Congratulations. You’ve built a hotel with a $3,000 ADR. You’re still losing money. How impressive.

In case you haven’t noticed, ultra-luxury hospitality is on fire. Consumers are spending, and as I’ve written before, a ton of capital is spilling over into ground-up development as a result. But some of these developers are nutso.

They show up with spectacular plans, nine-figure budgets, and financial models built around a $3,000 ADR. They might even achieve it. But not every dollar spent on development buys a higher room rate. And even the spending that does lift rates doesn’t necessarily produce a dime of additional profit.

Here’s a news flash for you: You can model absolutely anything. Seriously. And too often, an ambitious ADR becomes a license to spend. Developers start adding bigger suites, another restaurant, an elaborate spa, architectural flourishes, and finishes that cost a fortune. Every addition is suddenly essential to the guest experience. Apparently, once you type $3,000 into a spreadsheet, no one is ever allowed to say no.

And who’s paying for all this? The investor, that’s who. The developer gets to sell a spectacular vision, backed by a model in which the hotel commands extraordinary rates, enjoys healthy occupancy, and becomes an instant icon. Funny how rarely the pitch starts with what happens when construction costs jump 20%, the opening slips a year, or occupancy plummets to 45%.

And that’s why I say some of these developers are nutso. They model elaborate projects that cost a fortune to build, apparently assuming investors won’t see through the numbers. Do they think billionaires and fund managers can’t do math?

To be clear, a $3,000 ADR is not fantasy. Not in this market. It’s becoming easier and easier to achieve in this K-shaped economy. But that doesn’t mean you need every surface plated in gold or every conceivable amenity under the sun. Some of these hotels shouldn’t be built in the first place, because even if they perform exactly as modeled, the development budget has already made an attractive return nearly impossible.

A credible ADR projection isn’t an investment thesis. And here’s another headline: Neither is achieving it. You know what is an investment thesis? Making money.

You can build something guests will pay a fortune to experience without building something investors should pay a fortune to own. Simply put, you can get the room rate exactly right and the investment completely wrong.