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What are the Drivers for Hospitality Valuation

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Drivers for Hospitality valuation

Hospitality valuation: Like every other business, Hotels can be appraised for one reason or the other. It could be done for selling, business succession, or divorce purposes. To do this, many different factors can be used to find the value of a hospitality business. While a business owner can carry out a business valuation himself, it is advisable to seek the professional services of an experienced appraiser.

These experts know the best valuation method to use for every business. Many things are considered in hospitality valuation, such as tangible and intangible assets. Tangible assets can include buildings, land, equipment, vehicle, etc., while customers list, workforce, and technology are examples of intangible assets.

hospitality valuation

Hotel Intangible Assets

Some of the common Intangibles that affect the hospitality valuation are:

Intellectual property

Most of the hotel properties have a “flag.” This means that the properties are all franchised. This flag is known as intellectual property, and it is valuable.

Reservation System

The reservation system is another intangible asset in a hotel that can affect the value. You are buying the reservation system when you are buying the flag. System support and standard come with the reservation system when the flag is purchased and offered to the buyer.

Workforce

The hotel’s management and workforce are other significant intangible assets. Hotel management has more value in independent hotels. These play an essential role in hotel valuation.

Technology

Internet access and telecommunications are part of the technologies considered when determining the value of a hotel.

Noncompete Agreements

Non-compete agreements should be evaluated during business valuation as they have a value. It will increase the worth of your hotel.

Customer Lists

No successful or valuable business does not have customers. When your hotel has a customer list, it shows it is a selling business and adds value to the hotel. With more than 250 people in over 50 offices throughout the world, we offer expertise across all types of hospitality assets, including hotels, restaurants, casinos, shared-ownership lodging, mixed-use developments, golf courses, and spa and wellness, as well as conventions, sports, and entertainment facilities.

Aspects of Hotel Value

The theory of valuing a hotel is not different from other companies. The future economy’s benefits drive the value of a hotel by using reasonable capital costs. Many considerations are taken into account when an appraiser is determining the economic future benefits of the hotel. The demand and supply feature has a role in hotel valuing.

Some of the other aspects include:

Site Visit

Visiting the hotel you want to value is a standard practice done during a valuation engagement. While it is essential to visit the business, check other nearby alternatives. You will have valuable information that can hugely affect the value of the hotel positively.

Other Revenue and Costs

Consider every revenue form that may follow, like beverage, fitness centers, food, and stores. If the hotel to be valued is a resort, you will have extensive revenue-generating amenities.

Profitability

After everything, the value of your hotel comes to profitability. This aspect of business valuation analyses the free cash flow or net cash that the hotel will generate after an investment is done

Conclusion

A hotel can be valued in different approaches. The assets a hotel has predominantly affect the value. So, every tangible and intangible transaction should be considered before making a final price.

Hospitality companies are always looking for ways to increase their valuation. While there are many factors that go into a hospitality valuation, understanding the intangible drivers is essential. Noncompete agreements, reservation systems, technology, and intellectual property are all important considerations when trying to place a value on a hospitality company.

Different various valuation methods are generally used to value a hotel or other hospitality business. The most common method used by valuers is the Discounted Cash Flow (DCF) approach, which estimated the hospitality valuation based on the future cash flows generated by the business. The asset valuation method can also be used, which considers the costs of acquiring and developing the hospitality property. Comparables are another standard method, which involves looking at similar properties’ sales in the same market. Ultimately, the choice of valuation method will depend on several factors, including the type of property being valued and the valuation’s purpose.

Please don’t hesitate to reach out if you would like more information on how Valueteam can help with your hospitality valuation or any other related intangible valuation services. We would be happy to explain our various valuation services and our related valuation experience with you and how we can help you to achieve your strategic goals.