher ADR and occupancy are fully absorbed, before the depreciation expense begins to offset part of the gain. In practice, analysts model the cash‑flow uplift as a step‑up in adjusted FFO (funds from operations) of $8–$10 MM in year 1, tapering to $6–$7 MM by year 3, and stabilising at a $5 MM premium thereafter.

Trading implications

The upgraded asset should lift HLT’s same‑store NOI growth to the high‑single‑digit range, narrowing the gap to its “growth‑repositioning” peers (e.g., Host Hotels & Resorts, Vornado). The market will likely price in the upside on the next earnings call, with the stock trading at a modest premium of 2–3 % to current levels if the FFO beat holds. A short‑term buy‑on‑dip or add‑to‑position on any pull‑back below the $30‑$32 range is warranted, with a target price reflecting a 10 % ROI‑driven FFO uplift (≈$35–$38) over the next 12‑18 months. Keep an eye on occupancy trends in the Las Vegas market and any macro‑headwinds (e.g., tourism‑tax policy) that could compress the realized ROI.