How to underwrite a 112 key select service hotel when 41 percent of room nights come from two crew contracts

Take a 112 key select service property where the P&L looks clean until the segmentation report. Two crew contracts, both energy sector, account for 41 percent of room nights at a negotiated rate of $78 against a transient ADR of $121. Occupancy runs 71 percent and RevPAR is $86, so the contracts hold occupancy up while dragging rate down. Both contracts are annual with 30 day cancellation on the customer side. The seller's position in a case like this is that the contracts have renewed four times and the operator relationship is strong. The buyer's position is that a cap rate is being paid on income with 30 day duration and no renewal obligation, and the strict treatment is to underwrite the property at what transient demand alone supports. On these numbers that pencils to occupancy in the low 50s and RevPAR near $63, a 27 percent haircut to NOI that puts value roughly $3.4M below ask. The open question is whether that treatment is so conservative it stops being a usable bid, or whether there is a middle treatment that prices the contract risk instead of erasing it. An earnout tied to contract renewal is the obvious candidate, and it would be useful to hear whether sellers actually accept the mechanics. The lender side matters as well. If a lender gives contract revenue 50 percent credit in a debt yield test, the equity requirement changes even if the buyer wins the price argument.