Valuing a hotel is not the same as valuing a home, apartment, office or a commercial building. When you buy a home, you could get some revenues by renting it out. In the same light when you buy a hotel your main aim should be to get revenues by offering the rooms on rent. Hence, continuity of revenues and the rate at which they will increase over a period of time are very important factors to be taken into account while valuing a hotel. So revenue generation method is the best way by which hotels can be valued.
Apart from revenues there are also other important factors that should also be taken into account while valuing a hotel. The increase or decrease in revenues is directly connected to the location of the hotel. Hence, it is very important to look for hotels that are not only reasonably sure of their revenues but are also situated in a good locality. The next important point that should be kept in mind is the kind of food and beverages that are served in such hotels. Being in the hospitality industry, hotels are supposed to serve different types of foods to cater to various requirements. Hence, this is a very important point that cannot be overlooked when buying a hotel.
There are also other points that should also be taken into account. For example, good hotels are made of quality rooms, quality amenities and facilities which also must be closely looked into by the professional property valuers in Brisbane when they are assessing the same for its value. The loans and advances which hotel entrepreneurs have taken for running the hotel must also be factoring in before arriving at the net valuation of a hotel. Hence, valuation of a hotel without any doubt is a completely different ball game. It calls for hiring property valuers who are also good at valuing hotels, restaurants and food joints.
First and foremost, when buying a hotel it is important to appoint a property valuer as the initial step. This is because it is he who will be playing a major role in deciding whether the property is worth buying or not. Buying a hotel is a totally different cup of tea when compared to other property purchases such as buying of residential properties, offices, factories or other commercial apartments or buildings.
When buying a hotel it is done not with the intention of keeping it under lock and key. The main purpose of buying a hotel is to generate revenue. Hence, when you handover the entire documents pertaining to a hotel which you plan to buy, to a real estate agent, he will certainly look into from various angles. He will not only consider the cost element as far as the hotel property is concerned. He will also have to carefully evaluate the possible revenues that will come from the property over a period of time. Only when he is certain that the revenues will commensurate with the expenses, will he give a favorable valuation report.
Not all hotel properties are bought by paying cash. It is usually funded by loans from banks who certainly would like to know how the loan is going to be repaid. Hence, the role of a property valuer Melbourne becomes very crucial both for the banks and also for the entities who are planning to buy a hotel. Apart from hiring the right property valuer it is also important to make sure that you locate the property that is in the heart of the city or town where you are planning to buy it.
Hence, buying a hotel is a very tough task and apart from hiring the services of a good real estate valuer there are a number of other factors that you should also keep in mind. It is something that has to be done slowly and steadily and should never be hurried through under any circumstances.
Before beginning to even contemplate buying out a hotel, it is important to do your homework properly. Only when the normal organic growth options have been exhausted should one try to go in for acquiring a hotel. This is because by acting in haste you may be jeopardizing the normal growth prospects. You could be damaging the relationships with existing customers that you may have assiduously built over the past many years. Only when the growth avenue in the normal ways has been exhausted should one look for buying out of hotels.
It has also to be borne in mind that buying a hotel involves thousands and millions of dollars. Hence, a due diligence process that is extremely well thought out is very critical to find out the viability of buying a hotel out. As a starting step, the need to identify a reputed and experienced property valuer is the first step in this exercise. The entire due diligence process should be done by a team of which the real estate appraiser should be an important entity. When choosing this service provider, it may not be advisable to go in for the conventional real estate appraiser. This is because valuing a hotel might require adopting different methods. Hence, a good valuer is one who is able to value the hotel using the revenue model along with the conventional cost and sales models.
Further, when looking for a hotel for purchase, location is very important. Even if it is small hotel with lesser occupancy facilities, it is still having a look at it. Location plays a very important role as far as occupancy levels are concerned. There should also be the need to look into the revenue projections both from a short term and long term basis. This is important because it is quite natural that funds for buying the hotel will have to be sourced from banks. Therefore the promoters should be able to service the loans and interests comfortably. For this to happen, it is necessary that the hotel should have a decent occupancy rate at all points in time. The process is very lengthy and amongst the various professionals, the role of property value appraisers is perhaps the most important and significant.
While there could be a few things that are similar as far as valuing a property is concerned, it is not the same as valuing a building, apartment or even a commercial property. When valuing a hotel property different methods and yardsticks are used and we will have a look at them over the next few lines.
Cost approach is the most common method that is used for calculating the value of a hotel. This is nothing but considering the cost of entering into a hotel business by buying out a hotel property. Thought this is a widely used method of valuing a hotel there are some issues according to experts as far as this method of valuation is concerned.
Sales comparison method is another widely used method of valuing a hotel. It works on the premise that a buyer will be ready to pay only that sum of money that which similar hotels of the same size, location and utilities are available. This is quite a tough job and would require the valuer to have a look at the various properties of similar size, location and other amenities. The value of all these hotel properties needs to be plotted and then a mean average should be arrived at. This is a reasonably accurate method but does take time and it quite complex to calculate.
The income capitalization method is another way of calculating the value of a property. It is nothing but trying to have a fix on the income and revenues that a hotel will generate over a period of time. When such incomes are adjusted from the cost of acquiring the property the difference is often referred to as the value of the property. This again is a highly complicated method but something that finds favor with many valuers and also customers.
Valuation of a hotel is not the same as that of other properties. Though there could be some common points and similarities, you have to bear in mind that there are completely different factors that need to be taken into account. When valuing a hotel, location plays a very important role. This is the same with other properties too. However, as far as a hotel is concerned unless the location is good it might not be feasible to move ahead in the matter. Hotels run on customers and customers always look for locations that are easily reachable and logistically well situated.
Further when it comes to the method of valuing a hotel, as hotel owners you should be aware that most of the valuers are comfortable going in for the revenue model. They look at the possible revenues from a hotel for the medium and long term based on which they come out with a valuation. While the cost that you have incurred is an important component, unless you have revenues coming from such en expenditure the whole exercise would become futile to say the least.
Another important aspect that should be considered when buying old or new hotels, is the quality of construction and the rooms that are available. It should also take in to account the quality of amenities and services that are offered to the customers. The human resources that you plan to have for your new hotel will also be factored in by property valuers before coming out with the final report. Hence, all these points need to be taken into account when going in for a hotel buyout. You have to be closely coordinating with your valuer to ensure that you are buying the best hotel at the best possible prices.
Buying a hotel is not the same as buying a residential or commercial property. It is slightly different and you should take into account various important factors. Let us over the next few lines try to find out what are the various factors that should be kept in mind while choosing to buy a hotel. First and foremost, choosing the right location is of the greatest importance. If you are running a decent hotel business in a good location, you should be sure that you choose the new property only in those a location that is in complete sync with your overall image and goodwill. Going in for cheap hotel property that is not located well could not only damage your new venture but could also affect your existing business.
When choosing to buy a hotel, it is always better to have a property valuer to help you out. There are special valuers who are specifically experienced and skilled when it comes to valuing a hotel property. They take into account a number of factors including the expected occupancy levels, the facilities and amenities available for the customers who would be frequenting such hotels just to name a few. These valuers look at the hotel mainly from the point of view of its customers. This is totally in contrast to buying homes and residential properties where the only focus is on the comfort and satisfaction levels of their customers.
When choosing to buy such hotels, there is no doubt that the valuer has a very important role to play. He will also have a close look at the legal strength of the property and will examine all the documents closely and perhaps even under the microscope. Hence, it makes a lot of sense to hire the right valuer whenever you are planning to buy a hotel, however big or small it might be.
There is no doubt that a well thought out and well run hotel, food and beverage business can certainly bring in big money. However, it is a long term project and the gestation period might run into a couple of years. You have to learn to be patient in building your hotel business brick by brick. There are no magic wands for overnight success. There are a number of simple success principles that need to be followed if you wish to take your hotel business to high levels of success.
First and foremost identifying the right hotel is of paramount importance. When you get into this job you cannot do it alone but would have to depend on the help and services of a number of professionals. One such professional who has a very important role to play is property valuer. The first thing you should do when deciding to buy a hotel is to approach a good and professional valuer. You should explain your entire project and plan clearly to him. This will facilitate him to value the property that you have in mind from various angles that are relevant to your future business growth and revenue generation.
When valuing a hotel property, valuers keep a few important points in mind. Location perhaps is the biggest attribute when valuers value hotels. This is because success of a hotel is all about occupancy rates. Customers would like to stay in hotels that are centrally located. Therefore a lot of importance is given to the location of the hotel. The next important area of importance is the size of the hotel and the number of rooms that it has. This will have an impact on the revenues and the valuer is following the revenue model of valuation this is certainly an important point.
Apart from the above there are a number of other points too that a good valuer should take into account when valuing a hotel. These include, the kind of food and beverages that they have on offer, the star rating that the hotel is planning to acquire, the quality of staff and services that they are willing to provide. The tariffs that are being planned for various classes of rooms also will have a bearing on the valuation of a hotel.
The main reason for running a hotel is to ensure that it has the highest possible occupancy and as service providers the owners are able to satisfactorily serve their customers. At the end of the day apart from the value of the property or the land in which the hotel stands, there are a number of other intangible which need to be taken into account while valuing a property.
First and foremost hotel property valuation is quite complex and can be done only by professionals who have rich experience in this field. To begin with when a hotel comes up for sale, finding out the accurate market value of the same is the first starting point. The valuers will go about measuring the land on which the property is located. Once this is done, the next step is to value the building and the surrounding areas which form a part of the overall property.
This is quite a tough and difficult task and there are a number of factors that must be taken into account. The number of floors that the building has, the number of rooms that it has are just a few factors that must be taken into account while valuing a hotel property. The location in which the hotel is situated will have a big bearing on the overall valuation figure of the hotel. The kind of facilities that the hotel provides to its customers, the quality of food, the quality of staff that run the hotel are a few intangibles which must also be factored in while valuing a hotel property.
While there is no doubt that being in the hotel business is certainly a profitable venture for most, there are some challenges and pitfalls when running a small group of hotels. For big players there is not much of risk because any bad performance from one hotel is made up by a better performance by a few others. However, for those who are dependent on one or two hotels, treading carefully is very important. If they wish to move further in their ladder of success, they should understand the importance of buying out new hotels, either new or existing one. This calls for raising big resources and the only way this can be done is by going in for bank loans or other such financial means.
But banks and financial institutions will certainly ask for a number of details and valuation of the property is something that they will insist upon. Banks will not lend even a single dollar unless these applications for financing are supported by an independent valuation report. While valuation reports for ordinary flats, homes and apartments could be quite simple, when it comes to loans for buying of hotels the valuations reports will certainly be quite complicated. There are a number of factors and issues to be sorted out. The valuation itself has to be done from a completely different paradigm and it is very complicated to say the least. Apart from establishing the legality of the property as far as the proposed sellers are concerned it also calls for taking into account a lot of other factors.
This is a highly specialized job and only experienced and highly skilled valuers will be in a position to handle the same. The amount involved for purchase of even a small hotel in a reasonably big locality could run into millions of dollars and therefore a lot of care and caution will be exercised by the financiers. Even the prospective buyers would have to depend heavily on the valuation report to be reasonably comfortable that they are buying the right property at the right price and also at the right location.
Apart from valuation there are a number of other factors that should also be taken into account as far as these proposed buying out of hotels are concerned. The expected occupancy rates, the funds flow estimated from such occupancies, how the same will be used to service the loans that are being planned from banks and financial institutions are just a few things that ought to be kept in mind. The success of such buyouts would at the end of the day depend on two factors, accurate valuation of the entire project and how the occupancy levels are being projected for the short, medium and long terms.
First and foremost, if you decide to be in the hotel industry, you have to find a place to build a hotel. It is a very expensive proposition and calls for identifying the right land and at the right price. While you could easily identify a few areas or localities where you could set up the hotel, identifying the right property could be a big challenge. You should get the right sized property, at the right prices and situated at the right place.
When it comes to the price of a property you usually go by what the market has set. While there is nothing wrong in taking the help of the market, you should be sure that the market price represents the fair value of the land that you are planning to buy. It is under such circumstances that you have to depend on the services of a good and professional valuer.
They play a big role in helping you to be sure that you are being quoted the right price for the land that you are planning from a seller. Hence taking the help of a valuer is not an option but an indispensable necessity. Based on the valuation report submitted by the valuer you will be in a position to apply for bank loans for funding such hugely expensive hotel projects.
In the same light when you wish to sell your hotel after a period of time or would like to buy an existing hotel, here too the role of property valuation becomes extremely important. Today, no banks or financial institutions would be willing to lend money for such high cost projects unless a full valuation of the property is done by reputed, registered and experienced valuers.
So at the end of the day while there is nothing wrong in getting into the hotel industry, you should be sure that you are buying the right property, at the right price at the right location. You should be wlling to learn more about the hotel industry in details before you actually get into it.