How Much is My (That) Hotel Worth?

Chair:
Robert Chess, Head of Hotels, Fleurets

Speakers:
Bruce Cave, Director, Vision Hospitality Asset Management
Graham Craggs, Executive Vice President, Jones Lang LaSalle Hotels
David Harper, Director, Leisure Property Services
Stephen Richardson, Director, International Hotels Team, Atisreal
Bob Silk, Relationship Director, Barclays Hospitality and Leisure Team
Julian Troup, Hotels, Savills
Arvinder Walia, Finance Director, Hand Picked Hotels Limited
Stephen Wright, Manager, Development UK and Ireland, Cendant Hotel Group International

Session 1: How valuations are done
• The Hotel Market – is it the same everywhere?
- London
- Provincial
- Europe
• Valuations for different types of “Hotel” – is the valuation of a hotel the same whatever the structure?
- Owner/occupied, ie vacant possession, no brand
- Owner/occupied with brand
- Owned subject to lease or management contract
- Investment basis
- Rental valuation
- Goodwill
• Methodology – it’s on a capital value per room basis, surely?
- Income capitalisation
- Discounted cashflow
- Comparables
• Balance sheets and P&Ls – are they relevant?
- Advantages and disadvantages
- RICS Guidance
- International Accounting Standards
• UK versus Europe – we’re the best, aren’t we?
- Differences
- Brands
- Costs of acquisition
• The challenges going forward for valuers – are they different?

Session 2: What the values are
• Alternative use values – when to change a hotel into something else, and how can you tell if there is a more valuable alternative use for your hotel?
• Values to investors and values to operators – are they different and if so what drives these differences?
• What and who is driving the market? Who are the key buyers? Is there a distinct geographic bias to the buyer profile of today? Is the availability of debt funding driving values?

Session 3: What to do to increase these values and returns on capital, including harnessing the potential of outsourcing
Hotelier
• Branding
- Creating customer awareness
- Create loyalty and repeat purchasing
- Create a premium value if brand can be rolled out
• Differentiation
- Stand out from the crowd
- Exploit market opportunities and occupy a good position
- Sales mix to sustain profitability that underpins value
• Exploiting the web: own, third party, cost
- Low cost of sale
- Drive traffic to create loyalty and brand following
- Packaging
• Management focus
- Three golden rules: management, management, management
• Customer experience
- Create a product that meets the customer requirement
- Basic to full service
- An experience for the business and leisure user. Hassle free
- Special occasion
- Lifestyle
• Investment: sustaining the business model
- Short term gain versus the need to grow a long term business model
- Invest to create
- Nothing ventured, nothing gained

Asset Manager
• Optimising management contracts
• Performance tests
• Control of capex
• When to take the leasehold route
• Policies on guarantees and claw-back leases
• The place of condo-hotels, timeshares and shared ownership
• Franchising the restaurant: terms and profit shares. What else to franchise?
• The move to ultimate outsourcing – the hotel manager as brand owner and ringmaster

Franchisor
• What is franchising? (How does it work?)
• Who is in control? (How does it work?)
• What is the cost? (How does it work?)
• Strength of organisation (Does it work?)
• Value circle (Does it work?)
- Examples of existing hotels performance before and value proposition after branding (Does it work?)
• Franchisor support
- International room sales
- Training, quality assurance, ongoing development
- International marketing and PR support
• The value of world wide loyalty programmes
• Improved REVPAR and profitability
• How the financial institutions compare valuations between branded and independent hotels

Session 4: What the funders are thinking and doing
• What will lenders fund?
• What will it cost and what else will it take (terms and conditions)?
• What has changed over the last 3 years?
• Who needs an intermediary?
• How can you improve leverage and terms?
• Why you shouldn’t borrow too much, and what happens when you do? How important is securitized debt?
• How important is management/brand in improving debt terms?
• What effect is increased leverage having on hotel values?
• Are buyers over-paying due to increased leverage?