How to value the price of an hotel

[Gon Eisenberg]

Hello,

How do I value the price of an active and operating hotel building?

Thanks!

[Chris Falk]

Study the revpar (revenue per avail room; I believe that's 1 of the main metrics hotels use) compared to similar properties in the area (whoever selling the hotel should provide comp info). Also look at NOI end of day regardless of revpar to see how efficient or not mngmt is operating the hotel. What is avg occupancy over 1, 3 5 years etc? For example, if hotel is avg 50% occupancy the past year and it's not a result of rooms out of inventory due to remodel etc, then something isn't right. Is the hotel due for a refresh or full blown renovation? Sometimes a hotel may show kinda marginal #'s but a big renovation is planned and the operator hopes that will increase occupancy and revpar, etc. (in which case you take a leap of faith to an extent). Is the hotel part of a big chain w/rewards program? Obviously the Marriotts, Hiltons etc of the world have very powerful marketing machines and brand recognition which adds intrinsic value to the property (and they hold manager/franchise to high standards). I have only invested in a chain hotel and above is some of the info I studied but is really only a snapshot. The market the hotel is in, the seasonality of the market, is it geared towards biz or leisure travelers, does it have conference facilities, etc are also relevant. If I were looking at a non branded hotel (i.e. not a hilton, marriott, etc brand) I'd have to think and research deeper to make sure the property has some kind of attraction or reputational value that draws guests. It seems like SO much of the traveling population is geared to specific loyalty programs these days (unless you're talking a real high end property like a 4 Seasons) and I understand that as well as a past business traveler.