Valuing a hotel property
Hotel valuation in the German-speaking market
A hotel is not valued against comparable sales. It is valued on what the business earns. That is not a house view, it is standard practice in this market. For an apartment the comparison approach gets you there. For a hotel it does not, because two buildings of the same size in the same street can be worth very different amounts. Deriving a sustainable income takes an understanding of how the business actually runs, whether the owner operates it or a tenant does. Concept, location and the outlook of the site belong in the same calculation.
Three values that get confused
Someone asking for a hotel valuation does not always mean the same thing. What is measured depends on what is being sold or handed over, and the three figures can sit a long way apart.
Two of the three are often needed at once. An owner keeping the property and handing over only the business needs the business value and the rent value. An owner selling everything needs the property value and has to know which rent can be presented to a buyer as the basis of their calculation.
Why two hotels of the same size are worth different amounts
Room count and turnover explain only part of a hotel value. After the figures have been adjusted, what counts is the result that remains and how reliably it transfers to a new owner or operator.
In owner-operated hotels a market-rate salary for the owner is frequently missing from the accounts. The result then looks better than it will be for a buyer after completion. Other one-off effects belong in the same adjustment, from company cars and private costs run through the business to a year with a floor closed for refurbishment.
Location remains one of the strongest drivers. Between a hotel in one of the seven largest German cities and a comparable business in a rural area there are substantial differences at identical figures, because demand, price levels and the pool of possible buyers are all different.
How we work through it
We start with the operating figures and separate one-off effects from recurring results. A missing owner's salary is taken into account, as is a realistic allowance for maintenance and for the replacement of furniture, fittings and equipment.
Then we establish which level of income is sustainable. Type of operation, location and contractual position all influence which multiple the market finds plausible. For leased hotels we derive the rent value from the rent the business can carry over the full term, not from the rent currently being paid.
What comes out is a range. Anyone naming the value of a hotel without having seen the figures and the contracts is offering an opinion.
Questions and answers
Which valuation are you actually asking for?
There are three, and they are often confused. The property value covers land and building regardless of who operates. The rent value is the rent the business can sustain. The business value covers the operating company with its staff, contracts and forward bookings. Which one you need depends on what is being sold.
Is this a formal appraisal?
No. We produce a commercially reasoned value range with the assumptions written out. Where a court or a tax authority requires a certified appraisal under German rules, that is a different document and we will say so.
What do you need from us?
The commercial records of the business, current figures and the material contracts. For a leased hotel the Pachtvertrag, the German lease, is essential. What else is needed depends on the property.
How long does it take?
A full valuation is generally possible within seven days once the documents are complete. The waiting usually happens before that, while the documents are being collected.
Ask for an initial view
Send us the figures you already have. We will tell you whether they are enough for a first assessment and what is missing if they are not.
- Telephone
- +49 211 239 554 0
- Response
- within 24 hours
Your contact
Timo Hofmann
Managing Director
- Direct line
- +49 211 239 554 09
English and German. A short call is enough for a first orientation.
Related
What usually follows a valuation.