EBITDAR is a financial acronym that’s moved from the backrooms of accounting to the boardroom table in 2025. As Australian businesses adapt to new lease accounting standards and a fast-evolving economic climate, EBITDAR offers a sharper lens for assessing real operating performance—especially for sectors with hefty rental or leasing commitments.
What Is EBITDAR, and Why Is It Trending in 2025?
EBITDAR stands for Earnings Before Interest, Taxes, Depreciation, Amortisation, and Rent (or Restructuring) costs. While many are familiar with EBITDA, EBITDAR takes analysis one step further by removing the impact of rent expenses. This adjustment is critical for industries—think hospitality, aviation, or retail—where rent is a substantial and sometimes volatile cost.
- EBITDAR = EBITDA + Rent (or Restructuring costs)
In 2025, EBITDAR is gaining traction in Australia as businesses respond to the ongoing impact of AASB 16 (the Australian equivalent of IFRS 16), which brought operating leases onto balance sheets and muddied traditional measures of profitability. By excluding rent, EBITDAR allows analysts, lenders, and investors to compare businesses on a more even footing, regardless of their leasing arrangements.
How Australian Businesses Use EBITDAR in Practice
EBITDAR is particularly useful in sectors where rent or lease costs are a major part of the expense structure. For example:
- Hospitality: Hotels often lease their properties, leading to significant rental outlays that can distort EBITDA. EBITDAR strips these out to show core operational performance.
- Retail: Brick-and-mortar retailers, especially those with multiple outlets, use EBITDAR to benchmark performance across stores with varying lease terms.
- Aviation: Airlines with leased aircraft rely on EBITDAR to normalize results for comparison with peers who own rather than lease their fleets.
In 2025, banks and private equity investors are increasingly requesting EBITDAR figures during loan assessments and M&A due diligence. This helps them gauge a business’s true earning power before the impact of financing, tax, non-cash charges, and lease arrangements.
EBITDAR in the Context of 2025’s Financial Landscape
Several developments are driving EBITDAR’s popularity in Australia this year:
- Lease Accounting Changes: The full implementation of AASB 16 has made it harder to compare EBITDA across businesses with different lease structures. EBITDAR offers a solution by removing rent from the equation.
- Rising Rents and Restructuring: With commercial rents rising in major Australian cities and many businesses renegotiating leases post-pandemic, EBITDAR helps isolate operational performance from these external pressures.
- Investor and Lender Focus: As credit conditions tighten in 2025 and lenders scrutinize underlying earnings, EBITDAR provides a more reliable indicator of a company’s ability to service debt and generate cash flows.
Example: A Sydney-based restaurant group, facing steep rental increases after renegotiating leases, reported steady EBITDAR despite a dip in EBITDA. This signaled to investors that core operations remained healthy, and the rent spike was a temporary headwind.
EBITDAR: Opportunities and Caveats
While EBITDAR is a powerful tool, it’s not a magic bullet. Investors and business owners should be aware:
- Use for Comparison: EBITDAR is best for comparing similar businesses with significant rental outlays. It can be misleading if used in isolation or across dissimilar sectors.
- Transparency: Rent is a real, recurring cost. Stripping it out for analysis is useful, but decisions should also consider the business’s ability to manage these expenses.
- Watch for Adjustments: Some companies may use EBITDAR to mask underlying issues. Always review reconciliations and footnotes in financial statements.
Ultimately, EBITDAR is one more tool in the financial toolkit—best used alongside other metrics and with a clear understanding of its strengths and limitations.
