• Finance & Investment
  • Due Diligence Procedures for Hotel Appraisals

  • What is the first thing that comes to mind when you hear the phrase "business valuation"? Mathematics? Formulas perhaps? Maybe even WACC (weighted average cost of capital) for those of you with a MBA. The end product of an appraisal is often a numerical value and people sometimes perceive the process to be math intensive. Although it is true that the use of formulas and equations is essential to the valuation procedure, due diligence procedures encompass far more than mathematical models. The importance of due diligence research cannot be overlooked because of its crucial role in justifying the outcome of a valuation.

    There are many factors that directly influence the value of a subject business or hotel, and they can generally be classified under the following three main areas contributing to value: company environment, industry dynamics and economic conditions. These factors then form different aspects of due diligence research. In the following paragraphs, we will discuss the three areas of due diligence research in more detail.

    Company research encompasses several different factors, and in most cases, these have the most direct impact on a company's day-to-day operations. Some examples of company research are customer demographics, management/directorship structure, suppliers, advertising and intellectual property. ...


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Coming Up In The December Online Hotel Business Review

Feature Focus
Hotel Law: Legal Issues Looming Large in 2015
In an industry where people are on-property 24/7/365, the possibilities are endless for legal issues to arise stemming from hotel guest concerns. And given the sheer enormity of the international hotel industry, issues pertaining to business, franchise, investment and real estate law are equally immense. Finally, given the huge numbers of diverse people who are employed in the hospitality industry, whether in hotel operations or food and beverage, legal issues pertaining to labor, union, immigration and employment law are also significant and substantial. The expertise of all kinds of specialists and practitioners is required to administer the legal issues within the hotel industry, and though the subject areas are vast and varied, there are numerous issues which will be in the forefront in 2015 and beyond. One issue that is gaining traction is how hotels are dealing with the use of marijuana by employees, given its ever-changing legal status. The use of marijuana is now legal in 21 states and the District of Columbia for certain medical conditions. Two other states, Colorado and Washington, have legalized recreational marijuana use for individuals who are 21 years old or older, and Alaska and Oregon currently have similar legislation pending. Most state laws legalizing marijuana do not address the employment issues implicated by these statutes. Therefore, it is incumbent on all hotel operators to be aware of the laws in their states and to adjust their employment policies accordingly regarding marijuana use by their employees. Other issues that are currently looming large pertain to guest identity theft by hotel employees and the legal liabilities which ensue; issues of property surveillance versus a guest’s right to privacy; and immigration reform could also be a major compliance issue. The December issue of Hotel Business Review will examine some of the more critical issues involving hotel law and how some managers are addressing them in their operations.