Valbridge appraises both existing and proposed hotels throughout the region! Because we're knowledgeable on this property type, we decided to pick the brain of our own Brock Heyde, MAI about what to take into consideration when appraising in the hospitality industry! Hotels are an Operating Business: Many hotels often conduct other businesses such as restaurants/bars, banquet/meeting room rentals, and business services. Each business component requires its own income and expense analysis.
Hotels are Labor Intensive: In order to accomplish the goals of (1) executing 24-hour leases and (2) operating other related businesses, hotels are very labor intensive. Labor categories often include a general manager, front desk staff, housekeeping, maintenance, food and beverage staff, and sales and marketing staff. Depending on the size, location, and chain segment, additional labor categories can include security, human resources, accounting, and uniformed staff (bell-staff, valet, and concierge). Hotels are Capital Intensive: The excess wear and tear on hotel real estate and FF&E, due to the public nature of the facilities, requires annual expenditures for property renovation and improvements (that other real estate types do not require). There is a Formula for Measuring ADR: ADR (Average Daily Rate) is a measurement of the average rate paid for rooms sold. This is calculated by dividing the room revenue by rooms sold. Hotels are Typically "Branded" with a Chain Affiliation: In essence, the chain affiliation partially replaces the real estate broker as the leasing agent. Hotels Can Be Grouped Based on the Actual Average Room Rate: This method groups hotels in what is called "Chain Scales", with segments such as "Luxury", "Upper Upscale", "Upscale", "Upper Midscale", "Midscale", and "Economy". Independent hotels, regardless of their average room rates, are included as a separate chain-scale category called "Independent". We hope this has been helpful! Click here to contact our expert and contributor Brock Heyde, MAI!
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