Bay Street’s quantamental approach to hospitality investing rests on three pillars:
• Bay Score: A composite measure of attractiveness across risk, return, governance, liquidity, and structure.
• AHA (Adjusted Hospitality Alpha): A hospitality-specific excess return metric net of benchmark and liquidity premium.
• BAS (Bay Adjusted Sharpe): AHA divided by volatility, representing return per unit of risk in real hospitality terms.

Together, these enable apples-to-apples comparison between stabilized and development deals, REITs and private platforms, U.S. vs. Asia, or brand-led vs. independent operators.

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Bay Score: Composite Investment Attractiveness

Bay Score = f(AHA, BAS, Region Risk (R), Financial Stability (F), Sponsor Quality (S), Liquidity Access (L), Market Structure (M))

Each axis is scored 0–1 or 0–100 and normalized across market cycles using proprietary sub-sheets embedded in Bay Street’s scoring terminal.

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Adjusted Hospitality Alpha (AHA)

AHA = Return − Benchmark − Illiquidity Premium

The illiquidity premium is modeled as a range from 1% to 7.5%, based on:
• LSD (Liquidity Stress Delta)
• FX volatility
• Hold duration
• Repatriation friction

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Bay Adjusted Sharpe (BAS)

BAS = AHA / Volatility

Volatility is modeled using public REIT dispersion, CoStar submarket banding, and adjusted for leverage and liquidity traits of each deal.

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Use Cases & Applications

• Deal Screening: Score inbound private data rooms and public equity screeners in real-time.

• Cross-Asset Comparison: Use AHA to compare private IRR deals vs. REIT cash flows.

• Lifecycle Adjustment: Apply trailing or projected Bay Score across pre-stabilized or stabilized assets.

• Dynamic Inputs: Score updates auto-calculate via the Bay Street Terminal and integrate directly into IC memos.

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Quantamental Advantage

• Institutional Rigor: Metrics are repeatable, benchmarked, and explainable to LPs.

• Cross-Market Transparency: One metric system for all asset types and geographies.

• Real-Time Updating: Bay Score shifts dynamically with inputs, supporting risk-aware IC decisioning.

• Integrated Terminal Display: Used within the Bay Street Terminal dashboard for all strategy reviews.

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LP Takeaways

• Clarity Over Complexity: Bay Score simplifies fragmented underwriting into a score-driven hierarchy.

• Real Alpha, Defined: AHA doesn’t just beat a benchmark, it beats illiquidity and risk, too.

• Smarter Volatility: BAS shows whether high-return deals are worth the volatility they bring.

• Global Uniformity: Regional adjustments ensure local conditions are reflected without compromising comparability.

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Appendix: Formulas & Benchmarks

Bay Score = Weighted function of (AHA, BAS, R, S, F, L, M)

AHA = Return − Benchmark − Illiquidity Premium

BAS = AHA / Volatility (proxy via REITs × leverage × FX factor)

BSHI = Composite of:

• STR Global RevPAR Index (TRI methodology)

• CoStar Hospitality Data (weighted submarket logic)

• Cambridge PE Hospitality Index

• NCREIF Hotel Index (Time Weighted Return)

• FTSE Nareit Lodging Index

• MSCI GPFI Hotel Composite

• S&P Global Hotels & Resorts Index

• Dynamic Illiquidity Premium (1–7.5%)

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CoStar Methodology Integration & Forecast Notes

• CoStar Method Tag: Marks modeled inputs inferred from market-weighted logic.

• Forecast Confidence Score: Graded based on STR sufficiency and Oxford Economics forecast alignment.

• Bay Score Trajectory Forecasts: Visualized with confidence bands under base, bull, and bear cases.

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Copyright Notice and Legal Disclaimer

The materials provided by Bay Street Hospitality Fund I GP LLC are for informational purposes only. They do not constitute investment advice. All trademarks and proprietary terms (e.g., Bay Score, AHA, BAS, BSHI) are protected. © 2025 Bay Street Hospitality. All rights reserved.

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