ABSTRACT
This chapter considers the range of factors that impact on the valuation of hotels for immediate purchase or for determining potential value at the time of estimated exit from the investment. The principal aim for measuring the value of a business is to provide a monetary measure that can be used as the basis for negotiation with lenders and potential purchasers. However, the value is only crystallized with the price that a prospective purchaser is prepared to pay for the property. There are many widely accepted valuation techniques available, each focussing on a different aspect of the potential value of the business, and often the most appropriate method will depend on the subsequent use of the valuation. These uses include providing a balance sheet figure for statutory accounts preparation purposes as well as setting a value for acquisition purposes, for insurance assessment, for investment monitoring purposes such as return on capital employed measures and possibly to provide a figure to banks as the basis of collateral valuations when raising a loan. The most appropriate method depends not only on the end purpose of the valuation but also on the size and type of business and the aspirations of the potential owner or seller.
This chapter explores the application of a variety of widely used approaches to hotel business valuations, including a review of:
Market capitalization
Price earnings basis
Net assets basis
Comparable transactions
Earnings multiple
Replacement value
Net present value using discounted cash flows
Intangible values
Impact of sustainability strategies
