Class Notes (1,100,000)
CA (620,000)
Ryerson (30,000)
Lecture 2

HTD 500 Lecture 2: Chapter 2


Department
Hospitality and Tourism Management
Course Code
HTD 500
Professor
Richard Wade
Lecture
2

This preview shows pages 1-2. to view the full 8 pages of the document.
Chapter 2 Performing a Hotel Market Study and Valuation
Choosing Completive Set: 4Ps
Participation (in STR)
Proximity
Pricing
Product
The Purpose of the Feasibility Study
determine is a proposed hotel will be economically feasible
provide professional opinion to potential buyers
for potential sellers
to interested lenders
to determine if present management is maximizing the value of the property
What is a Hotel Market Study & Valuation?
Market study & valuation: scope of work involving estimate market value of various
assets comprising business
6 step process of market study & valuation
1. Evaluate hotel’s site & locational characteristics
2. Quantify lodging demand
3. Evaluate competitive lodging supply
4. Measure property-specific characteristics (for existing hotel)
5. Forecast revenues & expenses
6. Estimate market value
Valuation: focus on income capitalization approach & show how cost & sales
comparison approach provide support for final value conclusion
The Phases of Performing a Hotel Market Study & Valuation
Phase 1: Define the Assignment
Where is the property located?
Is the hotel existing/ proposed?
What facilities constitute the property?
What is the date of value?
What is the purpose of the study?
What property rights are to be appraised? (fee simple, leasehold, lease fee,
combination)
Is there any excess land?
What elements of property are being appraised? (FF&E, land, building)
Who operates/ will operate the hotel?
What is the financial structure (debt & equity) involved?

Only pages 1-2 are available for preview. Some parts have been intentionally blurred.

Phase 2: Collect the Data
data collection checklist should be prepared to ensure no. essential info overlooked;
include
- info provided by property owner/ client
- primary market research conducted by appraiser
- secondary research of in-house data & other secondary sources (STAR report)
data collection process should be thorough, accurate & all-inclusive
property location/ address
operator’s performance abilities
Phase 3: Analyze the Data
use sophisticated analytical procedures to manipulate data so appraiser can simulate/
model actual market conditions
Room Night Analysis
measure current hotel demand & forecast future demand (occupancy %)
calculate market share based on competitive strength relative to other hotels
Fixed & Variable Income & Expense Forecasting
income & expenses fluctuate w/ changes in sales volume & usage of property
provide basis for forecasting hotel’s net income bf debt
Mortgage Equity Valuation Model
use this model to make purchase decision
forecast net income bf debt; residual values are discounted to present value at discount
rate that reflect cost of debt & equity capital
Phase 4: Formulate Conclusions
intermediate conclusions lead to ultimate opinion of value
- suitability of the site for hotel use
- suitability of improvements & amenities
- surrounding neighborhood characteristics
- local economic & demographic conditions
- current level of room night demand subdivided by market segments
- expected future trends in lodging demand
- existing & projected competition
- subject’s relative competitiveness & projected capture of room night demand
- projected annual occupancy up to stabilized level
- projected room rate, use of & revenue from F&B & banquet facilities
- projected operating & fixed expenses
- estimated net income bf debt services
- opinion of value by income capitalization, cost & sales comparison approach
- reconciliation of each approach & final estimate of market value
You're Reading a Preview

Unlock to view full version

Only pages 1-2 are available for preview. Some parts have been intentionally blurred.

Define the Assignment
1st phase of hotel market studies & valuation: creation of complete & clear definition of
assignment
appraiser must understand client’s exact needs bf data collection & analysis process
need to determine amount of time & staff required to prepare accurate fee quote
Types of Data
Property-Specific Data
i. Does the Hotel Exist/ Is it Proposed?
ii. Property Location
iii. Description of Property
min facilities description
- guest room count & mix
- no & capacity of restaurants & lounges
- square footage & configuration of meeting & banquet space
- amount of retail space
- list of other facilities, amenities & services
further description
- building: foundation, frame, floors, ceilings, doors, windows, HVAC…)
- land: size, shape, topography, dominant, servient easements, ingress
- FF&E
Excess land: surplus land that not needed to accommodate site’s highest & best use
- description of parcel: size, access, visibility, topography
Assignment-Specific Data
include general info & assumptions provided by clients
i. Purpose of the Study
develop opinion of market value/ investment value for potential hotel purchasers
estimate market value/ investment value for potential hotel sellers
interest lenders in providing project financing
attract investors for equity syndications
resolve property tax disputes
establish value for bankruptcy and/or foreclosure
value property for condemnation proceedings
determine if proposed hotel will economically feasible
determine if present management is maximizing value of property
quantify value of property expansion/ renovation
ii. Property Rights Appraised
interests will be transferred as date of value: fee simple, leasehold, leased fee,
management contract, franchise limited partnership, corporate stock, minority
ownership
You're Reading a Preview

Unlock to view full version