Trends

1. Hotel Trends & Valuation
Methodologies
Stephen Rushmore
HVS International
20 October 1999

2. Hotel Valuation Case Study
Three Approaches:
Cost
Sales Comparison
Income

3. Cost Approach
Land Value:
8 acres @ $500,000/acre $ 4,000,000
Furniture, Fixture and Equipment:
250 rooms @ $14,000/room 3,500,000
Improvements:
250 rooms@ $80,000/room 20,000,000
Total Replacement Cost $ 27,500,000
Depreciation:
Age 9
Life = 36 = 25%
.25 x $20,000,000 5,000,000
VALUE BY COST APPROACH $22,500,000

4. Sales Comparison Approach
Sale# 1
Price Per Room: $86,000
Restaurant Seats/Room: .50
Lounge Seats/Room: .36
Meeting Space/Room: 18 sq.ft.
Sale# 2
Price Per Room: $95,000
Restaurant Seats/Room: .83
Lounge Seats/Room: .75
Meeting Space/Room: 42 sq.ft.
Sale# 3
Price Per Room: $92,000
Restaurant Seats/Room: .63
Lounge Seats/Room: .57
Meeting Space/Room: 30 sq.ft.
Subject
Restaurant Seats/Room: .72
Lounge Seats/Room: .50
Meeting Space/Room: 32 sq.ft.
Sale Percent Adjustment Adjusted
Sales Price/Room
1 +5% $90,300
2 -5% 90,300
3 -2% 90,160

5. Income Approach
Capitalization Rate:
Mortgage .75 x .1053 = .079
Equity .25 x .1200 = .030
Overall Rate .109
Valuation:
$2,450,000
.109 = $22,477,064
VALUATION BY INCOME APPROACH (SAY) $22,500,000
Proof of Value:
Mortgage .75 x $22,500,000 =$16,875,000
Equity .25 x 22,500,000 = 5,625,000
Total $22,500,000
Debt Service .1053 x $16,875,000 = $1,775,000
Equity Dividend .1200 x 5,625,000 = 675,000
Total $2,450,000

6. For any further information please contact:
HVS International
B - 1/25, Safdarjung Enclave, 1st Floor,
New Delhi - 110029.
Tel: 91 11 610 4644
Fax: 91 11 6104552

7. For any further information please contact:
HVS International
B - 1/25, Safdarjung Enclave, 1st Floor,
New Delhi - 110029.
Tel: 91 11 610 4644
Fax: 91 11 6104552